In his major speech on jobs and growth today, President Obama made a convincing case for timely action to address the nation's continuing jobs crisis. Among the president's proposals, two are likely to have the greatest impact on jobs and economic revitalization: infrastructure investment and assistance to state and local governments.
Economists agree that infrastructure spending generates a high return in economic growth while creating public assets that enhance productivity growth in the long run. The president should be commended for proposing "a boost in investment in the nation's infrastructure beyond what was included in the Recovery Act, to continue modernizing our transportation and communications networks."
Just as effective in terms of economic growth per dollar spent is federal aid to state and local governments, of the kind that the president also proposed: "Finally, as we are moving forward in these areas, we should also extend the relief in the Recovery Act, including emergency assistance to seniors, unemployment insurance benefits, COBRA, and relief to states and localities to prevent layoffs. This will help folks weathering these storms while boosting consumer spending and promoting jobs."
The president also proposed tax incentives for consumers to weatherize their homes and tax relief for small businesses. While weatherization might employ some workers laid off from the residential construction market, discriminating against big businesses makes no sense, particularly given the urgent need to rebuild the battered U.S. manufacturing sector, which is dominated by large firms and their suppliers. And the president's proposed complete elimination of capital gains taxes on small business investment may lead to gaming of the system and misallocation of capital. In its own jobs program, Congress should adopt reductions in payroll and corporate income taxes for large and small firms alike. And Congress should adopt President Obama's proposal to shift funds from the TARP program to programs designed to help job creation and economic growth on Main Street.
The president is right that there is no need to choose between jobs and growth now and reducing the deficit: "There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice. Ensuring that economic growth and job creation are strong and sustained is critical to ensuring that we are increasing revenues and decreasing spending on things like unemployment so that our deficits will start coming down."
The following New America Foundation experts are available to discuss the president's address on jobs:
Michael Lind, Policy Director, Economic Growth Program, New America Foundation
Leo Hindery, Chair, Advisory Council for the Smart Globalization Initiative, New America Foundation
About the New America Foundation
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