Can we have a TARP for jobs?
First, go and check out Mike Konczal’s wondrous gift to the internet today, a fabulous GIF-filled guide to QE3 and monetary policy, where I found the GIF above. It neatly encapsulates the greatest problem facing America today: people can’t find work.
This is not an existential crisis on the order of the financial crisis of 2008-9: if we fail to solve it, the entire economy won’t grind to a halt. But it’s a crisis all the same, and it’s being tackled with much less urgency — and much less money — than was brought to bear on the financial crisis.
And so Deborah Solomon’s idea is, at least in principle, a good one. She notes that no one expected Treasury to recoup much if any of the money it spent on the various bailouts, and that TARP, in particular, was considered a permanent government expenditure rather than some kind of temporary loan to the financial system. Now that hundreds of billions of dollars of TARP funds have found their way back to Treasury, couldn’t they be recycled to help, not Wall Street this time, but the unemployed?
The four-year anniversary of the financial crisis should prompt policymakers to consider using some of the money — funds that were never expected to be returned to the government’s coffers — to assist those in need. Some 12.5 million Americans remain unemployed, and 40 percent have been out of work for six months or longer. Almost 15 percent of Americans rely on the government for food stamps. The 8.1 percent unemployment rate, while far better than its peak of 10 percent, crept down last month largely because so many people have given up looking for work.
That $353 billion could go a long way toward helping struggling Americans who would benefit from some type of relief — whether through tax cuts or the extension of benefits. The U.S. taxpayer stepped in to help Wall Street in its time of need. It’s time for Wall Street, albeit indirectly, to return the favor.
The distinction to bear in mind here, however, is not that between Wall Street and Main Street, but rather that between stocks and flows. TARP wasn’t a new income stream for Wall Street; it was a one-off injection of capital, which got Wall Street back onto its feet, to the point at which banks were pretty much the first companies to start becoming hugely profitable again after the recession hit.
So the condign use of TARP funds in an unemployment context would not be through things like tax cuts or benefit extensions. Instead, it would be a massive capital expenditure: we would build a job cannon, and a whole forest of jobies, and manufacture a huge pile of job helmets, and fire off the unemployed to the wonderful world known as jobland, where they could live happily ever after without any further government support.
Buying a bunch of long-dated agency securities — quantitative easing — is not that. Besides, we’re talking about fiscal policy, not monetary policy, here. But even fiscal policy can’t easily create permanent jobs with one-off expenditures. A dynamic economy is just that: it’s dynamic, and the number of people being hired and fired every week is enormous. The total number of jobs is going up, far too slowly. But permanent jobs don’t — and shouldn’t — exist. What we really want to create is an economy where for every person who gets fired, two people get hired. That would bring unemployment down sharply.
Which brings me to the major speech that Barack Obama gave on September 8. No, not his acceptance speech at the Democratic National Convention — that was September 6, in any case. But rather the speech he gave on September 8 2011, presenting — and costing out — the American Jobs Act. And it turns out that the cost of Obama’s jobs act, which he doesn’t seem to mention much any more, was $447 billion: very much in Deborah Solomon’s ballpark.
Would the jobs act create job cannons and job helmets and jobies? Of course not: there’s no simple Main Street corollary to TARP which can be implemented with the requisite political will and a few hundred billion dollars. Job creation is more of an art than a science, and there aren’t any real experts in it. But at least Obama has (or had) a real, detailed plan. And, as Treasury officials love to say, as a general rule, plan beats no plan.