To restore jobs to the economy, what can Obama do?

Obama's team cites the stimulus bill for keeping people working, but with the US economy still shedding jobs, calls to do more are getter louder.

Paul Sakuma/AP
Maria Marroquin helps find work for unemployed workers Friday at the Day Worker Center in Mountain View, Calif. The unemployment rate rose to 9.8 percent in September, the highest since June 1983.

Worse-than-expected job losses are tough on US workers – and perhaps developing into a political problem for the White House and Democrats in Congress.

Republican critics say the dire employment situation calls into question President Obama’s economic policies and shows why Americans shouldn’t trust Democrats to reform the nation’s healthcare structure.

But White House budget director Peter Orszag on Monday defended Mr. Obama’s record, saying things would be far worse without actions such as the stimulus package passed by Congress in February. The administration will take further action if officials deem it necessary, said Mr. Orszag in an interview with the Associated Press.

“If the economy remains fragile, additional options will be considered,” he said.

Right now, the jobless rate is 9.8 percent – about half a point higher than the administration expected, according to the budget chief. That is the highest such monthly rate in more than 25 years.

It's expected to get worse. Many economists predict unemployment will climb over the 10 percent threshold before it begins to improve.

Talk of “green shoots” abounds on Wall Street, and the stock market has been doing well. But high unemployment spreads misery at the US grass roots.

“The recession may have ended. But labor market conditions remain harsh for those struggling to find a job,” writes Chad Stone, chief economist of the Center on Budget and Policy Priorities, in an analysis of the September employment figures.

On Monday, Obama met with his economic team to discuss possible ways to mitigate the effects of job losses and to convince US businesses to begin hiring. Among items under consideration:

Extension of benefits. The administration supports the effort by congressional Democrats to extend unemployment benefits. The House has already passed legislation that would add extra weeks of support for the jobless in states with high unemployment. The Senate has yet to act. Some senators want to broaden the program, making extra benefits available in all states.

Congress is also likely to move to extend subsidies available under the Cobra program, which allows laid-off workers to continue to buy health insurance under their former employers' coverage.

Former Federal Reserve Chairman Alan Greenspan, a past champion of free markets, on Sunday said that such extensions, while expensive, are the right thing to do.

“This is an extraordinary period and temporary actions must be taken, especially to assuage the angst of a very substantial part of our population,” said Mr. Greenspan in an ABC broadcast interview.

Tax breaks. Administration officials have discussed extending the popular $8,000 tax credit for first-time homeowners, which is due to expire later this year. Some have pushed for the revival of an idea from the debate over the stimulus package, in which Obama floated the possibility of providing businesses a $3,000 tax credit for each new person hired.

Paying firms to hire people, however, may just be in invitation for them to manipulate their employment rolls, according to some economists. That is one reason the $3,000 new-job tax credit was left out of the stimulus bill in the first place.

The economy and the employment situation would be in even worse shape if the stimulus bill had not been passed, said OMB chief Orszag in his interview with AP. He estimated that the $787 billion infusion has added two to three percentage points, on an annualized basis, to GDP growth.

“That may well be the entirety of any positive growth [this year],” he said.

However, critics say the job figures show how little the stimulus has achieved.

“At this point, the only measure growing faster than the president’s jobs deficit is his budget deficit,” writes former OMB associate director J.D. Foster, now a Heritage Foundation economist, in an Oct. 2 analysis of the job figures.

Healthcare reform, plus possible climate change legislation, would only make the employment situation worse, according to Mr. Foster.

“These multiple threats posed by Obama’s policies badly degrade the economic environment for investing and hiring and delay the needed process of substantial job creation,” he writes.


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