Lawmakers' tough choice: curb the deficit or create new jobs?
President Obama has made a priority of tackling the US unemployment rate – now about 10 percent. But a new jobs program would add more to the soaring federal deficit.
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The hearing was organized by Senate Budget Committee chairman Kent Conrad (D) of North Dakota, a backer of the commission idea. The panel might craft fiscal solutions that Congress would vote up or down, similar to the method used to break impasses over which military bases to close. Mr. Conrad is not alone in his concern. House majority leader Steny Hoyer and Treasury Secretary Timothy Geithner are among those who’ve said existing budget mechanisms aren’t likely to get the job done.Skip to next paragraph
A revived focus on deficits, however, does not mean the government will soon operate in the black or that job creation is a lower priority.
With 15.4 million Americans out of work, many economists continue to back government spending for job creation – on top of the $787 billion stimulus already under way. The idea is that federal expenditures can add fuel to an economic recovery to help make up for retrenched spending by households and many businesses.
A few days after his jobs summit, Obama laid out proposals that draw on many ideas economists and business leaders had offered. The ideas have support among those who worry that the pickup in private-sector job creation will be tepid. Some even say Obama should be much more aggressive, given the depth of joblessness.
Although the Senate doesn’t appear ready to act on Obama’s ideas, Democrats in the House showed their enthusiasm this week by voting for a $155 billion jobs package. The bill focused especially on two areas. First is spending on infrastructure such as highways and subways, which proponents say can add jobs quickly and at a relatively low cost per job. The other focus is aid to state governments, to reduce job cuts due to tight budgets.
But another sizable camp says using deficit spending to revive growth isn’t working very well. So far, some $175 billion in stimulus has created between 600,000 and 1.6 million jobs, according to estimates by the Congressional Budget Office. The economy needs many more than that.
The fix, conservatives say, mainly requires restoring private-sector confidence by keeping taxes and regulations in check.
Though the Obama administration differs with Republicans on jobs policy, it agrees that charting a path to sustainable federal budgets is vital. Otherwise, investors could lose confidence in the soundness of the dollar and the safety of Treasury bonds. Secretary Geithner wants to bring budget deficits down to 3 percent of US gross domestic product, from about 10 percent now. If GDP can grow at a 3 percent annual rate, that would hold the nation’s overall debt level constant, as a share of the economy.
Achieving that objective won’t be easy, because of the projected rise in healthcare and other entitlement spending. But without sustained attention to fiscal health, the risk is that rising debt and taxes will slow the economy’s growth rate – and make jobs even harder to come by.