The White House is hosting a job summit today to brainstorm ways to tackle unemployment. The numbers are familiar -- 10.2 percent unemployed; another 7 percent underemployed -- but the widespread pain they represent is extraordinary. Think of it this way. The number of unemployed Americans is currently about 16 million. That's the population of Pennsylvania and Connecticut combined. If you factor in underemployed workers, you get a population larger than the state of Texas. More than eight million have lost their jobs since December 2007. That's New Jersey. Almost six million Americans have been unemployed for more than six months. That's everyone in Maryland.
Beyond the numbers, the jobs crisis is multidimensional. Most importantly, those millions of Americans represent devastated families, broken investments and uprooted dreams for their children. But they also represent devastated consumer demand for products and services, which discourages employers from investing and hiring, feeding a vicious cycle. Politically, high unemployment mocks the White House's hundreds of billions of stimulus dollars and leaves incumbents vulnerable in 2010.
Unemployment in America deserves the White House's attention, which is why I'm cautiously optimistic about today's "jobs summit" where the administration will field advice from economists and public policy experts about how to slay this beast. To that end, I offer this menu of job stimulus ideas for White House fiscal policy with an eye out for pros and cons.
Here they are, without much editorializing, listed in order of how likely it is that they will be in a jobs stimulus bill.
1) Direct aid to states
State governments have been decimated by the recession, forcing them to to make steep cuts to programs like education to avoid deficits. Direct state aid would avoid these potentially devastating cuts.
For: It's simple: direct aid would save state government jobs (the first stimulus saved an estimated 250,000 education jobs). Now that private sector industries like manufacturing are beginning to rebound while state government continue to face a new wave of job cuts, we should be focusing on saving crucial state jobs and services.
Against: Some argue that the key to job growth is stoking private sector businesses to hire, rather than padding what they see as already-bloated state government rosters with easy money.
2) Infrastructure projects
One classic stimulus strategy is to fund infrastructure projects across the country that keeps construction workers working on roads and bridges and our roads and bridges, well, just working.
For: The CBO estimates that infrastructure projects have one of the highest multipliers, meaning that the money doesn't just sit in the pockets of employers, but rather it circulates through the economy at a good velocity which pads incomes and increases services. In other words, these projects are efficient creators of both jobs and demand and they produce roads and bridges that last.
Against: Some worry that infrastructure projects are one-offs that don't contribute meaningfully to GDP because the stimulus only helps a handful of construction large construction companies. Others worry about the kind of projects that are funded. "Shovel-ready" projects might be front-loaded, which means that some necessary, long-term construction projects are left out.
3) Tax credits for companies who hire
The Economic Policy Institute, a liberal think tank, says the government should offer tax credits for companies that expand their payrolls. They estimate that "a job creation tax credit that refunded 15% of new wage costs in 2010 and 10% of new wage costs in 2011 could create 5.1 million additional jobs in the U.S. economy over these two years."
For: We want companies to hire, and they're nervous about money. So why not simply tell employers: "Hire somebody and we'll give you money?" It's the easiest way for the government to dangle a shiny reward in front of employers' faces, and it's better than a public works project because it take on the entire salary of the newly created job.
Against: Tax credits can be gamed, and this one is no exception. Employers might try to finagle tax credits for hires they've already made, or were poised to make anyway. Some are concerned that firms might fire workers before the credit kicks in and hire them back to take the credit. That would turn the policy into free money for devious companies.
4) Small business loans (or tax cuts)
Let's not be too clever here. We know that small businesses have the potential to create a lot of jobs. So why not offer them non-recourse loans (or targeted tax cuts) to encourage them to expand and hire while protecting them against losses?
For: Since around 70 percent of job creation comes from small business, loans for those firms could go a long way in preserving and creating new jobs.
Against: Like job sharing and a payroll tax holiday, there's no guarantee that loans or tax cuts will directly create jobs, and the government might incur losses on the some loans if we promise business they don't have to pay back in full if profits don't rebound.
5) Tax credits for weatherizing homes
The NYT's David Leonhardt did a great job summing up this idea, and giving it a spiffy name: "Cash for Caulkers." The basic idea is that the government would give households money to pay for weatherization projects, which save energy costs in the future.