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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•Calm the foreclosure wave. Tackling the default and foreclosure problem would help clear the way for a recovery in home prices and in the health of banks. The 11 million mortgage borrowers who are "underwater," with negative equity in their homes, are a big damper on the spending needed to rev up economic growth. After all, it's hard for the Federal Reserve to pump life into the economy via ultralow interest rates if banks are reluctant to lend and relatively few customers are trying to borrow. A program reducing loan defaults and improving household finances would coax banks to write down the principal value of at-risk loans. (See related story, page 20.)Skip to next paragraph
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•Repair other avenues of finance. Businesses not only face a poor climate for borrowing, but also a bad environment for raising equity capital, such as by issuing stock. In a survey of venture capitalists this year, the National Venture Capital Association found more than half citing both "unfavorable tax policies" and an "unstable regulatory environment" as problems. Some industry leaders propose a federal task force to improve the funding climate for firms in both their early stages and their later initial public offerings on the stock market.
Obama has proposed some tax changes that would help nurture innovative companies. He wants to make a tax credit for research activity permanent..
•Open doors to more highly educated immigrants. Many of the best and brightest from other nations study in the US and then head home to pursue careers. A system of green cards for advanced degree holders could help fuel an entrepreneurial boom and the jobs creation that goes with that.
•Do more to retrain displaced workers. A more skilled workforce doesn't guarantee more jobs, but training is key to growth in high-wage employment. Democrats have proposed a Community College Technology Access Act, to fund classes for the many jobless workers who lack computer skills.
Are there more radical ideas?
Sure, but the most radical proposals have a harder climb in partisan Washington than more mainstream ideas. Some examples:
•On the right, some argue that eliminating or temporarily halting the minimum wage would encourage employers to hire many young or unskilled workers who have been hit hard by the recession.
•On the left, some call for a government effort to directly employ people, reminiscent of the 1930s.
•Another approach, with fewer bureaucratic challenges, is "work sharing." Employers would be encouraged to ask employees to work less, so that jobless people could be hired part time. The government would cover the pay shortfall of current workers who see their hours cut.
How much difference can a jobs policy make?
Economists generally predict a slow jobs recovery under any scenario. But a good set of policies might accelerate the process, while missteps or inaction could slow it down or stymie it altogether.
And timing is important. Although politicians are focused now on the election campaign, some economists say the next half-year or so is a danger zone with a significant risk of relapse into recession.