This morning's report showed jobs are still growing slower than the population. Here are six ideas that can jump-start job-creation -- and the stalled partisanship in Washington.
From the time the United States hit its statutory debt limit on May 16 until President Obama signed a bill raising the limit on August 2, the Dow Jones industrial average fell nearly 600 points. (By 1 p.m. on Thursday, it had fallen roughly 300 points beyond that, effectively wiping out all the market's 2011 gains.) Lenders foreclosed on some 500,000 homeowners. The Commerce Department reported that the economy grew by just 0.4 percent in the first quarter of the year and 1.3 percent in the second. About 300,000 more Americans went looking for a job and couldn't find one.
Lawmakers didn't do a thing about any of that.
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In a protracted quest to avoid an economic catastrophe entirely of their own making, members of Congress and Obama spent several months ignoring an actual catastrophe unfolding under their noses--the sharp turn of the U.S. recovery back toward recession. At the end of their tortured negotiations, both sides bragged that they had spared the meltdown of a sovereign default or a massive disruption in consumer spending. No one argued that they had boosted growth or created jobs.
Economists call that an "opportunity cost"--the price of doing one thing, measured in the value of what you could have been doing instead. Voters might call it negligence. By any name, it's finally over, and it's time for lawmakers to make amends. They should start by carrying their urgency from the final days of the debt-ceiling debate into an immediate crisis conversation about jobs.
This is not the time for recess, for fundraising, for catching up on sleep. Certainly not for golf. It's not time to talk about a "pivot" to job creation, as Obama and Senate Democrats did this week, or to promise action at some unspecified date on some small-scale bills languishing in both chambers. It's time for Obama to summon John Boehner and Harry Reid and Mitch McConnell and Nancy Pelosi and whatever lieutenants they require back to the White House, day after day, until they can work out a deal to help speed growth and unleash millions--millions--of new jobs. If the leaders can't handle the details themselves, they could pass the task off to another congressional super committee, like the one they created for deficit reduction under the debt-limit deal, and fast-track its recommendations to the House and Senate floors.
Assuming that Washington actually cares about job creation, as opposed to just talking about it, a bipartisan economic package should be able to attract a supermajority in the Senate and at least 160 Republicans and 90 Democrats in the House--something like the debt-ceiling coalition. It's clear that this Congress won't entertain any ideas that cost serious taxpayer money (such as a $100 billion-plus infrastructure bank or a similar effort to rebuild crumbling highways and bridges), no matter how many economists warn that faltering consumer demand is sinking the economy. But plenty of opportunities remain to leverage private investment and spur widespread job creation, in areas where Republicans and Democrats have found common ground in the past.
Here's a starter list of possible "grand bargains" for the politicians who spent the bulk of their summer arguing about everything but how to get America's 14 million unemployed back to work.
1. Open and improve trade. First, because it's the easiest. Republicans get swift passage of pending free-trade agreements with South Korea, Panama, and Colombia, along with accelerated negotiations toward a Trans-Pacific trading partnership with other Asian nations. Democrats get a diplomatically delicate--but wildly popular among voters at home--law authorizing the administration to retaliate against China for suppressing the value of its currency. Leveling the currency playing field would boost U.S. exports to China, perhaps dramatically (unless it sparks a trade war, which seems unlikely because that would be in neither country's interest). The total package of freer, fairer trade could support more than 2 million new jobs, according to cumulative calculations from the U.S. Chamber of Commerce and the Economic Policy Institute.
2. Stabilize the housing market. Housing, the recovery's biggest drag, has confounded the White House and Congress, and with good reason. The market is still working through a glut of foreclosures that started with homeowners who bought more than they could afford, and then spread to more-responsible borrowers who lost jobs in the financial crisis. An oversupply of cheap, repossessed homes has helped sink housing prices nationwide to their lowest levels in a decade, adjusted for inflation. Falling values have erased trillions of dollars in wealth for Americans who have kept their houses, spurring consumers to save more and spend less and robbing entrepreneurs of a tried-and-true tool--home-equity loans--for starting or expanding a small business. "You don't have a very good shot at sustained job growth unless you address the largest factor holding it back, which is demand," says Robert Shapiro, a former Clinton administration economic adviser who now runs the consulting firm Sonecon. "You can't get demand going until housing prices stabilize."
For people who could afford to stay in their homes if they found jobs, the government could set up a sort of bridge-loan program to stave off foreclosure.
Therein lies another possible bargain: Obama and Republicans could agree to try a double-barreled attempt to get foreclosure rates back to historically normal levels. They could reverse the administration's recent efforts to slow the foreclosure process for delinquent borrowers and, instead, take steps to shuttle the most-troubled homeowners--the ones who borrowed beyond their means--out of their houses and into rental units as fast as possible. Keith Hennessey, a former economic adviser to President George W. Bush, compares that effort to removing a Band-Aid: "Policies for several years now--including under the administration I worked for--have focused on trying to keep people in their homes," says Hennessey, now a research fellow at Stanford University's Hoover Institution. "That stretches out the problem," pulling the bandage off slowly. Maybe now, he says, it's time to "rip it off really fast. Stop trying to help keep people who can't afford to be in their homes stay in their homes."
For people who could afford to stay in their homes if they found jobs, the government could set up a sort of bridge-loan program to stave off foreclosure--money to cover mortgage payments for a year or two, until the economy improves and the borrower finds a job and pays back the money. Those loans could help stabilize home prices, restore consumer demand, and, hopefully, trigger job creation. "If you can get that virtuous cycle going," Shapiro says, "then the loan only has to be temporary, and they'll be able to handle their own mortgage" very soon. Double bonus: The cycle would help lift the rest of the economy, and hiring too. The political and policy challenge will be finding a best-fit formula for determining which homeowners can afford their loans and which ones are in over their heads. But the rewards of stabilizing housing outweigh the political risks. Top economists such as Stanford's Robert Hall and the University of Chicago's Amir Sufi contend that housing woes and their effects on consumers are key factors in stifling growth and job creation.