The Dangers Ahead for Obama’s Jobs Program
President Obama announced his $150 billion job creation initiative on Tuesday, which includes everything from new spending for highway and bridge construction, to small , to retrofitting millions of homes to make them more energy-efficient. It’s the sort of news that probably would have gotten more headlines today — it didn’t make the front page of The New York Times or The Washington Post — if it wasn’t for the congressional hearings on Afghanistan and the Democrats’ reported health care deal.
Still, in the financial blogosphere, this kind of thing doesn’t get missed. And not everyone is impressed. Robert Reich writes that Obama’s balancing act is too delicate for an employment crisis that may be more severe than is understood.
No president in modern times walks a tightrope as exquisitely as this one. His balance is a thing of beauty. But when it comes to this economy right now — an economy fundamentally out of balance — we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.
States and cities, for example, are estimated to be $350 billion hole this year and next. They can’t run deficits so they’re wildly cutting spending, cutting jobs, cutting contracts, and raising taxes and fees. That’s a huge anti-stimulus package roughly as big as the remaining direct spending in the old federal stimulus package. Which means, Obama’s “new” stimulus, announced today, is about all we have, and it’s not nearly enough.
At Economist’s View, Mark Thoma agrees. A failed second jobs package, he said, would do more damage than doing nothing at all.
A jobs program that is too small is politically dangerous. If unemployment is still a big problem even after this program is in place, it will look like two separate programs — which in their totality are not large enough to get the job done — have failed to generate new jobs. That’s not only costly in this recession — people who could be employed won’t be — but it will also undermine the case for similar programs in the future. This removes an important policy tool from the government’s arsenal, even though a jobs/stimulus program large enough to make a dent in the problem would likely work.
The administration is pushing ahead, nonetheless. Bloomberg reports Treasury Secretary Timothy Geithner plans to tell Congress today that the Obama administration will extend the $700 billion financial-rescue program until next October. The administration wants to use some of the money to aid small businesses and homeowners, Obama said in his speech on Tuesday.
It’s fair to argue over what a jobs package should look like — and whether the administration is being aggressive enough in dealing with unemployment. But one thing that shouldn’t be overlooked is the urgency of doing something. Although last week’s employment numbers showing a drop in the jobless rate to 10 percent prompted a sigh of relief that the worst may be over for jobs, that’s not necessarily true. It’s a one-month drop, not a trend. And Calculated Risk points out a scary fact today: Job cuts may be down, but hiring hasn’t picked up — labor turnover is near a record low, according to the Bureau of Labor Statistics.
So we’re not out of the woods yet. Obama’s jobs plan may not be enough, as Reich and others contend. We may well be in an employment crisis that is far worse than last week’s job numbers suggest. Maybe it’s best to look at the administration’s initiatives as a first step — but more needs to follow. Much more, regardless of whatever balancing act it may require.