The stand-off in Washington over spending reductions has pushed aside serious discussion about a far more pressing issue: job creation.
Granted, the country is long overdue for action on spending cuts. There is much that our government does that we can live without. Bureaucracies’ programmatic lassitude and congressional appropriators’ adolescent-like lack of discipline have contributed to our nation’s fiscal imbalance.
To be sure, the federal deficit is heading into a crisis zone the likes of which the United States has never seen, and a fairly dramatic policy response is needed to fix it. But one overlooked way to improve the fiscal picture would be to spark economic growth. This is precisely what worked well in the 1990s, something for which both a Republican Congress and Democratic President could legitimately claim credit.
But the focus on jobs and economic growth has been lost.
Democratic leadership chooses to focus on a narrow, government-driven idea of job growth, deluding themselves – against the huge weight of evidence – that government can lead the job growth agenda through stimulus. Republicans have made spending cuts the backbone of their jobs growth strategy, and they have embarked on a campaign to convince voters that if we cut enough spending, investor confidence will return, employers will hire more people, and jobs will return.
President Obama’s Sputnik moment was truly the stuff of science fiction, or at least the Truman Show, in which we all drive our Priuses from our homes to the train station down the street on our way to work or the gym in a carefully planned world that will – voila! – create millions of jobs. Republicans, for their part, have been primarily focused on non-defense discretionary spending – that part of the federal budget that accounts for only a little more than a third of all spending and which, if you removed all of it, would still leave the entitlement programs intact that add most to our debt and deficit. After the work of the scalpel is done, Republican theory goes, enough space will be cleared up in the economy for Adam Smith’s invisible hand to start generating jobs in an Austrian school-like spontaneous order, which will generate jobs…and so on.
Now, to their credit, Republicans have begun talking more seriously about introducing entitlement reforms this year that would address the more serious deficit issues. Given the bipartisan nature of President Obama’s debt commission, the plan should get the support of at least some Democratic members, even if the President and Democratic congressional leadership shove it aside.
But however much GOP congressional leaders might be wising up on addressing the deficit through fiscal restraint, they are AWOL on addressing it through job creation and growth, without which deficit reduction is much, much more painful.
Voters know this at some level. In a poll of self-identified conservative Republicans at ConservativeHome.com, a site I edit, respondents are eager to see deep spending cuts, but they also give Republican lawmakers low marks on job creation and economic growth. In a poll we conducted last week, nearly half (49 percent) of respondents said they thought Republicans had been doing a good job of pushing for spending reductions, but 69 percent said Republicans were not doing a good job of explaining what they were doing to create jobs. The party of growth and opportunity has not even convinced its most ardent supporters what it is doing on the economy.
Meanwhile, Gallup’s numbers this past week painted a troubling picture amidst slightly good news. While their survey showed an unemployment drop from 10.9 percent to 9.8 percent in the past year, this came mostly from gains among the most and least educated. Middle America remains pretty much stuck where it was. And then, as if to pour salt in a wound, Gallup released numbers three days later showing deterioration in jobs numbers in February compared to January.
We can’t keep going on pretending stimulus, on the one hand, and spending cuts, on the other, are a viable economic growth strategy. There needs to be a realistic plan put forward and the party whose candidate figures this out will win the White House in 2012.
The plan should consist of at least the following:
First, tax reform. The President’s debt commission put forward some really good ideas. The best idea winning the most bipartisan support is reforming the corporate tax code. Rather than being a giveaway to big business, lowering America’s ridiculously high rate is the most proven way to create jobs. The OECD, not some right wing group, has concluded this after studying the issue across a number of countries. Also, simplifying the tax code by getting rid of costly deductions would help.
Second, make it clear what being too big to fail means so investors will know, and start putting more capital into businesses that will create jobs. Luigi Zingales at the University of Chicago has a good idea about clarifying the current financial reform bill along these lines.
Third, make energy the central component of a growth strategy. The U.S. has the capacity to become a net exporter of natural gas and to re-start a generation of nuclear power production that would make us less dependent on nonrenewable energy. We would also be greener in terms of carbon emission and would create jobs.
Fourth, build more roads. Forget about those train tracks. We should be scraping together every unused stimulus dollar and wasteful penny of DOT funding to add lanes of highway to our most congested areas. Facilitating commerce and reducing lost revenue due to traffic congestion will also have the benefit of creating needed jobs.
This would be a start. Whether anyone will take up the challenge is another issue.
Ryan Streeter is Editor of www.ConservativeHome.com.
Official White House photo by Pete Souza.