As we have pointed out numerous times before, our country is currently experiencing – thanks to the Great Recession and weak recovery – a large jobs shortfall of around 11.2 million jobs. This includes 6.9 million jobs lost since Dec. 2007, plus 4.3 million jobs needed to keep up with population growth that weren’t created because of the downturn.
Presidential candidate Mitt Romney has recently addressed this jobs shortfall, coming out with a jobs plan that he claims would create 11.5 million jobs.
But would Romney’s plan actually create jobs anywhere close to this scale? “Believe in America,” his plan, is heavier on ideological rhetoric than it is on direct job creation solutions. In fact, nowhere in the 160 page plan could I find a stated job creation number – 11.5 million is a number Romney has quoted in public appearances, but it does not appear anywhere in his plan. The math doesn’t just appear to be fuzzy – it appears to be nonexistent. Not surprisingly, attempts to contact the Romney campaign for specifics on the 11.5 million miracle number went unanswered.
So what does Romney’s plan actually propose doing? He makes the George W. Bush-era tax changes permanent, at a cost of around $3.8 trillion over the next decade, and cuts the corporate income tax rate. He repeals the Affordable Care Act and financial regulatory reform. He pursues free trade agreements and creates something called the Reagan Economic Zone, which would basically be a partnership “codify[ing] the principles of free trade at the international level.” He goes after the NLRB and certain labor practices, focuses on private-sector job training, and promises to increase the legal immigration of highly skilled individuals. Finally, he promises to pursue a balanced budget amendment and a strict spending cap, both irresponsible policies that would make it extraordinarily difficult for the government to respond to economic crises. (Sweeping tax cuts coupled with a balanced budget requirement would also force big spending cuts, thereby reducing employment).
So Romney’s plan is really more of a conservative wish list of supply-side policies for stimulating long-term economic growth than a plan to put Americans back to work today or next year (or the year after next). And he relies on assumptions that don’t have a whole lot of foundation – for instance that trickle-down economics works or that it’s unhealthy for the federal government to ever run deficits. He also assumes that giving corporations lower tax rates will create more jobs, even though corporations are currently sitting on $1.12 trillion in cash and liquid investments, and waiting for demand to increase before hiring again. Romney then turns these supply side policies into a boost in near-term activity (4 percent per year for four years, versus 3.4 percent in the Congressional Budget Office’s economic projections). This better-than-expected growth is somehow translated into jobs numbers, without letting us see the math.
He also isn’t clear about what his jobs number means. Is it jobs created in addition to the number of jobs our economy is currently projected to create, or is it total jobs created? This is sort of an important point to clarify. In his speech Romney does say “new jobs,” but in reality a job is new both if it is projected to be created and if it is created on top of the number of jobs already projected to be created. Over four years, 11.5 million jobs breaks down into roughly 240,000 jobs created per month. Though significantly better than recent job creation, 240,000 jobs per month is a fairly modest target. In an economy coming out of a recession, monthly jobs numbers should be more on the order of 300,000–350,000 – something Romney’s plan would likely fall shy of accomplishing (again, it comes down to a short-term vs. long-term policy focus).
Richard Trumka, president of the AFL-CIO and a member of EPI’s Board of Directors, summed up Romney’s jobs plan by saying it can be reduced to two sentences: “Let rich people have a lot more money. And remove regulations and they’ll create jobs.” If we’ve learned anything from eight years of this tactic (2001-2008), it’s that this two-pronged strategy simply doesn’t work.