James Pethokoukis

Politics and policy from inside Washington

The jobs bill

February 12, 2010

1) Obama administration economists reckon the jobless rate will hover around 10 percent this year, and now say the U.S. economy will generate an average of just 95,000 jobs a month. That tallies with Team Obama’s forecast of anemic 3.0 percent GDP growth. Monthly job growth of 125,000 to 150,000 is needed to start bringing the unemployment rate down from its current 9.7 percent. That’s what would normally be expected more than two years after the onset of a recession. It’s not happening — at least not yet.

2) Enter the U.S. Senate. The centerpiece jobs proposal would spare businesses from paying payroll taxes on some new hires for the rest of 2010. Based on a Congressional Budget Office analysis, this measure might create a feeble 50,000 to 90,000 jobs.

3) Aside from the bill’s limited potential effects, short-term fixes are not what’s needed. America’s job machine didn’t suddenly break down in 2008. It has been sputtering since the Internet bubble burst. Some economists now think a decline in education, innovation and other former U.S. advantages means the realistic minimum unemployment rate has gone up from 4-5 percent to as much as 7 percent.

4) That suggests legislative efforts at improving the employment picture should focus on long-term measures to improve education and help innovative businesses. Options in the latter category include a reduction in the U.S. corporate tax rate, targeted infrastructure spending and long-term tax credits for research and development. It’s a shame Washington seems able to set politics aside to accommodate special interests, but not for what’s really needed.

Comments

Seriously? You think our advantage from 1880 to 1970 was education? Innovation maybe. The U.S. had a great human capital situation for manufacturing. Lots of low-priced, highly-motivated immigrants with low regulations. As we began restricting our human capital, we entered into a long period of reduced competitiveness. Now China and India have begun to remove the (false) reigns on their human capital and the result is a positive change in their competiveness. We don’t need a government engineered jobs recovery. We just need to restore freedoms. The answer, as it always has been in America, is freedom.

Posted by Andy Weeks | Report as abusive
 

Let’s start be recognizing that government is limited to effecting the environment of the nation. The government can not mandate innovation, creativity or economic growth. Government policy can set the table, but not prescribe the menu.

instead of “job training” programs intended to make us all “computer programmers”, why not training vouchers for unskilled or unemployed workers? Let people choose to be trained as cooks, welders, IT specialists or truck drivers.

Eliminate income taxes on new businesses for the first 5 years.

Above all, be creative. We know what’s not working, it’s time government takes a chance on what might work better.

Posted by Steve C. | Report as abusive
 

The business tax credit is laughable. With it, the administration will be able to claim a “job created” with every business that claims the credit. But the fact is, nobody’s going to hire an employee to get a one time tax credit if the business isn’t there and if they do, we’ll probably be bailing them out on the back end.

Such a shame that nobody in this administration appears to have a clue as to what drives business.

Posted by t22 | Report as abusive
 

The Jobs Bill will do little to put the most disenfranchised to work, especially poor Black and Latino youth. The majority of the Bill’s incentives go to businesses rather than direct job creation. Do they really think that businesses are bursting at the seems to hire inner city youth? When will they get it – If we don…’t provide jobs for the young people with whom we work, the majority will simply be without jobs.

 

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