Perhaps the most important thing President Barack Obama and Mitt Romney can do to win the job of president for the next four years it to show they can help other Americans find a job.
Hit by a great recession and now stuck in a weak recovery, the country has grappled with a jobless rate above 8 percent since February 2009, Obama’s first full month in office. That stretch of 43 months is the longest prolonged period of unemployment above 8 percent since record keeping began in 1948. It long ago passed the 27 months recorded during Ronald Reagan’s first term.
Roughly 7.9 million jobs were lost during the Great Recession, which spanned December 2007 to June 2009. Job growth turned positive in March 2010 and has stayed that way except for a few stray months. Yet 12.5 million Americans remain unemployed, and another 8 million work part time and are seeking full-time jobs. Hiring remains sluggish.
“The weakness in the job market during this economic recovery is due to a hiring shortfall of about 1 million per month,” said Mark Zandi, chief economist for forecaster Moody’s Analytics and an analyst sought out by politicians from both major parties.
“Hiring prior to the Great Recession was running at near 5.25 million per month. Hiring is currently running close to 4.25 million per month,” Zandi said. “The economy is experiencing net job growth only because layoffs are extraordinarily low.”
The two major party candidates offer very different prescriptions to help the country create more jobs.
Obama offers a plan that depends largely on government spending and tax cuts. Economists say the Obama plan could create 1 million to 1.9 million new jobs through short-term efforts to stimulate hiring, coupled with continuation of longer-term efforts already started to promote employment in emerging “green technologies” and spending on education to better prepare the nation’s future workforce.
Romney offers a different path that avoids targeted short-term government spending in favor of moves to improve the overall environment for business. He promises 12 million new jobs over four years through a revamp of both government taxation and spending, and pro-business strategies such as a lighter regulatory hand by federal agencies. The 12 million might be a safe bet: It’s in with Federal Reserve estimates of a return to full employment around 2017.
There’s evidence that both approaches could work, according to David Card, a labor economist at the University of California, Berkeley, and head of labor studies for the National Bureau of Economic Research.
Germany, he said, has been criticized for its high taxes, big health insurance costs and a strong government hand in regulating industry. Those are all things Republicans accuse Obama of seeking, and yet today Germany is one of the few developed nations that continues to do well despite a global economic slowdown.
Similarly, said Card, the smaller government, low regulation approach advocated by Romney has been undertaken in Hong Kong and has helped the former British jewel and now satellite of China become an economic powerhouse.
“The connection between these tax changes and policy changes are just so hard to figure out,” Card said, offering voters little help. “An economy can do well both ways.”
Those caveats notwithstanding, here’s a guide to the candidates’ proposals for job creation.
• Spend $30 billion to renovate schools nationwide, creating jobs in the hard-hit construction sector.
• Spend $50 billion on critical infrastructure, repairing bridges, roads, airport facilities and highways, creating jobs in the hard-hit construction sector.
• Cut payroll taxes for businesses, primarily smaller employers. He would cut in half payroll obligations on the first $5 million in payroll taxes.
• Give a payroll tax holiday for employers that add jobs or raise wages beyond the prior year’s payrolls.
• Extend business-expensing tax provision that allows companies to deduct from taxes the full value of new investment in equipment.
Obama’s plan is more specific on government programs to create jobs.
He offers a number of tax credits to encourage business investment, which would in theory create more demand for products and thus more jobs for those who make, warehouse and transport the goods. He’d also provide $5 billion to help communities hire or retain public safety personnel and first responders.
While many of these ideas have some Republican support, they’re packaged together in a bill that costs $447 billion and would be paid for through savings from a broader 10-year deficit reduction plan that is stuck in Washington’s infamous gridlock.
The administration has tried unsuccessfully to have the Senate pass components of its plan. Just Wednesday, Senate Republicans quashed a procedural vote on a bill to create the Veterans Job Corps, an effort to encourage the hiring of war vets as first responders.
“I think that if you look at plans that are out and on the table, that are specific, that are actionable and that independent economists have looked at, the president’s is the only plan that would have a significant impact on jobs and economic growth in the short term,” said Brian Deese, deputy director of the president’s National Economic Council.
The administration thinks its stalled jobs bill would spur 1 million additional jobs in the near term. The Romney campaign acknowledges it offers no similar short-term hiring program, focusing instead on a plan that prepares the way for robust hiring. It assumes that a change at the top on its own would be bullish for hiring in the economy.
“We would certainly plan to deliver a lot more certainty, just from clarity in policy, that is going to allow individuals and businesses some idea of how to make long-term hiring and expansion decisions, knowing what the rules of the road are,” said Pierce Scranton, Romney’s director of economic policy.
Obama’s team counters that the economy and hiring will actually go backward because of steep cuts in government spending envisioned in a plan offered by House Budget Committee Chairman Paul Ryan of Wisconsin, Romney’s running mate.
“It’s not just that it’s hard to find specific, direct job-creating policies. You also have to take into account the fact that they’re introducing substantial short-term austerity measures,” said Deese, who limited his comments to legislation introduced by Ryan, since the National Economic Council is not involved in the campaign.
• Maintain current tax rates on personal income, capital gains, interest and dividends. He would overhaul the tax system.
• Eliminate taxes on capital gains, interest and dividends for individuals with adjusted gross income below $200,000.
• Reduce the corporate tax rate to 25 percent.
• Repeal the Dodd-Frank Act, the sweeping revamp on financial regulation that became law in 2010, and replace it with new, streamlined regulation of finance and banking.
• Create a one-stop shopping, streamlined permitting process from the federal government.
• Raise visa caps for high-skilled foreign workers and grant permanent residency to foreigners pursuing advanced degrees in math, science and engineering.
The “Believe in America” plan offered by Romney envisions a flattening of the income tax code, lowering rates and broadening the tax base for both taxpayers and corporations by eliminating some deductions. It calls for caps on federal regulation and more aggressive exploitation of energy resources on public lands.
There are arguably only two points in his 59-point plan that focus specifically on job creation. One involves raising visa caps so that companies can hire high-skill foreign workers in the U.S. rather than ship a job overseas. The other involves granting permanent residency status to immigrants that are in the United States obtaining advanced college degrees in math, science or engineering.
The rest of the Romney growth plan involves promoting additional free-trade agreements, designating China a currency manipulator, amending the Clean Air Act to exclude carbon dioxide from its purview and similar steps Romney argues support freer economic activity and thus promote hiring.
“The difference in approach is that the Romney plan is geared at generating private-sector economic growth, whereas the Obama plan is aimed at temporary spending measures that increase the deficit, and the recovery, in his view, is going to be led by government spending,” said Scranton.
Romney’s election by itself would stimulate hiring, Scranton said, because it would “deliver a lot more certainty, just from clarity in policy,” and employers could begin making hiring and expansion decisions.