Americans live in a new economic reality, and it’s long past time that Washington did, too. In the short term, the nation faces a jobs crisis; in the long-term, a debt crisis. Each crisis presents opportunities to overhaul the state for a new era. Instead, Democrats and Republicans are using both to double down on the same stale ideas they were pushing in 2005, 2001, 1997 and even earlier.
The Bush tax cuts are a perfect example. The cuts and the tax code that preceded them were designed in the 1990s — an era of 5 percent unemployment, budget surpluses and a productivity-enhancing technological revolution. The current moment couldn’t be more different, yet we’re still debating whether we should return to the tax policies of George W. Bush circa 2004 or Bill Clinton circa 1999. The new thinking about how to create policy suited for 2011 — or even just a tax code suited to 2011? It’s nowhere to be found.
Ezra Klein
Ezra Klein is the editor of Wonkblog and a columnist at the Washington Post, as well as a contributor to MSNBC and Bloomberg. His work focuses on domestic and economic policymaking, as well as the political system that’s constantly screwing it up. He really likes graphs, and is on Twitter, Google+ and Facebook. E-mail him here.
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The debate on jobs is similarly narrow and counterproductive, pitting analyses of “cyclical unemployment” against competing narratives of “structural unemployment.” The cyclical side says that unemployment is a result of inadequate economic demand, thus we need Keynesian pump-priming to fill the gap. The structural side says that unemployment results from an erosion of skills and a changing economy and that there’s nothing much we can do to close the gap quickly.
There’s no need to choose — or to give up hope. Much of our unemployment is structural, and some of it is cyclical. Action is necessary either way. As former White House Council of Economic Advisers chairman Christina Romer told me in March: “If you think our problem is structural, there are things we should be doing: money for training, or helping people get out of their mortgages, or massive investment in Detroit. Saying it’s structural is not the same as saying it’s not our problem.”
We should begin with a commitment to hundreds of billions of dollars in infrastructure investments. This isn’t make-work or even an optional expense. Waiting to fix a bridge is the same as waiting to pay down the deficit: You’ll have to spend the money later if you don’t spend it today. But waiting to fix a bridge also runs the risk that the bridge will collapse, forcing you to spend much more later than you would spend today. Advancing worker-intensive, economically vital investments from the future to the present is exactly how a stimulus should work — and why the U.S. Chamber of Commerce and the AFL-CIO support it.
Moreover, infrastructure investment would create jobs in the construction sector — here unemployment is more than 16 percent — at a time when materials and labor are unusually cheap because of slack demand. Former president Clinton has suggested temporarily relaxing environmental regulations so construction projects could be approved quickly. A conservative economist told me that Republicans might support the idea if the government also temporarily suspended the Davis-Bacon rules, which require public works projects to pay the prevailing wage, boosting labor costs. If that’s what it takes to get a deal, so be it.
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