The agony of job creation
The prospect of 10 percent unemployment persisting into next year's elections has Congress itching to do something directly on "job creation." Lawmakers, no doubt, are hearing plenty from jobless Americans who won't have plenty to put on the table this Thanksgiving. More then 7.3 million people have lost full-time work since the recession began in late 2007.
So far, President Obama has wisely resisted rushing to adopt the various ideas that are proposed to boost private hiring through direct government action. He, like many of his economic advisers, seems frustrated at what little government can do. "What we're seeing now is businesses are starting to invest again, they are starting to be profitable again, but they haven't started hiring again," Mr. Obama told NBC News.
Still, pressure from lawmakers to do something before Christmas has forced Obama to plan a "jobs summit" for Dec. 3, which would at least look like Washington cares. He plans to ask business leaders and others for ideas to encourage hiring even as the economy recovers slowly from the longest contraction since World War II. He will then tour areas with high jobless rates,
Mr. Obama's caution about government's ability to create private-sector jobs may come from a reality check on his previous actions. He predicted the $787 billion stimulus package passed in February would keep unemployment below 8 percent. It hasn't, with most of the saved jobs being in local and state government.
He also promised to keep an accurate count of jobs "saved or created" by the spending. Alas, the numbers turned out to be highly inflated. The count lacks credibility.
His focus for now rightly remains on bolstering the economy at large, which still includes helping major lenders get back on their feet. He warns of the possibility of a recession returning in 2010, or what he calls a "double dip."
Still, at least two serious ideas to provide incentives for hiring are being discussed in Washington.
One is a short-term cut in the payroll tax that employers now pay to fund Social Security and Medicare.
The other one is a tax credit to employers for every new hire they bring on – something Obama proposed last winter for the stimulus package but Democrats in Congress rejected.
Both ideas have big trade-offs.
The lost revenue from a lower payroll tax may worsen the $1.4 trillion deficit if budget cuts are not made elsewhere, and thus put a drag on credit for business to expand and hire.
The second holds a chance of fraud, as many employers may take the tax benefit for hires they would make anyway.
Yet both liberal and conservative economists say both plans would create jobs – if the trade-offs are managed well. But Congress shouldn't rush into them. It can wait for the president to make sure they will work.
