Read the full issue brief (CAP Action)
When President Barack Obama announces his jobs plan in September, it should be a plan that matches the scale of the problem. With millions unemployed and job creation sluggish, this is not the time to be timid.
In particular, the president needs to offer much more than proposals that conservatives in Congress might support—tax cuts that wouldn’t be nearly as effective as the alternatives. The president’s proposals also will have to go well beyond simply extending provisions such as payroll tax cuts that are set to expire. With millions of unemployed Americans, the plan needs to be one that will improve the economy, not just tread water. And the plan needs to create jobs fast, not just lay the groundwork for jobs in the future.
In short, the plan should be a sharp contrast to the economically nonsensical agenda his political opposition is passionately arguing for. The idea that simply slashing government programs and taxes is the key to economic success is a tried and failed strategy. The tax system we have now is a tax system inherited from President George W. Bush. We’ve seen the results. Economists across the political spectrum agree that spending cuts in a weak economy run counter to everything we know about getting a country out of an economic hole. President Obama should not meet halfway those who only offer economic incoherence. He should take them head on.
The president’s plan should be designed to boost private-sector job creation. All of us, from everyday Americans and small business owners to the chief executives of corporations and investors on Wall Street, want private-sector job growth. We all know it’s the key to a sound and sustained recovery. And there is plenty of money in the private sector to create millions of jobs. Corporate America is experiencing record profits in the trillions of dollars. The problem is that not enough of that money is going back into our economy in the form of new hires or new investment. So if we all agree that’s what we need and there’s the money to do it, why isn’t it happening? What is the missing catalyst that will spur businesses to start hiring?
What’s missing is demand for the goods and services that businesses provide. Businesses are not going to create a new supply of jobs and investment unless there’s demand for what they sell. And the consensus is growing that this is what government needs to do—create the catalyst that will spur demand so business will have the need and confidence to create jobs and invest. Concern that the federal government will instead pull even further back as a source and instigator of demand is helping to spark volatile swings on Wall Street, and downward revisions on the outlook for economic growth from international financial institutions and business economists. Even a Republican billionaire bond trader such as Bill Gross of PIMCO has argued that “[c]apitalism in its raw form can’t pull us out of this hole.”
Does the president need to show how the nation is going to pay for his plan to create jobs? Of course. The plan should include specific mechanisms to pay for the job creation proposals in the 10-year budget window. The Center for American Progress has shown in several reports how this is possible. But economists of all points of view recognize that reducing the federal budget deficit too quickly would be counterproductive to getting the economy going and addressing the nation’s fiscal challenges—as well as to the central issue of job creation.
In this issue brief we offer three ideas that should be part of any plan to get our economy back on track so our nation’s job creation engine can re-engage. Our proposals are:
- Investing in our nation’s infrastructure through existing channels and a new infrastructure bank
- Speeding the housing recovery by reducing the flood of foreclosed homes on the market
- Supporting the retrofitting of homes and businesses to make them more energy efficient
These are not the only things that need to be done. The lack of jobs is a huge problem for the country and these three proposals alone will not solve it. But a credible plan to make substantial progress toward stronger economic growth and job creation must include these steps done at sufficient scale and in the right way. And that’s what we propose.
Read the full issue brief (CAP Action)
Michael Ettlinger is Vice President for Economic Policy at the Center for American Progress. Donna Cooper is a Senior Fellow with the Economic Policy team. Sarah Rosen Wartell is Executive Vice President of the Center. Bracken Hendricks is a Senior Fellow with the Energy Opportunity team at the Center.