The president has a plan for job creation he can't pass. Romney has a plan for economic growth, but it probably won't juice employment fast.
Last week's weak unemployment report was bad news. But here's an even more sobering piece of news. Even with jobs playing a central role in the campaign, neither Barack Obama nor Mitt Romney is going to turn things around anytime soon.
Here's the problem, in a nutshell: Obama has a plan for job creation but can't make it happen politically. Romney has a long-term plan for economic growth, but it isn't really a jobs plan.
Economists on both sides agree that the fastest ways to create jobs -- not to say the best or wisest -- are direct government employment or tax credits for low-income people. The president's dilemma is relatively simple. Despite Republican claims to the contrary, Obama does have a plan. It's called the American Jobs Act, and it consists of payroll tax cuts, direct aid to states and municipalities to prevent public-sector layoffs; job retraining; and a grab bag of other stimulative measures, like infrastructure projects and unemployment insurance reforms, all costing $447 billion. It's by no means enough to solve the jobs deficit. To get the country back to 6 percent unemployment, the country would need 12 to 14 million new jobs, assuming workforce participation increases somewhat.
But with the exception of some pieces of the bill -- like the Jumpstart Our Small Businesses Act and a February 2012 extension of existing payroll tax cuts -- Congress won't pass it. There's simply no appetite for a major federal spending push -- voters have soured on stimulus, because the $787 billion 2009 package didn't live up to initial expectations; voters and lawmakers from both parties are concerned about deficits; the Republican House refuses to pass spending increases without offsetting cuts, which would defeat the purpose of pumping money into the economy to stimulate demand. (Based on the administration's assumptions, the CBO estimated the Obama plan would essentially have a neutral impact on the federal budget.) Even if Obama wins reelection and Democrats hold the Senate in November, they're unlikely to retake the House, and it's hard to see a major stimulus package advancing in the near future.
But what about Romney? He's also been accused of having no plan, including by the agenda-setting conservative editorial board of The Wall Street Journal. That's just as false as the claim that Obama doesn't have one. Romney does have a plan -- 59 points worth, in fact. But while Romney bashes the president for not creating jobs fast enough, and has barnstormed the country with the slogan "putting jobs first," the fact is that his agenda isn't about jobs first. It's primarily about improving the business climate, with the expectation that jobs will follow. And it's essentially impossible to assess the job-creating impact of the plan, because -- with a few notable exceptions below -- the campaign has studiously avoided estimating how many jobs each component would produce.
When I spoke with Romney domestic policy director Oren Cass recently, he said that was exactly the point. "What the president sees as his role is to identify specific jobs he wants to create, and then go out and try to create them," Cass said. "That's essentially the approach he's taken, and we're seeing exactly how well that works in practice. Governor Romney's approach is focused on creating an environment in which job creation occurs."
The plan is textbook trickle-down economics. Romney seeks to treat the underlying illness, a stagnant economy, in order to eventually get rid of the symptom -- a rational approach, if you believe in trickle-down theory, but one that means the pain of high unemployment may hang around for some time.
Romney's plan hinges heavily on reforming both the corporate and individual tax code and removing regulations, including the Dodd-Frank financial reform law (you can read a distilled version of Romney's whole plan here). It also calls for deficit reduction, although independent analysts, such at the nonpartisan Committee for a Responsible Federal Budget, have estimated it would add hundreds of billions of dollars to the deficit.
Citing a study by Stanford and University of Chicago economists who argue that regulatory uncertainty is harming the job market, the Romney campaign suggests a more business-friendly policy regime could produce 2.5 million jobs in 18 months. Pointing to record-high corporate profits, Cass says, "The problem today is not necessarily that businesses don't have capital to invest, it's that they don't know where to invest it."
The one case where the campaign draws a direct line from policy changes to a specific number of jobs is in energy policy, where it estimates that a combination of expanded offshore drilling, expanded shale-gas extraction, and approval of the Keystone XL Pipeline would create about 1.6 million jobs (that's 1.2 million, 280,000, and 131,000 from each respectively).
If one accepts those numbers and the Stanford/Chicago estimates wholesale (something many liberal economists would resist), that's a total of 4.1 million jobs. But as mentioned above, to get the country back to 6 percent unemployment by 2016 -- which Romney has pledged to do if elected -- would require the creation of 12 to 14 million new jobs. It's hard to imagine a scenario in which companies would abruptly hire millions of workers, although Cass disagrees: "I think across all the policies he's proposing, you see the results instantly."
Instantly perhaps, but how great would the magnitude be? Even supporters of the measures that Romney is proposing aren't so sure. Aparna Mathur, a resident scholar at the conservative American Enterprise Institute, is bullish on the economic plan, saying it would improve the business climate and make the U.S. more competitive. A corporate tax reduction would likely cause an immediate increase in hiring, she says, but many of Romney's other proposals require time to work. "The process of getting people into the labor force is slow," she says. "It might be unrealistic to say 6 percent [unemployment] in next two, three, four years."
And that gets to the heart of the problem. Romney's economic plan offers conservatives a lot to like, with an economy reshaped with lower taxes and less regulation. Likewise, Obama's plan puts forward a more liberal conception of the American economy. A desire to see either of those visions enacted is a good reason to support the candidate hawking them. But no one should be under the illusion that either plan will provide a speedy resolution to the nation's ongoing jobs crisis.