Politics & Government

How to spur job growth? Obama will ask the experts

MCT

WASHINGTON — The nation's 10.2 percent unemployment rate gets renewed attention this week as President Barack Obama hosts a jobs summit on Thursday, a day before the Labor Department reports new job numbers that are unlikely to show significant improvement.

Obama invited academics, business and labor leaders to a White House seminar to hear their suggestions on what might spark them to begin hiring again.

Meanwhile, on Capitol Hill, there's growing Democratic support for a new "jobs bill" to provide more economic stimulus next year. Ideas Congress is weighing include potential tax credits for employers for new hires, a payroll tax holiday for employers and big government work programs like those of the 1930s, with today's efforts likely to boost inner city jobs and reverse years of neglect.

Democrats worry that the jobless rate will keep rising ahead of congressional elections next year, threatening the majorities they now hold in the House of Representatives and the Senate.

Weighing against new jobs programs, however, are trillions of dollars in projected federal budget deficits over the next decade, which threaten long-term economic stability.

The roughly 130 attendees at Obama's jobs summit will divide into six discussion groups_ on "green" jobs, boosting small business employment, government infrastructure spending, fostering growth of U.S. exports, business competitiveness and workforce development/training.

"The president is open to all good ideas to supplement the steps we've already taken to put Americans back to work. There are limits to what government can and should do, even during such difficult times. That is why we have invited representatives from across the private sector to discuss how we can work together to continue to spur job creation," said Jennifer Psaki, a White House spokeswoman.

Two issues sure to come up are whether more stimulus spending would boost employment and whether tax cuts, credits or holidays would help spur job creation.

Princeton University economist Alan Blinder, a summit attendee and a former vice chairman of the Federal Reserve, supports public works programs for low-wage workers. However, he warned in a recent article against providing tax credits to employers. It would be hard, he said, to distinguish between new hiring tied to the economic rebound versus hires sparked by tax credits.

William Dunkelberg, chief economist for the National Federation of Independent Business, which represents small businesses, hopes that Obama doesn't pursue tax credits for new hires.

"Our member surveys for plans to add inventory and plans to hire are all coming in at 35 year lows. They have no reason to hire anybody because they don't have anything to do. That's why the tax credit is a silly idea," Dunkelberg said. He said that consumer confidence, expressed in retail sales, must improve before firms consider new hiring.

Economist Mark Zandi favors a limited tax credit.

"If you wanted to give some juice to the job market towards the end of 2010, the best thing probably would be a jobs tax credit with a twist. You'd say, 'I've got $25 billion to spend on this_ first come, first serve.' You do a 'cash for clunkers' on the tax credit," said Zandi, chief economist for Moody's Economy.com.

Cash for clunkers provided a limited-time tax credit to consumers trading their older cars for newer, more fuel-efficient ones. Zandi's tax credit would be offered within a narrow timeframe to create both buzz and demand among employers.

"The timing may not be too bad on this. The job market by then may have stabilized a bit already, credit should be flowing a little bit more normally and if you put this kicker on top of it, perhaps it turns things around more quickly," said Zandi, who also favors $75 billion in additional stimulus spending. "I think that's not an unreasonable thing to take a shot at."

The White House summit invitees include small business owners, who provide most employment nationally. There will be, however, a heavy presence of big corporations, including the top executives from Google, AT&T, Qwest, FedEx, Disney, Boeing, Dow Corning and other major companies.

The nation appears to be out of recession, as shown by the 2.7 percent growth in the third quarter, a period when the largest distributions were made from the $787 billion economic stimulus bill passed in February.

Zandi and other economists think the bill's aid to states and extensions of unemployment insurance kept money circulating and preserved state and local government jobs. Stimulus money for new construction or repair of bridges, roads and other infrastructure projects also helped.

That's why Associated General Contractors of America supports more government work programs and infrastructure spending. Its chief economist, Ken Simonson, pointed to October statistics showing that 17 states added rather than lost construction jobs.

"It's sort of the first chrysanthemum of the fall. I don't know that it means the whole garden will bloom," he said.

The Economic Policy Institute, a liberal policy research group with ties to the Obama administration, this week proposed a $400 billion American Jobs Plan. It calls for a mix of additional state aid, targeted spending and tax credits to foster employment. It would be paid for with a tax on financial transactions.

Many mayors want a jobs program that targets large metro areas, where joblessness approaches or exceeds 20 percent.

"People ask what I am doing with all the stimulus money. What stimulus money?" asked Doug Palmer, the longtime mayor of Trenton, N.J.

Trenton has a jobless rate above 17 percent, and Palmer said that cities suffered as stimulus funds were disbursed by state governments plugging their own budget holes first.

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