Obama’s American Jobs Act is mostly on the mark

President Obama got a lot right in his jobs speech tonight, starting with the understanding that we can’t budget-cut our way out of the unemployment crisis. No jobs will be created by cutting federal spending or the deficit, something every economist knows.

He was absolutely right to focus on increasing consumer spending by putting more money in the pockets of working class and middle class families. Consumer spending drives the economy and gives businesses the incentive to invest here in the U.S. and hire here, rather than overseas. Emergency Unemployment Compensation creates jobs by giving the jobless money to spend at local businesses that would close or lay off employees if they didn’t have enough customers. Payroll tax cuts will do the same on a broader scale.

The president was also right to focus on job-creating investments like school repairs and transportation infrastructure. We lost more than two million construction jobs when the housing market collapsed, and more than a million construction workers are still officially unemployed. There is plenty of work for them to do and now is the time to do it. It costs money to build bridges and transit systems, to improve highways, and to repair and upgrade our school buildings. Unemployment is this year’s crisis, today’s crisis, and worries about our long-term debt are not the priority now. We can’t solve deficit problems with 25 million Americans underemployed. Spending on infrastructure is far preferable even to tax cuts for working families: it puts more people to work for every dollar spent and leaves us with public goods that will increase productivity and improve the quality of life and the performance of our schoolchildren for many years. Renovating 35,000 schools is a terrific goal.

The recession wrecked state budgets, forcing them to lay off essential personnel like teachers and police officers. The president is right to help states preserve those jobs with $35 billion in grants. Every job saved is as good as a job created, but these particular jobs are also essential to public safety and the future performance of America’s workforce.

The president’s proposed tax credits for hiring new workers, when combined with the payroll tax holiday, might be enough to induce some employers to hire when they otherwise would have hesitated. EPI and the president both proposed a bigger credit two years ago but Congress never acted. In this case, bigger would be better. The payroll tax holiday itself is bad Social Security policy and poor job creation policy. It’s only value is political: it appeals to Republicans. The money would be better spent to increase the hiring credit.

The president stumbles with his proposed expansion of a failed, illegal state program, Georgia Works, that lets employers “try out” employees without paying them. It is the first step in unraveling a critical part of the safety net, unemployment insurance, and a poorly thought-out tactical ploy that working Americans will come to regret. A million Americans are already working without pay in internships. Enough is enough. The president should be cracking down on labor standards violations, not promoting them. This is not the pathway to middle-class jobs and good wages; it’s a recipe for wage depression. It brings the grade for what was otherwise an A plan down to a B+.

  • beyond binary parties

    Ross, thanks for pointing out the adverse effects of the payroll tax reduction and the (what i see as deplorable) Georgia jobs plan.
    last night’s speech by President Obama motivated me to consider a range of items i see in need of critical analysis. if our current economic/finance structure is unsustainable, which i think is the case, i’m at a loss at how tweaking the knobs within the structure while leaving the failing structure in place is very helpful.
    => we continue to ignore the LocknLoad Elephant (bloated war budget) in the room at our own peril. (our current high incarceration rate is similarly ignored at out own peril)
    –> simultaneously, strategies to coerce broad populace support for the privatization of publicly owned agencies and programs are underway via induced budget destabilization. such strategies may be viewed by some as necessary to continue to fund the bloated war budget. ex. the post office budget has been unnecessarily destabilized by the mandate for it to fund future benefits to an extreme extent required by no other public agency – thus fueling calls for privatization. ex. last night’s Plan which calls for reduced payroll taxes which will destabilize Social Security (we can anticipate this will pave the path for renewed calls of privatization of this public good).
    => if we’ve nearly completed our run on the table of cramming lopsided trade agreements down the throats of 2/3 world countries, which i think we have, then i suspect we won’t be able to find takers/suckers for our “have i got a deal for you” agreements much longer.
    => if we implement the Georgia job training program across the nation which trains folks on the job for weeks and months without pay (or with minimal stipends even below minimum wage) then we’ve merely implemented cheapened labor conditions which sets corporations frothing at the mouth for their continued good fortune at the expense of the labor force.
    => the American Jobs Plan seems to be a cobbled together set of status quo bits favored by various power-brokers. It’s like a box of bandaids to cover over a whole lot of ills when we’re in need of a radical structure change.
    Hopefully i’m seeing this all wrong. Hopefully this cobbled together offering is more of a mindset shift towards a better structure than i’m perceiving. I hope, but doubt, this Plan really does change our economic/finance structure towards a healthier way of being in the world.