To stanch the flow of
continued job losses (with 263,000 jobs lost in September, up from 201,000 in August), the White House is weighing
new options. Among them are more stimulus-style projects as well as traditionally
conservative approaches
such as tax cuts for small businesses. As Obama's economic team
pursues new strategies for America's catastrophic unemployment,
economists of all stripes are offering suggestions. Dire times have pushed some pundits to cross party lines looking for solutions. Below, five ideas for tackling unemployment and two warnings about what not to
do.
- 1. Send Money to States The Wall Street Journal's Gerald Seib notes
that states are more vulnerable since many are required to balance
their budgets and are also better at pushing out jobs than the federal
government. "Getting additional help to states in coming months might
well be both
the most efficient and the most politically feasible action Washington
could take to avoid sinking deeper into the jobs hole," he writes.
"Getting money out to states quickly may have been the single most
effective impact of the February stimulus package. That money -- which
went for construction projects, education and health-care programs --
helped financially strapped states avoid even bigger disasters as they
put together budgets for the current fiscal year."
- ...But States Must Court Businesses Jennifer Rubin examines Michigan,
a state that has spent and worked extravagantly to promote jobs without
success. "For starters, it is one of the more heavily unionized states
around.
The UAW did its number on the car industry, and any employer coming
into the state will have a similar experience with Big Labor. Given the
choice between a right-to-work Sun Belt state and a Big Labor–dominated
Rust Belt one, most employers will (and do) choose the former," she
writes. "Think for a moment (aside from the political impossibility of
it) what
would happen if the state passed a right-to-work law allowing employees
to refuse to join a union. I’d imagine employers might take another
look at Michigan."
- 2. Public Works Projects The New York Times's Bob Herbert suggests something similar to Roosevelt's WPA. "A massive long-term campaign to rebuild the nation’s infrastructure —
which would put large numbers of people to work establishing the
essential industrial platform for a truly 21st-century American economy
— has not seriously been considered. Large-scale public-works programs
that would reach deep into the inner cities and out to hard-pressed
suburban and rural areas have been dismissed as the residue of an
ancient, unsophisticated era," he writes. "The master in this area, of course, was Franklin Roosevelt."
-
3. Payroll Tax Holiday Salon's Robert Reich proposes "a one-year payroll tax holiday on the first $20,000 of income.
Republicans as well as Blue Dog Dems could go along with this, and it
would be a highly progressive tax cut since 80 percent of Americans pay
more in payroll taxes than they do in income taxes."
- 4. Additional Stimulus Spending Ryan Avent,
arguing that the bust has been too rapid for the free market to absorb
on its own, wants more stimulus. "If you’re saying that the private
sector is literally unable to absorb
workers during the short time-frame, more or less coincident with
recession, then why not pursue an aggressive stimulus? Reducing or
eliminating whatever the cyclical portion of unemployment is should
make it easier for new growth industries to find a footing. And if not
all the structurally unemployed can be redistributed at once, there is
no reason stimulus aid needs to stop with support for the cyclically
unemployed."
- 5. More Small Business Loans This is also from Robert Reich, who thinks small businesses are the key for job creation. "Dramatically expand the Small Business Administration's lending
programs and have the Fed buy up the SBA's debt. Big banks are not
lending to small businesses. TARP has been an utter failure in this
regard. The SBA and the Fed should circumvent them and help small
businesses get the capital they need, so they can start hiring again."
- ...But Tax Credits Alone Won't Do It Gerald Seib cautions against over-relying on tax cuts, a politically popular measure. "One idea that Republicans have floated is a tax credit for employers
who create jobs. The hope would be that a tax break would provide
employers a direct and immediate incentive to add jobs. Rep," he writes. "Expect to hear more of that idea, and there may well
be some bipartisan support for it. The question, though, is whether a
tax credit is sufficient incentive to overcome the profound economic
uncertainties employers are pondering as they consider creating jobs."
