EDITORIALS

Creating Jobs Will Cost

Posted Sept. 05, 2011, at 4:25 p.m.

If you thought the debate between Democrats and Republicans over raising the debt ceiling was an epic clash of principles, wait for the fight over President Barack Obama’s proposal to create jobs.

Join us here at The Maine Debate from 10 a.m. to noon Tuesday, Sept. 6 to hash out how job creation can best be accomplished.

The accepted strategies for job creation are simple.

Putting more money into the hands of the middle class and working poor is one accepted method. That segment of the population spends money on retail products and services, which in turn can spur production and hiring. The ways to get that money into the hands of those people include extending unemployment benefits, direct Treasury Department rebate checks, such as those issued in the first George W. Bush term, and cutting income tax withholding rates for that group.

Another accepted strategy for job growth is for the federal government to buy things. The thinking behind such a strategy is that the federal government is the only entity able to inject money into the economy. States must have balanced budgets, and the private sector will not hire people just for the sake of helping the country, nor should it be expected to do so.

What makes this stimulus approach attractive is that the government is able to “buy” something it needs with its money. With the Obama administration’s $825 billion stimulus package in 2009, the idea was to pay for infrastructure work that had been deferred. Much of the money also went to states which, as Maine did, paid for such activities as education, thereby preserving existing jobs.

With the nation teetering between an economy that runs on petroleum-based energy and emerging renewable energy, a logical jobs program would have the government pump its money into research, development and manufacturing of new technology.

Yet another accepted strategy is for the federal government to directly create jobs. During the Great Depression, the Roosevelt administration, facing a 25 percent unemployment rate, simply hired vast numbers of Americans on the fed’s dime.

This “make work” approach, if used to today, would horrify those for whom the free market is sacrosanct. Yet it did work, and would work again.

FDR, in fact, used both the “make-work” and infrastructure upgrade approaches to job creation. His job strategies were institutionalized in the Public Works Administration and the Civil Works Administration.

The PWA directed government spending to private contractors. As seen in the Obama stimulus, only a small percentage of the money allocated by Congress in the early 1930s was spent. President Roosevelt then diverted a third of the PWA’s $3.3 billion budget to the CWA, which was more effective in creating jobs.

The key concerns for policymakers come down to two issues: bang for the buck and payment due. Whether it’s $100 million or $500 billion, the government must be assured that the money is going to worthy projects, that the work is of a high quality and that it is filtering down to middle class workers.

Government does not have a great record in such matters, so any jobs program must include a healthy element of accountability.

The second element is paying back the “loan” of such an initiative. When the economy begins growing more robustly, new tax revenue must be dedicated to paying down debt.

Join us for The Maine Debate.

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