In a couple days, the President will convene a jobs summit, amidst pervasive calls to deal with the budget deficit during a recession. Sadly, both the issue of jobs and the deficit are being dealt with in Congress through conservative frames, with policies like across-the-board, untargeted tax cuts for job creation, or “entitlement reform” commissions basically oriented to cutting social services programs for the deficit, favored by centrists and the lobbyists who love them.
However, a wealth of policies that would seek to create perhaps millions of jobs, while responsibly paying for the investment and then some, are taking shape on Capitol Hill. Democratic leaders and the White House simply cannot say there are no ideas on the shelf but tax cuts and cat food commissions that would accomplish the same goal. Here’s just a sampling:
• The American Jobs Plan: Conceived by the Economic Policy Institute, the five-point plan includes the following provisions: 1) stregthening the social safety net by extending unemployment benefits, the COBRA subsidy and food stamps benefits, giving people economic security and some money to spend; 2) aid for state and local governments, which are facing cutbacks of at least 900,000 jobs in the next fiscal year if they receive no federal help; 3) public investment in transportation infrastructure and educational facility repair to the tune of at least $30 billion; 4) direct employment through public service jobs through the Community Development Block Grant program, jobs like cleaning up vacant lots or staffing child care and Head Start programs or renovating and maintaining public spaces; 5) a two-year job creation tax credit equal to 15% of expanded payroll costs.
Four of the five are unquestionably progressive; the fifth, the job creation tax credit, I still have trouble with because it’s likely to be easily gamed, but it couldn’t hurt at this crisis stage.
• Small business lending through remaining TARP funds. The only part of the AFL-CIO’s jobs package not overlapped by EPI’s recommendations is this idea, which would take the over $200 billion in the TARP and distribute it to community banks to lend to small businesses, which are still having trouble finding capital in the tight credit markets.
• small-bore “Cash for Caulkers”-type programs. Cash for Clunkers was unquestionably successful in creating economic activity and moving out some auto inventory. There are even better ideas for using direct funds – encouraging energy checks of homes, or painting energy-efficient white roofs, or trading in energy-sucking appliances – that would probably lead to even more job creation than Cash for Clunkers did.
There are other ideas, like fast-tracking the transportation bill, or increased physical infrastructure spending, but in general, you can envision a dozen ideas or more to create lots of jobs in America.
• Financial transaction tax. EPI’s American Jobs Plan is financed entirely through a financial transaction tax beginning three years after implementation, which would pay for the entire program. Brad DeLong thinks that it must be applied everywhere in the world at once or jobs from the financial sector would leak, but 1) they wouldn’t be missed and 2) the world has already proposed this kind of tax, only to be rebuffed by Timothy Geithner. Some Democrats continue to fight for this policy, which would assess a tiny tax on all stock, futures, derivatives and other trades. Peter DeFazio and Ed Perlmutter have even come up with a catchy name: “Let Wall Street Pay for The Restoration of Main Street Act of 2009.”
The financial transactions tax is basically a tax on speculators – practically nobody else would feel it, and it would discourage rampant trading that has no social utility and needlessly burns through capital that could go to job creation ends. It would slow down the casino on Wall Street and raise tens of billions.
• War surtax. The President will announce his way forward in Afghanistan today, and David Obey and some other House leaders want him to pay for it, on budget, with a graduated tax. Much of our deficits since 2001 have come from financing two wars on credit cards. Unfortunately, this looks like only a talking point for Democrats rather than a legitimate strategy. But make no mistake – there’s no reason to hide the real cost of war through borrowing. If it’s worth fighting, it’s worth funding, and a graduated tax would accomplish that goal (in addition to forking Republicans politically, which is why they hate it so much).
• Gas tax increase. The Obama Administration should know about this – their own Transportation Secretary endorsed it yesterday.
Congress must consider raising the federal gas tax for the first time since 1993, Transportation Secretary Ray LaHood said Monday morning during a transportation summit in Fort Worth [...]
“To index the federal fuel tax, that’s something Congress is going to have to decide. As we get into the reauthorization bill, the debate will be how we fund all the things we want to do. You can raise a lot of money with tolling. Another means of funding can be the infrastructural bank. You can sell bonds and set aside money for big projects, multibillion-dollar projects. Another way is (charging a fee to motorists for) vehicle miles traveled. The idea of indexing the taxes that are collected at the gas pump is something I believe Congress will debate. When the gas tax was raised in 1992 or 1993, in the Clinton administration, there was a big debate whether it should be indexed. At that time, they thought there’d be a sufficient amount of money collected. Now we know that isn’t the case. That is one way to keep up with the decline in driving, and more fuel-efficient cars.”
LaHood offered several financing ideas right there.
I would add one other policy that could reduce deficits and create jobs over the long-term: Cramdown. There is no bigger drag on the economy right now than foreclosures, which cost a quarter of a million dollars apiece in economic activity by some accounts. The pretty-please approach to converting loan modifications to permanent status isn’t working; as Diane Thompson of the National Consumer Law Center said, trying to publicly shame bad servicers as the “only tool for accountability” is “a fundamental problem in the way the program is set up.” It’s time to bring back cramdown, which would let bankruptcy judges modify payments on primary residences the way they can on vacation homes and yachts. This would shore up the housing market, fixing the economy. And the predictability of the housing market would reduce federal exposure to more bailouts and bank failures, cutting their deficit exposure.
Nobody is saying that any or all of these programs would fix the unemployment rate in a week, or completely eliminate the federal deficit (although if you reduced the defense budget, maybe you’d get somewhere). But they would all be a far more powerful corrective than plans that come from the some conservative orientation that brought us into this mess, or the mushy-middle “centrism” that has provided a jobless recovery. There are literally dozens of ways to provide jobs and revenue in ways that are balanced and reasonable; the only thing missing is political will.