The Right Way to Create Jobs

With over twenty million Americans still unable to find full-time work, Washington shouldn't take its eye off job creation for a minute. That's certainly the feeling of voters, who overwhelmingly told exit pollsters on Election Day last November that fixing the economy should be Congress's number one priority—far more than said reducing the deficit.

Frankly, though, official Washington seems better at destroying jobs these days than creating them: Exhibit A are the sequestration cuts, which are eliminating jobs as I write this. Exhibit B is the rollback of the payroll tax holiday on January 1, which ensured that nearly every working American has been living with a pay cut for the past ten weeks. 

But there's an even deeper problem with how most politicians approach job creation, which is that many of their ideas depend on secondary stimulus effects—i.e., creating jobs by giving consumers more money to spend which presumably leads to more demand for goods and services and more jobs. That's particularly true of tax cut proposals, including the cuts for middle and lower class workers that Democrats prefer (like that payroll holiday).

Indeed, at this point, probably half of all stimulus approved by Congress since early 2009 has been in the form of tax cuts—if you include both the original big stimulus measure program (nearly 40 percent of which was in tax cuts) and the payroll tax holiday. 

But there are a few basic problems with indirect stimulus. First, Americans with extra cash don't necessarily go out and spend it. Given the high debt loads of many less well-off households, spare money is often used to pay down credit card balances or take care of other outstanding loans. And that doesn't create jobs.

Second, even when people do take their extra cash to the mall, it's not clear how much their spending will help American workers. Most consumer goods are made overseas, so a U.S. spending spree may end up being as much a stimulus for, say, China's economy as our own. To be sure, increased retail or hospitality spending requires more employees, but as we've written here, workers in these sectors make very low wages and have little discretionary income. 

A third problem with indirect stimulus is that policymakers have little control over where jobs are created. There are seven states with unemployment over 9 percent and a half dozen states where unemployment is under 5 percent. But a blunt stimulus like the payroll tax holiday spreads money around equally. The gas driller in booming North Dakota gets the same tax cut as the underwater homeowner in Las Vegas. 

All these points underscore the need for stimulus measures that directly create jobs. And this week the Congressional Progressive Caucus released a bold plan to do exactly that. The centerpiece of the plan is a $1.1 trillion program to invest in infrastructure, and it's hard to think of money better spent for job creation. Huge numbers of construction workers lost their jobs when the housing bubble imploded, and many of these people are still unemployed. In fact, construction workers have the highest jobless rate of any group of workers— 15.7 percent, over twice the national rate and three times higher than most white-collar professions. So infrastructure spending would help those workers who are still suffering most from long-term unemployment.

And such spending could be geographically targeted, too. It just so happens that many of the states with the highest unemployment also have terrible infrastructure problems. Take New Jersey, for example, with 9.5 percent unemployment. Quite apart from the devastation wrought by Sandy, the state has a huge backlog of public works needs. According to the American Society for Civil Engineers, New Jersey has 651 structurally deficient bridges and 66 percent of its roads are of poor or mediocre quality. The state also has 217 hazardous dams and needs to spend $40 billion on water and waste water projects over the next 20 years. 

These problems need to be fixed at some point. Why not now when cheap labor is plentiful and borrowing costs are near an all-time low?

Of course, though, even a huge infrastructure program won't reach everyone who needs a job. And that's why the CPC plan includes a range of other measures, most notably a half billion dollars for "funding public works jobs programs to boost employment, with particular emphasis on aiding distressed communities."

Mention public works programs and they'll try to laugh you off Fox or CNBC. Of course, there is nothing radical about this idea at all: We already have a range of government programs like AmeriCorps, Senior Corps, and the Youth Conservation Corps that could easily be expanded on an emergency basis to ensure jobs now.  And it's easy enough to quickly create additional such bodies, as the U.S. did during the Great Depression. Representative Jan Schakowsky presented a blueprint for doing this in her 2011 "Emergency Jobs to Restore the American Dream Act." The CPC budget would fully fund that legislation, and then some. 

We tried a surge in Iraq and another in Afghanistan. How about one at home?

I know, I know: most of these ideas don't have a prayer right now in Congress, given who runs the House. But let the record show: While past stimulus measures have been disappointing, we actually do know how to create jobs—namely by, well, creating jobs. 

Read more on the CPC budget here

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