Friday, April 18, 2014
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Obama versus Romney on Jobs

BERKELEY – The United States has just completed its third year of economic recovery, but the unemployment rate remains above 8%, and there are worrisome signs of a slowdown. So it is no surprise that jobs have become a major focus in the presidential campaign – or that the candidates have very different ideas about how to boost employment.

Last autumn, President Barack Obama proposed the American Jobs Act, a $450 billion package of fiscal measures aimed at job creation. The AJA amounted to about 3% of GDP and was designed to take effect in 2012, providing a timely employment boost and insurance for the US recovery against global headwinds. Most of its measures had enjoyed bipartisan support in the past; tax cuts comprised about 56% of the total cost; and the package was paid for in Obama’s long-term deficit reduction plan.

Several independent economists concluded that Obama’s plan would provide a significant lift to the job market in 2012-2013. Indeed, two of the nation’s most respected forecasters predicted that the AJA would add 1.3-1.9 million jobs in 2012 and more than two million jobs by the end of 2013. The non-partisan Congressional Budget Office (CBO) also found that most of the AJA’s policies ranked high in budgetary effectiveness, measured by the number of jobs created in 2012-2013 per dollar of budgetary cost.

The AJA was filibustered by Senate Republicans, and the Republican-controlled House of Representatives likewise prevented the bill from coming to a vote. Mitt Romney, now the Republican presidential candidate, attacked the plan as “mere stimulus” that would “throw a cup of gasoline on the embers” of the recovery. Ultimately, Obama, bolstered by polls endorsing his plan, won partial passage of two AJA policies: a one-third cut in employees’ payroll taxes (he had proposed one-half), and an extension of unemployment benefits by about 60% of what he had recommended.

But Congress failed to approve a 50% cut in employers’ payroll taxes – a business tax cut that many Republicans favored in the past and that ranks high on budgetary effectiveness. Nor did Congress approve $30 billion in federal grants to states to enable them to employ about 135,000 teachers, police, and firemen, despite strong voter support. Such grants between 2009 and 2011, totaling $130 billion, helped states to maintain vital services and retain the public employees providing them.

Romney opposes more federal money for the states, arguing that “it is time to cut back on government and help the American people.” But teachers, firemen, and police are American people who help other American people. Government employment is falling at the fastest rate since the 1940’s, and is now at its 2006 level. If public employment had grown during the last three years at about the same rate as the population, as it did during George W. Bush’s presidency, the unemployment rate would be around 7% rather than 8.2%, owing to about 800,000 additional jobs.

Likewise, Congress failed to approve Obama’s call for $90 billion in additional infrastructure spending, which would have supported about 400,000 jobs, despite the fact that the US has at least $1.1 trillion in unfunded infrastructure needs. Moreover, infrastructure investment not only creates jobs in the near term, but also promotes long-term competitiveness.

Altogether, Congress left at least one million jobs on the negotiating table, holding unemployed workers hostage to the outcome of November’s election.

Meanwhile, in response to persistent media pressure, Romney has unveiled his policies to boost short-term job creation. They are not convincing. Romney says that he would ensure that the US puts more people to work in the energy sector. But, while the oil and gas industry has grown significantly since 2007, it employs fewer than 200,000 people, implying a negligible effect even if employment in this sector doubled in the short run.

And, while Romney says that he would open new foreign markets, Obama has been doing just that, winning passage of three major trade agreements and increasing federal support for US exports, which have been growing nearly twice as fast as they did during the recovery from the 2001 recession. Moreover, Romney’s promise to charge China, America’s third-largest export market, with currency manipulation, and to impose large tariffs on Chinese imports, would almost certainly invite retaliation, causing a decline in US exports and jobs.

Romney would also repeal “Obamacare” – the 2010 health-care reform legislation – because it “is scaring small business from hiring.” But the evidence for this claim is meager and anecdotal.  A recent survey found that most small businesses support the reform. Most businesses, large and small, cite insufficient demand as the primary reason they are not hiring.

Nor is Romney’s promise to enact immediate cuts in federal discretionary spending by an additional 5% likely to boost job growth, as he asserts. When an economy is suffering from high unemployment and weak aggregate demand, spending cuts are contractionary. Romney conceded this point recently, acknowledging that the “fiscal cliff” – the expiration of Bush-era tax cuts at the end of this year, combined with large spending cuts already scheduled to take effect – would push the economy back into recession.

Finally, in addition to extending Bush’s tax cuts, Romney promises an across-the-board 20% reduction in marginal personal-income-tax rates and a significant cut in the corporate rate to encourage businesses to hire more workers. Despite large cuts in marginal income-tax rates at the start of the Bush administration, however, job growth between 2000 and 2007 was half the rate of the previous three decades.

Even if Romney’s new tax cuts strengthened investment and growth in the long run (a debatable proposition that depends on how they are financed), their short-term effect on job creation would be minimal, and they would entail a significant loss of revenue. Indeed, these cuts perform poorly on the CBO’s measure of budgetary effectiveness.

Obama’s proposals to boost job creation are convincing, whereas Romney’s proposals would have little or no effect – and some could even make matters worse. Voters need to know the difference. 

Read more from our "America Votes" Focal Point.

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  1. CommentedAlexander Guerrero

    I wonder how can we be a little more consistent on this "The United States has just completed its third year of economic recovery, but the unemployment rate remains above 8%........". How can USA's economy or any other industrialized economy could be recovering with such high unemployment ?. We all know that numbers like those can be found in far less developed economies, particularly commodity producers countries where high rates of economic growth can in the long term survive with high unemployment rates.

  2. CommentedEdward Ponderer

    Point well stated Ms. Jones.

    In a movie version about the Manhattan Project, FDR uncertain what course to take asked to speak with Eleanor for a moment. He asked, "If Hitler had a bomb powerful enough to destroy all of London, what would he do." Without a moment's hesitation came the answer, "He'd use it."

    This may well have been mere dramatization -- but most certainly the sentiment was real. And in the present political climate, with the heat rising from Radical Islam per the Muslim Brotherhood, the situation is more real.

    [Per Egypt, one might ask -- would they kill an entire nation of many million if angry at a few independent citizens? Think what attacking an embassy and burning a flag represent, and the recent intelligence services warnings about attacks (presumably random) that might happen in the U.S.]

    If we are lucky, Iran would only use the treat of nuclear weapons to shield it from the US and the rest of the world to take aggressive actions with its army. But like with Egypt, it may not take much to light the fuse of a very big fire cracker. This is not a fourth of July that America would want to see.

    I was till recently, unemployed myself for 2 1/2 years. With all due respect to all the fraction of struggling former middle class bread winners that Mr. Obama has put back to part time minimum wage work at McDonald's, I was hoping that his foreign policy might have been better than his economic saavy. But its not being so is more frightening, because in a world with a nuclear Iran, things in all ways -- including economically -- could be so much worse.

    We need a world in which we all take mutual responsibility for each other -- it is our only chance out of the present morass of Humanity. But in the world of a nuclear Iran and growing Middle Eastern radicalism that Mr. Obama is leading us to, we'll have lost it.

  3. CommentedBrenda Jones

    Please, with all due respect, forget all this. The main question that should be addressed is the difference between each candidate's stand on Israel. Why? Because, with Iran's movement towards nuclear weapons capability and its determination to eradicate Israel, with the Syrian uprising, the rise of Islamic extremists in Turkey and Egypt, and with terrorists groups stockpiling more missiles, tensions in the Middle East are escalating to break point.

    And, if break point is reached, we could easily find ourselves in a global confrontation, a third world war. This would be more than horrific for obvious reasons.

    Obama is no lover of Israel and based on his record, I would have to conclude that he intends for Israel's destruction.

    In 2010, when Turkey issued a resolution in the UN Security Council to condemn Israel and then demand an investigation of the Gaza flotilla raid, Obama refused to veto it, saying and doing nothing.

    When the President of the PLO, Mahmoud Abbas, held a celebration in February of 2011 honoring the terrorist Dalal Mughrabi for murdering 37 Israeli's, the Obama administration said nothing. There was neither protest nor criticism.

    When in September of 2011, PLO Chairman Mahmoud Abbas delivered a fiery anti-Israel speech to the UN, denying that Jews have any historic connection to Israel and when he delivered that speech on PLO letterhead showing a map of Palestine with Israel erased, there was no criticism from Obama.

    By diplomatically and politically isolating Israel, by relating to Israel in a way that encourages Israel's enemies, Obama is putting the seal to Israel's destruction and perhaps ours as well since such is a very real threat to world peace.

    1. CommentedEdward Ponderer

      Point well stated Ms. Jones.

      In a movie version about the Manhattan Project, FDR uncertain what course to take asked to speak with Eleanor for a moment. He asked, "If Hitler had a bomb powerful enough to destroy all of London, what would he do." Without a moment's hesitation came the answer, "He'd use it."

      This may well have been mere dramatization -- but most certainly the sentiment was real. And in the present political climate, with the heat rising from Radical Islam per the Muslim Brotherhood, the situation is more real.

      [Per Egypt, one might ask -- would they kill an entire nation of many million if angry at a few independent citizens? Think what attacking an embassy and burning a flag represent, and the recent intelligence services warnings about attacks (presumably random) that might happen in the U.S.]

      If we are lucky, Iran would only use the treat of nuclear weapons to shield it from the US and the rest of the world to take aggressive actions with its army. But like with Egypt, it may not take much to light the fuse of a very big fire cracker. This is not a fourth of July that America would want to see.

      I was till recently, unemployed myself for 2 1/2 years. With all due respect to all the fraction of struggling former middle class bread winners that Mr. Obama has put back to part time minimum wage work at McDonald's, I was hoping that his foreign policy might have been better than his economic saavy. But its not being so is more frightening, because in a world with a nuclear Iran, things in all ways -- including economically -- could be so much worse.

      We need a world in which we all take mutual responsibility for each other -- it is our only chance out of the present morass of Humanity. But in the world of a nuclear Iran and growing Middle Eastern radicalism that Mr. Obama is leading us to, we'll have lost it.

  4. CommentedMichael Smith

    Her debate with Sir James Goldsmith on Charlie Rose which can be seen in entirety here http://video.google.com/videoplay?docid=5064665078176641728&hl=en# is all you ever need to know on the amazing benefits of global outsourcing and the wonderful brave new world we now find ourselves in now. If Sir James Goldsmith were alive to today to see his bold and sad predictions manifest to where we are at now. All you need to is watch and see the stark difference between a seasoned, vastly experienced business professional give stark predictions of our brave new world and an ivory tower Keynesian who is completely out of her league in he Socratic school of Debate.

  5. CommentedKen Fedio

    As one of the proponents of NAFTA who garnered the most attention I fail to see how anyone would take Tyson's commentary of job creation with any creedence. She was part of the cabal of economists who, during the Clinton years, opened the chicken coop to the nocturnals of Wall Street. Two decades of Globalization later, look around you. Worked out well for Mexicans and their clients like VW, though. Oh, and Canada too. Thanks Laura. Glad I don't share your citizenship.

  6. CommentedMelanie holzman

    One of the first initiatives by the Obama administration to create jobs AND promote a green policy was to buy functioning old cars and make them not functional. Every "poor" person I met was extremely distraught because the price of a car they could afford -- a used car -- doubled. That did not create jobs; it bankrolled dealers and salespeople.
    Next, the Solyndra bankruptcy. There was also another solar failure and, instead, of hiring American companies, Obama outsourced to Spain.
    No thanks on the job creation.
    No thanks to more police. It's the poor who end up in jail. California is going bankrupt because the cost per inmate is approximately 55K. The US has more people in prison by percentage than any other country in the world.
    No thanks to more teachers. They have turned into nannies rather than educators.
    No thanks to socialized healthcare. Deregulate. Push people to take better care of their own health.
    Absolutely, no thanks to more government. Cut it in half, please, as soon as possible.

    1. CommentedKen Fedio

      The real problem is failed economic policies foisted upon middle America by failed economists. The Age of the Economists turned middle America into a post-industrialist shell that is just now recovering from the carpet-bombing of off-shored industrialism led by the domestic forces of Globalization.

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