Obama's Jobs Program: "Go Long" or Go Home

Last Updated Aug 31, 2011 1:38 PM EDT

President Obama's speech next week on how he plans to create more jobs isn't only the most important speech to date of his presidency -- it also represents would could be a historical turning point for the U.S.

Now, as then, the government's main task is to put people back to work. The challenge is stark. Succeed, and the economy will recover; fail and it won't. Succeed, and restore people's faith in government; fail and shatter it. As FDR said in his 1932 inaugural address, "This nation asks for action, and action now."

Obama hasn't outlined his job-creation program, but he has offered hints. For one, it will have "bipartisan" appeal:
"The President's proposal will be a combination of things that, in a world less riven by partisan politics, would garner broad bipartisan support," Jay Carney, the White House press secretary, told reporters aboard Air Force One on Tuesday. "The President hopes that members of Congress of both parties, having returned from their August recess, will come back imbued with the spirit of bipartisan compromise, and imbued with the urgency required to address the needs of our economy and the needs of our workforce."
On the table
Such rhetoric, a hallmark of this administration, suggests that the White House is thinking smaller, not bigger. That likely rules out a major program akin to the nearly $800 billion stimulus package Obama arranged in 2009 to keep the economy from collapsing. Instead, the emphasis appears to be on ideas he considers politically viable. Among the proposals reportedly under consideration:
  • Extending emergency unemployment benefits for jobless workers
  • Paying businesses to hire the long-term unemployed
  • Paying businesses to provide job-training
  • Offering tax credits for companies that hire new workers and invest in "green" manufacturing
  • Extending special accounting provisions for businesses
  • Reducing employer and employee payroll taxes
  • Spending to renovate public schools, roads, airports and other national infrastructure
Economic research firm Macroadvisers estimates that extending the employee payroll tax "holiday," supplemental jobless benefits and business expensing treatment would create some 600,000 jobs by the end of 2012, although the impact would quickly diminish in successive years. That's well short of the roughly 7 million jobs the nation needs simply to reach pre-recession employment levels.

Ramping up infrastructure spending also would boost job-creation, but the immediate effect on the economy is likely to be limited unless spending is done quickly and on a massive scale. Republican opposition to such spending makes that unlikely.

A new Works Progress Administration
In terms of job creation, a better idea would be for the government to hire the unemployed directly. Putting people back to work in this fashion would deliver the fastest jolt by immediately putting money in people's pockets, boosting consumer spending.

As Demos detailed in a recent report, direct hiring also would allow the government to target key sectors, such as construction, and help create hundreds of thousands of jobs in the private sector. And depending on how it's designed, such a program would likely be more efficient than other stimulus measures. The New York think-tank estimates that this approach would generate 10 times as many jobs as extending the Bush-era tax cuts, for instance (see chart at bottom; click to expand). It also would be relatively affordable. Demos puts the cost of creating a million jobs in a government program at a modest $46 billion per year.

Obama would naturally face enormous opposition to such a program, even from within his own party. That's all the more reason to do it. Non-partisan leadership doesn't have to mean pleasing all sides -- sometimes it means pleasing none.


Table courtesy of Demos
Related:
  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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