Will the Obama Administration's Latest Job Creation Ideas Help?

More

All could spur some hiring, but politics and practical obstacles could pose a problem

600 obama jobs Larry Downing Reuters.jpg

Now that the debt ceiling debate is finally over, the Obama administration has "pivoted" to jobs. Of course, the unemployment problem is hardly a new one at this point. Lots of ideas are already out there. Let's consider those the administration is currently said to be considering. Would they help, and are they politically feasible?

Hiring Tax Credit

One proposal would give companies a tax credit to hire unemployed workers. This is not a new idea. In fact, a similar proposal became law in March 2010, but it expired at the beginning of this year.

Pros:

  • The logic is clear enough. If well-designed, it would encourage hiring unemployed workers.

Cons:

  • Obviously, we didn't see an earth-shaking response last year when a similar program was in place.
  • Many firms will claim the credit for people they would have hired anyway. 
  • Other companies might hire people a little earlier than anticipated just to obtain the credit, only to hire fewer people in the months/years that follow. (Though, this isn't all bad.)
  • For firms that have no hiring plans, unless the credit is enormous, it won't spur them to suddenly decide to hire. Ultimately, future demand matters most.

Would such a measure get through Congress? It isn't free, which makes it a tough sell in a budget-cutting climate. But Republicans do often like anything that cuts businesses' taxes, so some may be persuaded to go along with it.

Investments in Domestic Clean/Renewable Energy

Wind power would reportedly be the major target. The measure would reportedly include renewing renewable energy tax breaks expiring this year.

Pros:

  • This is one of those industries poised to grow in future years, so may be a sweet spot for investment.

Cons:

  • The industry has very high costs, of both goods and labor, so the money might not go very far to create many jobs.
  • It is not a direct job creation measure, so there's no guarantee how much it will encourage hiring.
  • Many jobs will not be shovel-ready, as they'll rely on new contracts. 
  • New hires will often need advanced education or specialized skills, which might make new openings a mismatch for most unemployed Americans.

Again, this one will require spending, which might doom its chances. Moreover, many Republicans tend not to be too crazy about renewable energy spending, so getting their support could be tough.

Renting Out Foreclosures

Instead of selling foreclosures at depressed prices (or possibly donating them for bulldozing), Fannie Mae and Freddie Mac would rent them out.

Pros:

  • This would help slow housing market inventory growth, which may slow price declines.

Cons:

  • It's unclear how this would create jobs, other than very indirectly by trying to aid the housing sector.
  • But would it really? Investors purchasing these at distressed prices would do the same thing. Assuming there's a finite number of renters, then if the government is renting out houses, investors will purchase fewer to rent out and housing inventory would not decline any quicker than it otherwise would have. So the biggest difference here is that the losses for Fannie and Freddie would be delayed through this proposal. 
  • Moreover, if investors purchased these at a discount instead, they would more likely put work into some so they could charge higher rent, which would create renovation jobs.

The good news is that this proposal wouldn't require any additional spending. It would just require the will of Fannie and Freddie to sign on, which is not a guarantee. The Obama administration can't force them to go along.

Is This All We've Got?

These are the ideas that the Washington Post says are on the table. The above analysis should make pretty clear that these ideas all have quite a few cons and all could run into political difficulties. None of them would create millions of jobs. If the administration really wants firms to hire more aggressively, let's hope it will consider other ideas other there as well.

Do Republicans have anything better? According to the WaPo article, they are suggesting two alternatives: reducing regulation and making sure taxes stay low. The first could help, but isn't likely to gain much traction with Democrats controlling the Senate and White House. The second isn't so much an active way to create new jobs, but a passive measure to ensure that jobs that would be created won't be preempted. So the other side of the aisle isn't offering any very compelling, politically feasible short-term fixes either. It looks like Americans are just going to have to wait this thing out.

Image Credit: Larry Downing/Reuters

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

Why Are Americans So Bad at Saving Money?

The US is particularly miserable at putting aside money for the future. Should we blame our paychecks or our psychology?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In