To assess the jobs bill that passed the Senate, let us turn to some of the giants of classical economic philosophy. Oscar and Felix in The Odd Couple:
“Is that a jobs bill or is that a joke?”
“That’s a jobs bill.”
“That’s a joke.”
Alas, a dog’s breakfast, and a small one at that, of assorted tax breaks will not create many, if any, new jobs. It is a deeply unserious exercise as America confronts a jobs crisis that may linger for years and affect millions. Tax breaks add to the deficit, but set that aside. The labor-market disaster has a variety of causes that have nothing to do with taxes. Yes, some small businesses are on the brink and any break would help, and no Americans, apparently, want to pay any taxes, even as they enjoy the commons. But the fundamentals of the crisis aren’t tax based, and won’t be fixed by temporary tax cuts.
The Obama administration has done a poor job of explaining that the stimulus, although too small to fill the lost output from the Great Recession, is a jobs bill. It has saved or created at least 900,000 jobs and probably more. Programs such as the TIGER grants for transportation projects will create many more jobs. It’s in infrastructure and research where government can directly create new jobs and even industries. Here the government could help hiring by expanding these programs, especially ones that create permanent jobs, such as in transit and smart grid.
Then there are the little-discussed job killers. The banking system remains both sick and corrupt. In the latter case, the largest banks and the capital markets as a whole are profiting from trading, speculation and “innovations” such as concealing Greek deficits, rather than providing the funding to start and expand businesses. This has become a fundamental structural problem that was cloaked by the real-estate bubble, which did create jobs but based on a mania rather than real economic demand. Second, the tax system and lack of antitrust enforcement encourage job-killing mergers that don’t ultimately help anybody but the M&A boyz and the CEOs. Where’s the reform on these fronts?
Trade policy is heavy lifting. But in reality the trade deals America has made over the past 20 years have come back to devastate whole industries and destroy millions of good jobs. And there’s just so much slack that can be picked up by Wal-Mart. Add to this Chinese currency manipulation and protectionism, and it’s a continuing giant sucking sound, as H. Ross said.
Tax cuts. They seemed to help job creation in the 1980s. Back then I wrote that the best way to “stick it to the rich” was to have tax rates at a level that caused them to pull their money out of tax shelters and invest it, creating jobs. But the world and the capital markets have changed. The Bush years showed that tax cuts may create jobs, but they are overseas as investors and companies race to the bottom amid a global labor surplus. Also, we saw that investors would rather buy bundled subprime mortgage swindles than invest in productive activity. Moreover, not all tax cuts are created equal. We’re way below the rates of JFK’s or even Reagan’s cuts. At some point, long ago reached, they have become a cancer on both the federal budget and national polity.
Back to the jobs bill. Companies, especially small business, are making do with fewer people. The expansion is weak at best. The chances of another recession are strong. So few executives are going to add employment in such an environment. Also, to the extent that the bill “helps” construction jobs, it may be trying to sustain the unsustainable. Construction became one of the few sectors where jobs that couldn’t be outsourced — and became a bubble engine — so someday soon we’d better find ways to create or bring back other productive American jobs.
Still, this is a jobs bill. It’s to help members of Congress keep their jobs. And, unlike more and more Americans, they get health care, too.
Today’s Econ Haiku:
Turns out Toyota
Had its own share of blunders
Can’t blame the union