No Jobs Relief in Sight
On Monday morning, President Obama swept into the Rose Garden and put Congress on notice: tonight, he said, he would be sending his new $447 billion American Jobs Act (AJA) to Capitol Hill. “This is the bill that Congress needs to pass,” he added, echoing the exhortative refrain of last Thursday’s big jobs speech. “No games. No politics. No delays.” Obama was surrounded by teachers, police officers, firefighters, construction workers, small-business owners, and veterans—the sort of “men and women,” he argued, “who will be helped” by the plan.
But the sad truth is that those teachers, police officers, firefighters, construction workers, small-business owners, and veterans probably won’t be getting the assistance they need anytime soon, regardless of who’s in the White House.
Here’s why. There are three people who have a chance to lead the free world in the coming years: Obama, Mitt Romney, and Rick Perry. (Sorry, Herman Cain.) So far, two of them have released detailed blueprints for economic growth: Obama, with the AJA, and Romney, who unveiled his “Believe in America” proposal last week. The other, Perry, is touting his seemingly impressive record of job creation in Texas and claiming that he could create the same kind of jobs boom as president by doing exactly what he’s done as governor.
When examining these plans, partisans often obsess over broad ideological brushstrokes: conservatives like Romney’s proposal because it cuts corporate tax rates and locks in the full range of the Bush tax cuts, liberals prefer Obama’s legislation because it would involve modernizing public schools and preventing teacher layoffs, and so on. But as America teeters on the brink of a double-dip recession, the important question to ask is this: which one would create (or save) the most jobs now? Not five years from now. Not two years from now. Right now. ASAP.
Romney says his 59-point plan will create 11.5 million jobs. That sounds very impressive. There’s only one problem: Romney’s proposal doesn’t actually focus on the short-term unemployment. Instead, he outlines a long-term, pro-business strategy to reform the tax and regulatory structure and rework our trade deals: lowering the corporate tax rate from 35 percent to 25 percent; eliminating taxes on interest, dividends and capital for American workers; cutting nonsecurity discretionary spending by 5 percent immediately; passing free-trade deals with Colombia, Panama, and South Korea; and getting tough with China. This is all well and good.Republicans have been trying to pass these policies for years. But regardless of their long-term effects, Romney's fixes wouldn’t do anything to spark immediate hiring, nor are they intended to. Even Romney admits his plan wouldn’t create its 11.5 million jobs until “the end of my first term,” or more than four years after passage.
In fact, one of Romney’s proposals—instantly capping government spending at 20 percent of GDP—would actually hurt the near-term employment picture. How? By slashing next year’s GDP by 3 percent, or $476 billion, according to the nonpartisan Congressional Budget Office. As liberal economist Jared Bernstein puts it, “I truly can’t imagine any reasonable economist of any political stripe who doesn’t believe that would turn an already weak economy back into a recessionary economy.”
Unlike Romney, Perry doesn’t have a specific plan to boost employment. Still, he often points to Texas, home to 37 percent of all new American jobs created since 2009, as an example of what would happen if he were to get his hands on the U.S. economy. Perry’s argument is that low taxes, tort reform, and lax business regulations have attracted both employers and workers to the Lone Star State.
Unfortunately, this isn’t entirely true. The reality is that while Perry’s policies may have helped around the margins, the biggest drivers of the “Texas Miracle” are forces Perry didn’t have any control over: large oil and gas reserves, strict regulation of mortgage lending, fewer constraints on new housing supply, and rapid population growth, which creates purchasing power and keeps wages low. Furthermore, even if Perry wants to argue that a state offering cheap labor and weak regulation can attract jobs from other states, he can’t really claim, as Paul Krugman explains, that “depressing wages and dismantling regulation in America as a whole would create more jobs” for the simple reason that “every state can’t lure jobs away from every other state.” In other words, a national version of Perrynomics wouldn’t create new jobs—it would just spark a “race to the bottom” competition between states to move existing jobs around.
Which brings us to President Obama and the American Jobs Act. Unlike his Republican rivals, Obama has actually put forth a plan that would create or save jobs in the short-term. By cutting the payroll tax in half for 98 percent of businesses, offering employers a payroll-tax holiday for added workers or increased wages, and providing $140 billion for modernizing schools and repairing roads and bridges, the AJA would “add 2 percentage points to economic growth next year and bring down the unemployment rate by 1 percentage point compared with current policy,” according to John McCain’s economic adviser, Mark Zandi. (Other experts have said the bill would “raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline.”) This is good policy. The economy is currently ailing because of a lack of demand, not because of government regulation or overspending. The AJA would attack that shortfall by putting more money into people’s pockets, both directly (through payroll-tax cuts) and indirectly (by helping them get jobs)—which would, in turn, encourage them to spend more money on goods and services and (hopefully) get the economy humming again.
But Obama’s plan, which is barely big enough to address the challenges at hand, will only work if it survives Congress pretty much intact—and right now, that’s not a particularly safe bet. Speaking to Politico this morning, a House GOP aide revealed why: politics. “Obama is on the ropes," he said, "Why do we appear ready to hand him a win?” The aide then added that his party shouldn't “co-own ... a jobs bill that won’t work or at least won’t do enough.” This is not encouraging: the sane response to legislation that “won’t do enough” isn’t deciding to do nothing—it’s deciding to do more. But the top political incentive for Republicans—preventing Obama’s reelection—points in precisely the opposite direction.
In his speech Monday morning, the president tried to warn his fellow Washingtonians against idleness. “The next election is 14 months away,” he said, “but Americans don’t have the luxury of waiting 14 months for Congress to take action. That’s OK when things are going well—you play politics. It’s not OK at a time of great urgency and need across the country.” Remember those teachers, police officers, firefighters, construction workers, small business owners, and veterans standing behind him? They had better hope their representatives were listening. At this point, Obama's jobs bill is the best—and only—chance they’ve got.