For job creation, is government a help or hindrance?
The dueling job-creation plans that President Obama and GOP figures have rolled out are feeding into a broader debate about what role the US government should play in the economy.
With economic growth so slow that forecasters see a significant risk of tipping back into recession, US presidential candidates have been busy rolling out job-creation plans.Skip to next paragraph
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But the job plans are proliferating even as Washington is also focusing on how to cut federal deficits. Traditionally, fiscal restraint is viewed as the opposite of an economic "stimulus."
Are these two goals – jobs and fiscal responsibility – at odds? The question points to a broader debate that has flared up about what role government should play in the economy.
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Will the economy spring to life by – to borrow a phrase from Texas Gov. Rick Perry (R) – getting government "out of the way"? Or are government actions a vital source of economic fuel at a time when the private sector shows little momentum?
President Obama provided his answer to those questions while rolling out his new jobs plan on Sept. 8.
Washington "can help," he said near the start of his address to Congress. And later he added: "In fact, this larger notion that the only thing we can do to restore prosperity is just dismantle government, refund everybody's money, and let everyone write their own rules, and tell everyone they're on their own – that's not who we are. That's not the story of America."
Republican critics rushed to label his plans as more government "stimulus," arguing that such ideas have been failing to work since Mr. Obama took office in 2009.
Both sides say the economy is in trouble. The Labor Department's latest monthly employment tally, for August, showed zero new jobs. Federal policy isn't the only reason, but it appears to be playing a role. Consumer confidence took a sharp midsummer dive just as high-stakes bargaining over the nation's self-imposed debt ceiling came to a head.
It wasn't that Americans were losing faith in one party or the other. Approval ratings plunged for both Obama and Congress. In part, the debt-limit wrangling revealed a dysfunctional capital, but it also served as a wake-up call – with recent parallels in Europe and Japan – that government doesn't have an infinite capacity to spend.
Gary Shilling, who heads an economic research firm in Springfield, N.J., says in a recent report that the world faces a crisis of confidence resulting "from the realization that governments, through their monetary and fiscal policies, have no magic bullets they can fire" to revive growth rates seen in the 1980s or '90s.
So what can government do?
In his speech to the nation, Obama made the case for renewed fiscal stimulus – without using that now-tarnished word. He proposed a $447 billion American Jobs Act, including tax cuts (more than half the plan's cost), spending on infrastructure, and help for the unemployed.
The proposal would extend a temporary payroll-tax cut for a year, to keep an extra $1,500 flowing to a typical household. Another payroll-tax cut would go to businesses, in a way designed to reward new hiring. Obama also urged other steps, from spending on schools and roads to maintaining extra weeks of unemployment insurance and launching a "returning heroes" tax credit for firms that hire veterans.
All this would come even as a congressional "super committee" is tasked with finding $1.5 trillion in budget savings during this decade. Obama said his new proposals should be paid for by having that panel find additional spending cuts or tax hikes in future years.
Obama's plan contrasts sharply with ideas from GOP rivals for the White House. Just days earlier, former Massachusetts Gov. Mitt Romney released his own 59-point jobs plan. Where both men say their goal is to help job creation immediately, the Obama stimulus emphasizes temporary jolts while Mr. Romney pledged permanent changes to taxes and regulation.