Alec MacGillis -- Why aren't President Obama's job-creation efforts more direct?
Sunday, November 8, 2009
To hear President Obama tell it, he's been busy creating jobs since taking office. The $787 billion stimulus package, he said last winter, would "save or create 3.5 million jobs." The White House is touting reports from recipients of stimulus funds asserting that they have created or saved 640,000 jobs so far.
Yet the national unemployment rate has now hit 10.2 percent, helping explain why Republicans won the governors' races in Virginia and New Jersey last week, just a year after the party's 2008 drubbing. And Obama declared Friday that more action is needed.
"History tells us that job growth always lags behind economic growth, which is why we have to continue to pursue measures that will create new jobs," he said. "And I can promise you that I won't let up until the Americans who want to find work can find work."
It was a strong vow, but it raises a question: Why has a White House that talks so much about boosting employment steered clear of the most direct strategy that could keep Americans on the job?
Since taking office, the Obama administration has studiously avoided paying people to go to work, which could be accomplished by subsidizing workers' private-sector employment or by creating new government-paid jobs. There are programs in a handful of states that financially compensate employees who cut their hours to prevent broader layoffs at their companies -- an approach that costs relatively little, since it results in lower payouts of unemployment benefits, and that has helped Germany keep unemployment under 8 percent despite the deep slowdown there. But the Obama administration has so far opted not to expand this initiative. And aside from a small summer employment program for young people, it has not sought to create jobs on the public payroll, something the country did in the 1930s and 1970s.
Instead Obama's team has taken a more indirect approach, a prudence that critics on the left say is misplaced. If you're spending hundreds of billions of dollars on stimulus, why not do it with conviction? Engaging in more forthright job creation could invite some political pitfalls (such as those constant accusations of socialism), but is double-digit unemployment any less a political risk?
The administration is "scared of [any plans] seeming like old-fashioned make-work, but that's what it is: You're giving [people] jobs because they have nothing left to do," said Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning think thank. "Giving people a shot at a job has to be worth a little bad publicity . . . but as in a lot of areas, they proved more cautious."
White House officials express confidence in the steps taken, saying the stimulus is spending money and creating jobs ahead of schedule, and forestalling far higher unemployment. They say they opted against direct jobs programs not for political reasons but because they thought such efforts would not produce long-term value. And they have not pushed the private-sector job-sharing idea -- being promoted by Sen. Jack Reed (D-R.I.) -- because they want to build real demand for workers, not just spread work among more people.
"I think we got the Recovery Act right," Larry Summers, the president's chief economic adviser, said in an interview. "The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that's not as desirable as expanding the total amount of work."
Two-thirds of the stimulus went toward tax cuts, fiscal aid to states, and expanded unemployment benefits and food stamps. These efforts helped cushion the recession's blow, saved public jobs and, by injecting demand into the economy, bolstered employment indirectly. On Thursday, Congress buttressed these efforts with an extension of unemployment benefits and an expansion of the tax credit for homebuyers.
The remaining third of the stimulus, however, was expected to be the real jobs generator: $250 billion for infrastructure -- roads, transit, water treatment -- and for investments in energy efficiency, broadband access and other areas. But it is becoming clear that much of that spending is not producing many new jobs. Highway funds have put repaving crews to work, but $6.5 billion flowing to states and cities for energy projects has only just arrived and has created virtually no private-sector jobs yet.
The jobs impact is also paltry so far for the $3 billion in National Science Foundation grants and the $10 billion for the National Institutes of Health. And much of the $19 billion for health information technology will not be spent until 2011.