Let us take a wild leap of faith for a moment and imagine that the newly-elected Congress arrives in Washington D.C. ready to do the nation’s work. Let us further imagine that those voted in by the frustrated and the angry, the disappointed and the impoverished, will shuck their unrealistic campaign promises and decide to tackle our crushing unemployment without prejudice. How might they go about actually creating jobs?
Despite the mind-numbing torrent of campaign speeches, endless debates and TV spots, there has been little said on this topic – to many, the essential issue of this election cycle. Arguably, it was President Obama’s neglect of job creation, along with his dogged pursuit of unpopular health care legislation that singed his popularity and the prospects of his party.
Today unemployment is 9.6 percent. There are 14.8 million Americans out of work, another 9.5 million involuntarily working part-time, and another 2.5 million “marginally attached” to the workforce. Overall, then, there are 26.8 million people who need full-time jobs. That is a huge number, and one which will continue to depress the economy unless it can be significantly reduced. What to do?
To answer that question I asked (via email) three of the sharpest economic minds in the country: Alan Blinder, a professor at Princeton University, Ed Hyman, founder of research powerhouse ISI Group (and Wall Street’s highest-rated economist for decades), and Byron Wien, Blackstone advisor and financial world favorite. I figure if these fellows don’t know what to do, we are in real trouble.
All three support further measures to boost the economy.
Ed Hyman warmed to the task: “Wow! Total power? OK.” His first order of business was dealing with the third rail of the budget discussion: “I would pass legislation limiting entitlements and phase them in starting 2013. That will keep federal outlays unchanged for 5 years.” Hyman believes that “the Tea Party is 'the tip of the iceberg' and that the nation’s mood might actually sanction reining in our out-of-control spending programs. Other musts on Hyman's “to do” list:
- Support QE2, Federal Reserve Chairman Ben Bernanke’s intended quantitative easing proposal aimed at keeping interest rates low.
- Make current tax rates permanent.
- Lean on the Chinese to have the yuan appreciate by +15 percent.
- Instill a more pro-business attitude on the past of President Obama. For instance, he suggests a tax holiday for repatriated profits “subject to being invested.”
Notwithstanding his enthusiasm for putting a lid on federal outlays, Hyman endorses spending $500 billion to “Rebuild America” with, as he says, “no gimmicks.”
Byron Wien also champions this approach. As he notes, “only two-thirds of the $787 billion stimulus has been spent and the administration has particularly fallen down on the infrastructure component.” Wien says “construction workers are looking for jobs because of the slowdown in housing and commercial building. A vigorous infrastructure program would put some of these people back to work.”
Byron Wien also thinks the government should suspend the payroll tax for people making less than $100,000. He says the move would “ensure a good Christmas and provide some momentum for the economy even though it would increase the budget deficit.”
Alan Blinder continues to endorse a new jobs tax credit. He thinks the government should reward companies that “increase their employment above some base level,” as he described in a recent Wall Street Journal op-ed. He notes that Congress already enacted a minor-league version of this plan, with its HIRE Act in March – a $17.5 billion program that Blinder dismisses in the same piece as legislated on a “pitifully small scale.” He thinks we need a much larger version.
Blinder would cut sales taxes to stimulate consumer spending, with the federal government replenishing state coffers for lost revenues. Philosophically, he favors fiscal spending programs over monetary easing, but recognizes the political distaste for further increases in the budget deficit. Like Wien and Hyman, Blinder endorses expanding federal, state and local jobs.
So what could our incoming legislators learn from these gurus? They should encourage consumption through lower payroll and sales taxes, and boost hiring through an infrastructure spending program. Needless to say, to pass such measures, they will need to leave their budget deficit worries at the door.
The best selling point for such initiatives – and one we have heard little about – is that budget deficits can best be reduced by growth, and the measures recommended could spur that growth. In 1992, Time Magazine wrote about “the job drought, the debt hangover … the real estate depression, the health care cost explosion…” and the other obstacles that seemed to doom the economy at that time. As Businessweek recently reminded us, even as the pessimists were issuing the kind of dire forecasts we hear now, the economy snapped back when the “jobless recovery that helped elect Bill Clinton in 1992 ushered in a decade of prosperity, with 23 million new jobs created.”
Part of that success stemmed from an explosion of technology-fueled productivity gains. Partly, it came from ramped-up trade. It also came from a president that collaborated with the private sector to fuel growth. There’s a lesson there.
