Beyond unemployment insurance: Six ideas to lift the economy
While Congress fights over extending unemployment insurance, Americans remain sour on the economy. But a few proposals show promise for encouraging growth.
The economy's slow patch has become a test of American confidence – and of whether policymakers can implement ideas to rev up job-creation engines beyond President Obama's exhortations to Congress to extend unemployment benefits.Skip to next paragraph
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Overall, Americans are still gloomy on the economy, according to a new TIPP poll of American adults. An index that measures economic mood fell in July for the second straight month and has been in pessimistic territory (below the 50 mark) for the year. Its July reading of 44.7 is well above its 2008 low of 37, but the index is at a new low since February 2009.
Three in 10 Americans have so little confidence in a recovery that they say an economic depression – not just recession – is likely within the next six months.
But is the negativism overblown? Whatever the answer is to that, does America need some new policies to get the economy moving faster?
The level of economic anxiety may be too high in one sense: The public has a much more pessimistic view than most professional forecasters, who don't see recession or depression ahead. To some extent, mood can become a factor driving real economic behavior – restraining spending and investment.
Yet, real reasons are driving America's pessimism:
•The pace of a nascent jobs recovery has cooled in the past two months. Businesses are reluctant to hire until they see more consumer spending.
•Tax hikes (at least for affluent Americans) and regulatory changes loom on the horizon.
•Despite stimulus programs, per capita income remains below 2008 levels.
•The banking system is burdened by heavy losses on bad loans.
•Households are still loaded with high debt, and the federal government's debt load is rising fast.
All those factors explain why the economy isn't exactly roaring forward. And they explain why many economists and business managers call for new actions to coax job creation.
"No one has been given a compelling reason to take on more risk," says Don Charlton, who runs a Pittsburgh-area start-up that helps other businesses manage the hiring of new workers. Small businesses, he says, "can't commit to a new hire unless we really feel like the trend lines in the economy are going to allow us to pay that salary for quite a while."
In fact, business owners are adding their own dash of pessimism to the climate. A survey of small-business optimism, released July 13, showed a sizable decline in June as business owners fretted about a lack of sales growth and what they see as faltering federal policies.
"Confidence is lacking and the news out of Washington is discouraging," said economist William Dunkelberg of the National Federation of Independent Business, in reporting the group's survey. "Until this changes, don't expect small businesses to start hiring."
So the vital question has become what policymakers should do now. Much of the debate centers around government stimulus, and whether the need is for more federal spending (liberals say so) or less (conservatives say federal deficits are hurting confidence instead of helping). This week, Mr. Obama forcefully inserted himself into the congressional wrangle over extending unemployment benefits, which have remained stalled since they expired June 4.
Obama says that laid-off workers deserve "emergency relief to help them weather this economic storm." Republicans have countered that extending the benefits would be fiscally reckless, deepening the national debt.