The June 13 column in The Wall Street Journal by Jeff Immelt and Ken Chenault describing the progress report of the President’s Jobs and Competitiveness Council, which Mr. Immelt chairs, is mostly encouraging but raises some concerns. The president created the council earlier this year when he asked 26 private-sector leaders—including General Electric CEO Immelt and American Express CEO Chenault—to develop ideas on strengthening the economy, ensuring the competitiveness of the United States, and creating jobs. The column describes a set of “fast-action” steps that the council has agreed on and offers some generalities regarding the council’s focus as it develops proposals designed to have a more significant, longer-term impact than the short-term steps provide. To be successful, the council should look beyond the specific sectors that it has highlighted so far and put more emphasis on the demand side of the economy. If it does these things there’s great potential for this council to make an important contribution.
The short-term “fast-action” steps the council offers—which include training workers, streamlining permitting, boosting tourism, improving small-business credit, and promoting construction jobs—will be helpful for accomplishing its goals. One of the most appealing features of these steps is that they take aim at the actual problems the economy faces. It is not a list of council members’ pet solutions looking for problems to justify them.
This is a welcome contrast from what we see from conservative political leaders who have one answer to every question: cut taxes for the wealthy and corporations. That’s the “answer” whether the economy is weak or strong, we’re at war or peace, or we have high budget deficits or small. They never waiver from that answer—they just change the question they claim to be answering to match the times. It is thus refreshing the council took a fresh, honest look at the economy in developing its initial set of recommendations.
The fast-action steps are all likely to produce benefits. Small-business credit, in particular, has been a nagging challenge even as the Federal Reserve and the administration have taken substantial steps to make loans easier to come by. Taking another swipe at that is well worth the effort. Also worthy of special note is putting construction workers back on the job to make public and private buildings more energy efficient. This proposal gets at a sector that has been hit especially hard and provides a valuable investment that will pay returns for years in the form of lower energy costs and reduced energy consumption and imports.
To its credit, the council recognizes that even though these fast-action steps are worthy, more is needed. Thus the council plans on releasing a more fulsome set of longer-range ideas in September. We hope that they’ll be as sensible as this initial batch. But the framework offered in the column for the longer-term proposals is a mix of sensible and worrisome: “First, we need to focus on fast-growth companies and small business. Second, we need to make America the most attractive place on Earth for high-tech services and manufacturing jobs and to accelerate foreign direct investment in the U.S.”
Those ideas may seem perfectly sensible but they are also somewhat disconcerting as described. Focusing just on “fast-growth,” “small,” and “high-tech” leaves out many important industries that employ millions of Americans. Making “America the most attractive place on Earth for high-tech” may seem appealing. But it has risks. Followed literally, it would probably hurt U.S. employment and be bad for the country. It would almost certainly mean large taxpayer subsidies for that sector coupled with lowering environmental and other standards. That might be great for the high-tech sector but that diversion of economic resources could do more harm than good economy-wide as less privileged sectors would suffer and jobs in those sectors would be lost.
The high-tech sector is very important to the nation’s economy—disproportionately so. We do indeed want the United States to be attractive as a place to locate high-tech industry jobs. But it’s a mistake to speak in absolutes and laser in on one sector at the potential expense of others without careful balancing of the potential unintended consequences. The council needs to keep the big picture in mind.
There is one other concern about where the council appears to be headed. It does not seem to be focusing sufficiently on the demand side of the economy. A big reason we have a persisting jobs problem is that businesses simply don’t have confidence that there will be growing demand for their output. Without that confidence, they are reluctant to hire and invest.
The council has not addressed this adequately. There’s no mention, for example, of the importance of continuing extended unemployment benefits beyond the end of the year. Research has shown that the immediate per dollar benefits to the larger economy from unemployment compensation are greater than almost anything else the government can spend on. Unemployment benefits are not terribly generous to recipients, but they do temper to some degree the reduction in spending by the unemployed—which helps businesses as those dollars show up in stores and, in turn, spurs jobs and investment.
Another area the council appears to side-step thus far is public employment. Obviously in these tough fiscal times it’s difficult to discuss expanding levels of government employment. But the layoffs we’ve been seeing at the state and local level are damaging to both the short-term and long-term economy.
In the short term, layoffs have added to the unemployment rolls and created more competition for the jobs that are available in the private sector. In the long run, cutting teachers, police, and other public servants creates big economic problems. Education is obviously of key economic importance, but rising crime, wasted time at the motor vehicle bureau, and even cutbacks in parks that generate tourism dollars have an impact. The federal government needs to be helping state and local governments address their fiscal problems to address both the short-term employment problem and our long-term economic needs.
The number one issue in the country is getting the economy back on track and creating jobs—by far. Unfortunately, Washington has become distracted. Hopefully ideas that come from the President’s Jobs and Competitiveness Council can cut through ideological divides and re-focus the nation’s attention on what matters most.
Michael Ettlinger is Vice President for Economic Policy at American Progress.