South By North Strategies, Ltd.

Critiquing the Jobs Proposal

Writing for CBS MoneyWatch.com, economist Mark Thoma raises concerns about the Obama administration’s recent jobs proposal. Says Thoma:

This proposal is not very specific, and if it makes it through the legislative process it will likely change quite a bit. But as it stands there are three problems with it. First, it does not create jobs directly, all job creation occurs indirectly through incentives such as reduced capital gains taxes for small businesses, other measures that make investment cheaper, rebates for home weatherization, etc. The program relies upon people acting upon these incentives, which they may or may not do, and even if the incentives are acted upon job creation is likely to be slow due to its indirect nature. Second, the amount, $70 billion, is too small to make much of a difference given the size of the unemployment problem. Third, it’s disappointing that one of the best job creation/preservation measures the administration could have proposed, more help for state and local governments battered by budget problems arising from the recession, is not part of the proposal.
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We need more direct and more immediate job creation than this proposal puts forth, and we need a much larger job stimulus package to make a noticeable dent in the problem. The argument for the package as announced is that this is the most that the administration can possibly get, anything larger or involving direct hiring won’t be politically feasible due to worries over the deficit and worries that direct hiring amounts to wasteful “make-work” (a view I disagree with).

Around the Dial – Dec. 14

Economic policy reports, blog postings, and media stories of interest:

• Mark Thoma shows why 5 percent unemployment may be 7 years away.
• Joseph Stiglitz argues why some banks are “too big to live.”
• Paul Krugman details why the Federal Reserve must do more to create jobs.
• The Wall Street Journal explains why renting may be good for you.

Social Insurance at Work

The Triangle Business Journal reports that the Employment Security Commission of North Carolina has paid $239 million in insurance benefits so far this year to unemployed individuals residing in Durham, Orange, and Wake counties. Although the news report is unclear, this amount likely only reflects regular benefit payments and excludes at least some federally-funded benefits.

If, as the research firm Moody’s Economy.com estimates, every $1 in unemployment insurance benefits generates $1.64 in economic activity, then that $239 million in insurance payments has generated some $392 million in economic activity across the Triangle.

What Are They Thinking?

In The New Republic, journalist Noam Scheiber describes the key economic policy debate taking place within the Obama administration. The central problem is how to reconcile two seemingly irreconcilable issues: the need for more economic stimulus and a desire to manage the federal budget deficit. Writes Scheiber:

“The entire town is more schizophrenic than I’ve ever seen,” says one senior administration official. “Everyone cares about jobs, and everyone cares about fiscal discipline. The weight shifts week by week, unemployment report by unemployment report.”
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The basic problem is that any additional stimulus adds to the deficit, while deficit reduction steps on a weak economy. And so, Democrats now find themselves having to pull off a balancing act that would seem to defy the laws of economics: taking on both tasks simultaneously. “We’ve got about as difficult an economic play as is possible,” the president observed at his recent jobs summit.

Weekend Wonk Out

A round-up of policy reports from the week ending on 12/11:

• Demos proposes ways to reform credit rating industries.
• The Brookings Institute thinks finds that Americans aren’t moving.
• The Economic Policy Institute asks how to improve transportation funding.
• The Center for American Progress shows how to improve apprenticeship programs.
• The Center for Economic & Policy Research wants to save “our children from themselves.”