Some suggestions on how to grow jobs

WASHINGTON?? President Barack Obama on Thursday is expected to offer a plan to jump-start flagging U.S. job growth that relies on a package of tax cuts and government spending that could cost upward of $200 billion.

With the U.S. recovery at risk of stalling and unemployment stuck above 9 percent, Obama is under heavy pressure to find a way to breathe more life into the economy.

His success could determine whether he wins a second term in the elections in November 2012.

Reuters asked some prominent economists and leading Washington think-tanks what they would recommend to Obama if they were his economic advisers.

Here are their submissions:

JEFFREY SACHS, ECONOMICS PROFESSOR, COLUMBIA UNIVERSITY:

The jobs crisis mainly reflects a lack of international competitiveness for lower skilled workers in the United States. The United States has been shedding manufacturing jobs for high-school graduates (indeed all those without a bachelor's degree) for well over a decade. This was disguised by the housing boom, which temporarily created jobs in (nontradeable) construction until the bubble burst in 2008. Those construction jobs in housing are not coming back any time soon.

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Thus, a real jobs program needs to be a "competitiveness program," involving: major public investments in education, training, job matching, technological upgrading, and infrastructure. Today's unemployed kids should be back in school or in training and apprenticeship programs, not put on "shovel-ready" dead-end jobs.

A serious jobs program is therefore not a quick fix, but a fundamental reorientation of the economy in the age of globalization. It should be paid for by higher taxation on the rich and on multinational companies that are parking vast overseas profits in international tax havens and hideaways. To give more tax breaks to those deadbeats would be a travesty and a macroeconomic failure.

ROBERT REICH, LABOR SECRETARY UNDER PRESIDENT CLINTON:

What would a bold jobs bill look like? Here are the 10 components I'd recommend:

1. Exempt first $20,000 of income from payroll taxes for two years. Make up shortfall by raising the ceiling on income subject to payroll taxes.

2. Recreate the Works Progress Administration and Civilian Conservation Corps to put long-term unemployed directly to work.

3. Create an infrastructure bank authorized to borrow $500 billion a year to repair and upgrade the nation's roads, bridges, ports, airports, school buildings, and water and sewer systems.

4. Amend bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence, so they can reorganize their mortgage loans.

5. Allow distressed homeowners to sell a portion of their mortgages to the Federal Housing Administration, which would take a proportionate share of any upside gains when the homes are sold.

6. Provide tax incentives to employers who create net new jobs ($2,500 deduction for every net new job created).

7. Make low-interest loans to cash-starved states and cities, so they don't have to lay off teachers, fire fighters, police officers, and reduce other critical public services.

8. Provide partial unemployment benefits to people who have lost part-time jobs.

9. Enlarge and expand the Earned Income Tax Credit -- a wage subsidy for low-wage work.

10. Impose a "severance fee" on any large business that lays off an American worker and outsources the job abroad.

Some of these won't cost the federal government money. Others will be costly in the short term but lead to faster growth.

Remember: Faster growth means a more manageable debt in the long term. Which means the president could tie this (or any other jobs bill of similar magnitude) to an even more ambitious long-term debt-reduction plan than he's already proposed.

A bold jobs bill is good politics and good policy.

J.D. FOSTER, SENIOR FELLOW, THE HERITAGE FOUNDATION:

It boils down to three words: "do less harm." The economy has reached a point where it doesn't need a lot of poking and prodding from the federal government. It would be able to recover if only the government would get out of the way.

President Obama should stop threatening to raise taxes and halt the regulatory onslaught, which are creating uncertainty and freezing business decisions. He should send the free trade agreements with South Korea, Colombia and Panama to Congress.

Pursuing a "do less harm" doctrine, Obama should press Congress to make current tax policy permanent. At a minimum, he should be leading the charge to extend current policy until the economy returns to near full employment.

The vital missing ingredient in the economy is confidence, while the key debilitating factor today is an excess of uncertainty. Many of Obama's efforts have, not surprisingly, only served to sap confidence while heightening uncertainty. For example, the economy would be well-served if the president would stop threatening to raise income tax rates that fall heavily on small businesses and investors, the most productive elements of the economy.

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This same approach applies to federal spending. Substantial spending reductions would resolve questions over the federal debt and work toward recovery of the nation's triple-A credit rating; substantial spending reductions become an essential component of a "do less harm" economic growth policy.

Obama should choose job growth over ideology, opting for smaller, less intrusive government over a philosophy that says government should seek to address every problem afflicting the economy and society.

HOWARD ROSEN, RESIDENT VISITING FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS:

President Obama and Congress need to place a high priority on policies that are expected to raise business investment in plant and equipment over the medium to long term. At the same time, the president and Congress must act immediately to stop any more workers from dropping out of the labor force.

The federal government should provide assistance to state and local governments in order to immediately stop the hemorrhage of state and local government employment.

• Congress should reauthorize and fully fund the Workforce Investment Act, including significantly expanded resources for state and local one-stop workforce centers.
• There is likely to be a fight in Congress over continuation of extended unemployment insurance, which is scheduled to expire at the end of this year. President Obama and Congress might consider conditioning UI extension on requiring workers to enroll in aggressive job search assistance programs and/or training.
• Provide employment bonuses and wage insurance to workers who find jobs within the first 26 weeks after layoff, financed from the unused portion of weekly UI payments as encouragement for workers to return to work sooner.
• Ironically, over the last eight months Congress has refused to renew the Trade Adjustment Assistance program, which already provides many of these innovations. Congress should immediately reauthorize TAA and even consider temporarily relaxing its eligibility criteria in order to provide the program's targeted and intensive assistance to more workers.

ROSS EISENBREY, VICE PRESIDENT, ECONOMIC POLICY INSTITUTE:

President Obama should announce a plan big enough to create millions of jobs over the next two years -- currently the economy needs more than 11 million jobs just to return to pre-recession unemployment rates. A serious plan must put a big dent in that shortfall. There are plenty of ways to start:

• $270 billion of needed repairs and maintenance have gone undone on the nation's 100,000 K-12 schools while over a million construction workers are unemployed. A $50 billion investment in school repairs and improvements could employ 500,000.
• Hiring employees to work in the national parks and forests, to provide quality child care in every city, and to replace the hundreds of thousands of teachers and other public employees laid off over the past two years.
• Reauthorize and expand the nation's key infrastructure legislation to add at least 100,000 more jobs a year improving highways, bridges and transit systems.
• Renew emergency unemployment compensation and last year's payroll tax rebate.

If Congress won't act, the president should resist the temptation to compromise on more tax cuts for the rich, more tax cuts for businesses that don't add jobs, and regulatory rollbacks that endanger the public health but create no jobs

Progress can be made even if Congress stonewalls:

• The president should end the active management of U.S. currency values by foreign governments, which makes U.S.-manufactured goods less competitive and costs the U.S. 2 million jobs per year.
• And the Federal Reserve can help create millions of jobs by greatly expanding its support to the economy, both through buying long-term assets and raising inflation expectations. The president should make sure that the two vacancies on the Fed's Board of Governors are filled with bona fide unemployment hawks.

GARY BURTLESS, SENIOR FELLOW, BROOKINGS INSTITUTION:

On the components of a sensible package to boost employment, I suggest four policies:

• Public infrastructure: The federal government should boost its own spending on capital projects, and it should provide financing for state and local governments to invest in capital projects (highways, mass transit projects, maintenance or improvement of water and sewage systems and public buildings).
• The program guidelines should require states and localities to spend the additional dollars within the next four years. States and localities that accept the funds should receive sizable financial penalties if they reduce their own spending below the average level of the past couple of years.
• Payroll tax cuts focused on inducing employers to add to their payrolls: Tell employers they will not have to pay payroll taxes on wages to employees who represent net additions to their payrolls; this could cut compensation costs on net new hires by 6 percent to 7 percent. Ensure that this does not encourage employers to turn one full-time job into two part-time jobs by stipulating that the tax concession will only be available for firms which maintain the average monthly earnings of their workers. The tax concession should be payable only for payroll increases in 2012 and 2013.
• A tax preference for investment undertaken in the next couple of years is an old-fashioned but reasonably effective anti-recession policy. It is usually one that is supported by both parties.
• Federal grants to states and individuals to support enrollments in colleges and universities: Budget pressures are forcing states and localities to scale back their support for post-secondary schooling. A recession is a particularly bad time to reduce this kind of spending. Youngsters and adults who cannot find jobs should be encouraged to improve their skills by investing in post-secondary education and training. The federal government can give institutional support to public colleges and universities and direct financial aid to students.

ALEX BRILL, ECONOMIST, AMERICAN ENTERPRISE INSTITUTE:

The president's proposals should have the following traits: First, employers are seeking policy stability and predictability. Therefore, new temporary policies such as a payroll tax holiday are not a good solution. Second, it is incredibly difficult if not impossible for politicians to guess where the next generation of jobs will come from. Entrepreneurs, both small-business owners and creative managers in big firms, must be the implementers of any hiring agenda. Thus, a good jobs agenda will be one that spurs growth through greater economic neutrality. Washington cannot reduce the national unemployment rate through a commitment to one industry or even just a handful of industries.

Any serious and meaningful reform will require congressional action, and the president, while setting forth specific ideas, should also be prepared to compromise and to accept new ideas. Given the need to also address our fiscal imbalance, the president should be prepared to offset any new programs with structural change to existing programs, particularly Medicare, Medicaid and Social Security, all of which are unsustainable in their current form.

DEAN BAKER, CO-DIRECTOR, CENTER FOR ECONOMIC AND POLICY RESEARCH:

There are several steps that can and should be taken to create jobs, including a youth jobs program (the unemployment rate for black teens is over 45 percent), aid to state and local governments, and a serious infrastructure program.

However, the best way to get people back to work is to restructure the unemployment system to give employers incentive to shorten work hours rather than lay people off. We would be much better off if employers reduced 50 workers' hours by 20 percent, than lay off 10 workers.

The money saved on unemployment compensation could be used to limit the pay cut for these workers. They may work 20 percent fewer hours for 10 percent less pay. This approach has been incredibly successful in Germany. Its unemployment rate is lower than it was at the start of the downturn even though its growth has been roughly the same as ours. Every month 2 million workers lose their jobs as part of the labor market churning. If this can be reduced by 10 percent through work sharing, it would generate 2.4 million jobs a year.

HEATHER BOUSHEY, ECONOMIST, CENTER FOR AMERICAN PROGRESS:

A job-creating agenda should begin with infrastructure investments, including more efficient use of state infrastructure dollars alongside funding a new infrastructure bank. His plan must also include measures to reduce the flood of foreclosed homes onto the market, and support for retrofitting of homes and businesses to make them more energy efficient, which requires hiring people to work right now while also paving the way for jobs growth in the future.

There is much we can do to reduce layoffs by encouraging employers to keep workers on the job, even if they have to reduce hours, and to stop layoffs in key sectors such as education. Local governments need federal help to stop shedding hundreds of thousands of jobs, mostly in education and public-private partnerships....

Temporary federal help to the states helped our economy recover from the Great Recession, but the money will run out this year. Problem is, we are not out of the woods yet. We need to help the states anew as well as ensure that benefits are available to the unemployed while they search for jobs.

Copyright 2011 Thomson Reuters. Click for restrictions.

Source: http://www.msnbc.msn.com/id/44427977/ns/business-stocks_and_economy/

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