5 Ideas to Fix Unemployment

To stanch the flow of job losses, even Obama considers crossing party lines to grow jobs

To stanch the flow of continued job losses (with 263,000 jobs lost in September, up from 201,000 in August), the White House is weighing new options.  Among them are more stimulus-style projects as well as traditionally conservative approaches such as tax cuts for small businesses. As Obama's economic team pursues new strategies for America's catastrophic unemployment, economists of all stripes are offering suggestions. Dire times have pushed some pundits to cross party lines looking for solutions. Below, five ideas for tackling unemployment and two warnings about what not to do.

• 1. Send Money to States  The Wall Street Journal's Gerald Seib notes that states are more vulnerable since many are required to balance their budgets and are also better at pushing out jobs than the federal government. "Getting additional help to states in coming months might well be both the most efficient and the most politically feasible action Washington could take to avoid sinking deeper into the jobs hole," he writes. "Getting money out to states quickly may have been the single most effective impact of the February stimulus package. That money -- which went for construction projects, education and health-care programs -- helped financially strapped states avoid even bigger disasters as they put together budgets for the current fiscal year."

• ...But States Must Court Businesses  Jennifer Rubin examines Michigan, a state that has spent and worked extravagantly to promote jobs without success. "For starters, it is one of the more heavily unionized states around. The UAW did its number on the car industry, and any employer coming into the state will have a similar experience with Big Labor. Given the choice between a right-to-work Sun Belt state and a Big Labor–dominated Rust Belt one, most employers will (and do) choose the former," she writes. "Think for a moment (aside from the political impossibility of it) what would happen if the state passed a right-to-work law allowing employees to refuse to join a union. I’d imagine employers might take another look at Michigan."

• 2. Public Works Projects  The New York Times's Bob Herbert suggests something similar to Roosevelt's WPA. "A massive long-term campaign to rebuild the nation’s infrastructure — which would put large numbers of people to work establishing the essential industrial platform for a truly 21st-century American economy — has not seriously been considered. Large-scale public-works programs that would reach deep into the inner cities and out to hard-pressed suburban and rural areas have been dismissed as the residue of an ancient, unsophisticated era," he writes. "The master in this area, of course, was Franklin Roosevelt."

• 3. Payroll Tax Holiday  Salon's Robert Reich proposes "a one-year payroll tax holiday on the first $20,000 of income. Republicans as well as Blue Dog Dems could go along with this, and it would be a highly progressive tax cut since 80 percent of Americans pay more in payroll taxes than they do in income taxes."

• 4. Additional Stimulus Spending  Ryan Avent, arguing that the bust has been too rapid for the free market to absorb on its own, wants more stimulus. "If you’re saying that the private sector is literally unable to absorb workers during the short time-frame, more or less coincident with recession, then why not pursue an aggressive stimulus? Reducing or eliminating whatever the cyclical portion of unemployment is should make it easier for new growth industries to find a footing. And if not all the structurally unemployed can be redistributed at once, there is no reason stimulus aid needs to stop with support for the cyclically unemployed."

• 5. More Small Business Loans  This is also from Robert Reich, who thinks small businesses are the key for job creation. "Dramatically expand the Small Business Administration's lending programs and have the Fed buy up the SBA's debt. Big banks are not lending to small businesses. TARP has been an utter failure in this regard. The SBA and the Fed should circumvent them and help small businesses get the capital they need, so they can start hiring again."

• ...But Tax Credits Alone Won't Do It  Gerald Seib cautions against over-relying on tax cuts, a politically popular measure. "One idea that Republicans have floated is a tax credit for employers who create jobs. The hope would be that a tax break would provide employers a direct and immediate incentive to add jobs. Rep," he writes. "Expect to hear more of that idea, and there may well be some bipartisan support for it. The question, though, is whether a tax credit is sufficient incentive to overcome the profound economic uncertainties employers are pondering as they consider creating jobs."