America's Job No. 1: A better employment rate
A selection of solutions for a better employment rate: From cutting taxes to raising taxes, job sharing to job training.
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•Extend the Bush tax cuts. Republicans argue that renewing the tax cuts when they expire at year-end would boost employer confidence. In their "Pledge to America" plan, they would combine these other steps to reassure the private sector: cuts in other discretionary federal spending and an effort to slow the pace of new regulations.Skip to next paragraph
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Many Democrats argue for a tax-cut extension that's short term (a couple of years) or partial (excluding the rich). If the cuts expire, the economy could feel a 2 percent dip in GDP early next year, economists at Goldman Sachs estimate.
•Get the government's fiscal house in order. Any steps that restrain the rise in government debt (even if the changes aren't immediate) could give confidence to investors, businesses, and consumers. This in turn could spark spending and hiring, as Americans conclude that a debilitating debt crisis is less likely. Advocates of this idea don't recommend an immediate sharp cut in federal spending, given the current fragile recovery. But in a new Brookings Institution report, William Galston and Maya MacGuineas argue that high public debt is harming the economy, and that reforms leading to fiscal restraint are likely to boost economic growth.
•Increase government spending on strategic infrastructure such as energy security and university research facilities. Many economists argue that this will keep the US at the forefront of innovation and high-wage jobs. For budget hawks, the trick is to distinguish vital goals from pork-barrel projects.
•Promote exports. Economists agree on the goal of a more balanced economy, with stronger exports and less borrowing from abroad to finance imports. But there's less agreement on how to do that. Some call for a tougher tack with trade partners. Until this happens, says Peter Morici of the University of Maryland, China will keep manipulating its currency, subsidizing exports, and raising barriers to American imports. If US exports rise, and if Americans buy more US-made goods, that will create jobs. (The risk: a possible "trade war" that closes off some benefits of international trade.) The Obama administration aims to double US exports within five years, to create up to 2 million new jobs. But economists say it would probably require strong economic growth overseas and a big shift in exchange rates to achieve that goal.
•Give another monetary boost. The Federal Reserve – having already dropped short-term interest rates to near zero percent – has signaled that it may try "quantitative easing." In this plan, the Fed would buy assets such as Treasury Bonds to push up the prices of financial assets and expand bank lending.