Jobs were, not surprisingly, a big topic in last night’s presidential debate. President Obama, however, did not seize the opportunity to discuss his administration’s job creation record and substantive job creation proposals—in particular the American Jobs Act (AJA), which would provide a quantifiably substantial economic boost but has largely been stonewalled by the House of Representatives for more than a year.
Those who watched the debate saw Republican presidential nominee Mitt Romney ding Obama on some of the trends that my colleagues here at EPI are constantly analyzing: A) a high unemployment rate (though he misspoke and said it was rising—it’s not); B) millions of unemployed workers (though he overstated by saying 23 million are unemployed—12.5 million were unemployed in August; Romney was likely conflating unemployment with the number of people underemployed); and C) insufficient job creation measures (something I wouldn’t disagree with, though Romney’s budget proposals would have the opposite effect of creating jobs in the near-term). And despite this last point on his budget’s employment impacts, Romney promised, again unsurprisingly, that as president he would more effectively spur employment growth than Obama has proven capable.
Missing from the debate was a clear presentation of the fact that not only has Obama created and saved millions of jobs, but he also made a valiant effort to create millions more with the AJA. Remember that the AJA, despite the fact that it included many historically bipartisan policy proposals such as the payroll tax holiday, business hiring credits, and other tax cuts, failed to get through Congress, save for watered-down versions of the payroll tax holiday and emergency unemployment compensation extensions included in the proposal.1
Unveiled by the administration over a year ago, the AJA is a package of policies that we have written and talked about many times. The AJA was a fairly bold two-year plan by the administration to fund $447 billion in state aid, infrastructure investments, emergency unemployment benefits, and tax cuts for households and businesses, among other provisions. The price tag of the AJA would be fully paid for over a decade, largely by capping the value of itemized deductions for upper-income households and repealing tax preferences like the carried interest loophole and oil and gas subsidies, as detailed in the report Living Within Our Means and Investing in the Future.
As my colleague Andrew Fieldhouse recently wrote, the AJA would have—if fully enacted—increased GDP growth in 2012 by 1.4 percentage points, and brought the unemployment rate down by between 0.5 and 0.7 percentage points. Full passage of the AJA would have increased employment by 1.6 million jobs, above the 1.5 million jobs supported by the scaled back payroll tax holiday and emergency unemployment benefits enacted.2 This estimate is consistent with the findings of Moody’s Analytics chief economist Mark Zandi, who found that the AJA would have increased real GDP growth in 2012 by 2 percentage points, added 1.9 million jobs, and reduced the unemployment rate by one percentage point.
The AJA was Obama’s attempt to build on the relative success of the American Recovery and Reinvestment Act (ARRA), passed the month after he took office, as well as less ambitious subsequent ad hoc stimulus (for example, increased Medicaid matching funds for states, the first payroll tax cut, emergency unemployment benefits). As many have documented (including myself), the ARRA kept our economy from swerving over the cliff. Prior to its passage, we were stuck in an ominous downward spiral of job losses; the ARRA provided the boost to aggregate demand necessary for job losses to sharply decelerate in mid–2009, and then eventually give way to job gains early in 2010.
It would have served Obama well to highlight his successful job creation track record more forcefully than he did. Though he pointed to private-sector job growth (the public sector has not been adding jobs—something the AJA would help address) he failed to make the case to the American people that his policies are responsible for the creation of millions of jobs in the aftermath of the Great Recession. Furthermore, the administration deserves credit for proposing a serious job creation package in the AJA that regrettably has largely been obstructed by House Republicans. While we’ve often argued that the administration and Congress should be doing more for job creation, it is worth stepping back and taking stock, not only of what was done, but what has been proposed.
1. Though I’ve always felt Obama could be more aggressive in pushing for stimulative, pro-growth measures, it’s worth remembering that this is a president who has dealt with an opposition party in Congress bent on opposing everything put forward, no matter the impact it would have on the recovery.
2. This is relative to the partial continuation of Emergency Unemployment Compensation and the payroll tax cut extension that Congress had initially enacted in Dec. 2010. Congress passed a less robust version of each of these policies than the administration pushed for in the AJA (see endnote 5 in this paper).