Jobs: The Elephant Being Ignored in Deficit Talks?
Amid the backdrop that the White House and Republicans are moving further apart in the debt and deficit negotiations comes yet another round of bad jobs news following last week's dismal employment report. A national survey released Tuesday says small business owners' appetite for hiring remains at "recession levels." And the government followed up with its own depressing news that the number of open job listings at the end of May was still 32 percent lower than job openings back in December 2007, the official start to the Great Recession. If by some miracle all 3 million job listings tracked by the Bureau of Labor Statistics were instantly filled, we'd still have 11.1 million unemployed.
Getting Jobbed
Still, jobs remain a peripheral issue among wrangling D.C. lawmakers. For all the talk of spending cuts and tax revenue increases tied to the debt and deficit negotiations, you don't get much in the way of specific ideas on what to do about the 14.1 million unemployed and the fact that one of every six Americans is either out of work or stuck making do with a part-time job. It was nearly a half hour into his Monday press conference focused on the debt/deficit negotiations before President Obama directly weighed in on the jobs problem:
"I am not somebody who believes that just because we solve the deficit and debt problems short-term, medium-term or long-term, that that automatically solves the unemployment problem."
The president went on to say, "I think we're still gonna have to do a bunch of stuff" to create more job growth mojo. He mentioned that a trade deal currently hung up on Capitol Hill could add tens of thousands of jobs. That's not nothing, but we need hundreds of thousands of jobs, not tens of thousands.
And that's when Washington pretty much goes radio silent. But yesterday Alan Blinder and Larry Summers, economist heavyweights with top-level D.C. experience on their resumes, took to the op-ed pages of the Wall Street Journal and the Financial Times, respectively, to make a case for the need to focus on job creation in the short-term. Yes, they are both Democrats. And yes, this is not a new line of reasoning in certain economic circles. The New York Times' Paul Krugman and MoneyWatch's Mark Thoma, among many, have been agitating for meaningful jobs stimulus for what is beginning to feel like eons, not months. But the timing of the two well-placed op-ed pieces yesterday makes for an interesting counterpoint to the austerity obsession of Washington.
A National Jobs Emergency
In his op-ed piece, Princeton economist Alan Blinder, a former vice chairman of the Federal Reserve, made a case for more forceful jobs stimulus. Working from his premise that we find ourselves in the midst of a "national jobs emergency," Blinder lobbed the idea of offering a payroll tax credit for employers that add workers. To sweeten the pot for the anticipated Republican push back to any new spending program, Blinder offered up the idea of giving corporate America the "repatriation" tax holiday of foreign earnings it yearns for, but only if it's tied to hiring:
"For example, if XYZ Corporation paid wages covered by Social Security of $1.5 billion in 2011, and then boosted that amount to $1.6 billion in 2012, it would be allowed to repatriate $100 million at a tax rate of 5% or 10% instead of the usual 35% rate. The tax savings to the company would thus be $25 million-$30 million for raising its payroll by $100 million. That's a powerful incentive."In his FT op-ed, former Treasury Secretary Summers, who recently stepped down as President Obama's economic advisor, made the case that any deal made today isn't just about what it might do for our deficit level 10 years down the road:
"Decisions about spending and taxing over the next year or two will have a significant impact on job creation over the next year, the economy over the next decade, and on the path of U.S. national debt over an even longer horizon." (emphasis mine)To help the economy in the here and now, Summers offers up a few spending programs that he suggests would provide much needed stimulus for today: "A combination of continuing payroll tax cuts, maintaining support for unemployed workers, and accelerating infrastructure maintenance." That's not going to be an easy sell in D.C., but at least the infrastructure spending idea might get some traction among Republicans.
It's not as if Summers or Blinder, or any economist with a bent for jobs creation over austerity today is blind to the issue of spending more amid the current clamor for deficit reduction. But Blinder suggests this isn't some either/or scenario. We need both deficit reduction and job growth, staged properly:
If Congress and the president are fixated on reducing the federal budget deficit to the exclusion of all else, we are not going to make headway. So yes, let's enact a major deficit reduction program right away, but start the cutbacks only in the future. For now, we need a jobs bill.Moreover, Summers calculates that targeted spending today to get the economy moving faster could have the effect of reducing our long-term deficit by $400 billion over 10 years. And he points out that itself is "more than it looks like Democrats will be able to come up with in revenue raising or Republicans in cuts to the cost of healthcare." Seems like something to consider.