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Obama's Jobs Program: If the Choice is Between "Go Big or Go Home," Start Packing Now.

Rhetoric, reality, and the Great Recession

Nick Gillespie
September 1, 2011

Months into the new normal that is routinely called the worst economy since the Great Depression, President Barack Obama gets it. It's all about jobs, jobs, jobs. And not like it was back in January 2009 (when he promised 3.5 million jobs over the next couple of years) or December 2009 (when he pushed for clean-energy jobs) or January 2010 (when he announced that jobs would be his "number one focus" in his State of the Union address) or even September 2010 (when he promised employment via road-building projects that weren't undertaken as part of the 2009 stimulus' stated emphasis on shovel-ready infrastructure projects). This time he means it.

Of course he does. After all, this time, it's not just about the economic vitality of the nation. His political future rests upon a jobs program so urgently needed that he's going to announce it mere days after Labor Day weekend. Nothing focuses the mind so much as worries about losing your own job.

While Republicans pray that he'll go for broke and then go home in 2012, progressives everywhere are urging the president to "go big" or "go long." In the Christian Science Monitor, former Joe Biden and White House adviser Jared Bernstein, now with the Center on Budget and Policy Priorities, says Obama should keep on doing what he's been doing—that is, extend the payroll tax holiday and unemployment benefits, increase the number of mortgage refinances—and do "some kind of on-the-job training for the long-term unemployed." Inspiring? Not quite. Game-changing? Not at all. And not just for Obama's future, but for the employment prospects of the 9 percent of jobless Americans.

Democratic partisans such as The New Republic's Jonathan Chait acknowledge that Stimulus II: This Time It's Effective, has no "chance at enactment" due mostly to the popular view that the first one didn't work. Instead, says Chait, "Obama can try to design a strategy to exact a political toll for Republican obstruction, but he can't design a strategy to result in passing any significant new stimulus." The payroll tax cut and "some infrastructure projects" are popular with voters and unpopular with Republican legislators, counsels Chait. Try to pass them and then blame the GOP for blocking them. If Obama hangs on to win a second term (a distinct possibility, given the GOP field), goes this line of thinking, then the president can push his advantage come 2013.

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[Reason.tv's Editor in Chief discusses the limits of government-led job creation on Fox Business' Freedom Watch. Air date: September 1, 2011.]

This much seems certain: Transportation will be a big part of whatever Obama proposes. Infrastructure is the new plastics. Earlier this year, Obama said he wanted to spend $556 billion on transportation, while the House and Senate are looking to split the difference between proposals to cough up $235 billion and $109 billion. Screw all those shovel-ready projects that were supposed to benefit from 2009 stimulus. “The president will discuss the importance of moving forward...to protect nearly a million American jobs and highlight the opportunity we have to work in a bipartisan way to further invest in rebuilding our nation’s infrastructure to strengthen our economy and create new jobs across the country,” the White House said in a news release about his current thinking.

Needless to say, this sort of thing didn't work in the past to restart the economy or to seriously reduce unemployment when $800 billion was okayed for stimulating the economy back in 2009. A new study from the Mercatus Center at George Mason University suggests some reasons why. Authors Garrett Jones and Daniel M. Rothschild surveyed 1,300 managers and workers at firms receiving money via the American Recovery and Reinvestment Act (the official name of Obama's stimulus) and found that firms hired more people who already had jobs (47 percent) than people who were unemployed when they were hired (42 percent). The Mercatus study, touted as "the first of its kind" in surveying the effects of how such funds are actually used by employers, has its limitations for sure. But it drives home a disheartening reality about government's role in the economy: There's no on-off switch that Obama or anybody else can flip in the right direction.

The starting point of any serious discussion about jobs, jobs, jobs should be the brutal fact that government, regardless of who is running it, cannot create positions apart from public-sector jobs. And those in most cases are zombie jobs that can only survive on infusions of fresh cash taken elsewhere from the economy via taxes. That's why state and local payrolls are being cut as federal stimulus dollars dry up.

Which isn't to say that government can't help foster an environment that makes it easier for self-sustaining jobs to be created. Indeed, that's the one thing government can and should do: Create a reliable and stable fiscal and regulatory framework that businessess can rely on. What might go into creating such an atmosphere? Precisely the sort of things that Obama and congressional leaders, Democrats and Republicans, have ignored over the past several years in the rush to embrace all manner of bailout economics. What's needed is a sense of stability to the general fiscal landscape that might help to contain the "known unknowns," such as federal spending levels, debt creation, market interventions, and tax rates.

From a political perspective, it was probably smart of Obama to push for a debt-ceiling increase that should take us past the 2012 election; that's one less moving piece he'll have to deal with while trying to climb up from dismal approval ratings. From a fiscal point of view and for the good of the economy, it would have been even smarter for either the president or his Republican counterparts in Congress to insist on passing a budget for fiscal year 2012, which begins in a month, or at the very least create the conditions for a continuing resolution that signal what's in store over the next 12 months.

As UCLA economist Lee Ohanian puts it, "Uncertainty is the enemy of job creation." Ohanian and his colleague Harold L. Cole argue that private-sector job growth in the Great Recession is weak for the same reason that it was during the Great Depression. In emulating the sort of "bold, persistent experimentation" that Franklin Roosevelt pursued in the 1930s, Obama (who has used FDR's signature phrase) is making the job market tougher. All we've got—and all we've had for way too long—is uncertainty. Market uncertainty is beyond politcians' control. But political certainty? That's their job.

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In the sunniest of circumstances, it's tough to know when to hire more people, even for employers in growing sectors. But apart from all the problems stemming from basic economic factors, the Obama adminstration has done nothing but add storm clouds to the forecast: How will health-care reform play out in terms of dollars and cents for workers and employers? Will the housing market be allowed to reset at levels clearly lower than what the government is willing to accept? Are taxes going up and if so, when and by how much and for whom?

Obama has never been shy about claiming to be the only adult in the room, the harried parent trying to force his child-like colleagues to eat their peas, rip off Band-Aids in one clean tug, and all that. If he's serious about being serious, he ought to give a speech that is long on the reality sketched above and short on the clever rhetoric and the Hail Mary job-creation passes. And he might think about layering in the following points. Odds are that he—and the Republicans too—won't come anywhere close to doing the following:

1. Forget targeting particular industrial sectors such as "infrastructure" or "green" jobs or the house construction industry by lobbing money and arcane tax incentives their way. These have been tried before and didn't work for a variety of reasons. When it comes ruinous targeted spending, the second or third time won't be the charm. He needs to suspend regulatory schemes that add nothing of value but are throttling burgeoning fields such as oil and natural gas development. Does it make sense for his Department of Justice to be meddling in mergers such as the one between AT&T and T-Mobile? Or the National Labor Relations Board on the ability of companies to build plants where they want to? Not in the best of times and certainly not now. If Davis-Bacon rules requiring "prevailing wages" in "green industries" are retarding hiring, suspend them at the very least. If "Buy American" provisions in stimulus funds got in the way of hiring, don't replicate them. Doing the same thing is unlikely to yield different results.

2. Bring the extension of unemployment benefits to a close. Every economist—including new White House advisor Alan Krueger—will tell you that extending benefits delays when people re-enter the workforce. Delaying a return to employment—even at lower pay—compounds a widely observed problem: Long spells of unemployment typically reduce future earnings beyond the actual jobless period. It's not anything anybody hunting for a job wants to hear (and certainly it's not what any politician pushing a jobs program wants to say) but any job beats no job. There are jobs out there. They are not as good as the ones people had before, but nobody's prospects get better waiting two or three years to go back to work.

Given that we're entering the thick of the presidential campaign season, there's a real sense that politics will be in a holding pattern. GOP presidential candidates such as former Utah Gov. Jon Huntsman have released jobs programs that take comprehensive looks at how to fix the economy. Apart from any of their particulars, such plans are not near-term fixes and not simply because the people proposing them don't already occupy the White House. There are no short-term, rock-solid fixes. There's only a long, slow slog ahead that may well be about government doing less rather than frenetically doing more. That's a course of action which will require the sort of leadership that has been long absent in Washington.

Nick Gillespie is the editor in chief of Reason.com and Reason.tv and the co-author with Matt Welch of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America. This column first appeared at Reason.com.


Nick Gillespie is Editor in Chief, Reason.com and Reason TV


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