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Obama’s Jobs Plan Focuses On Federal Investment

Filed by KOSU News in Politics.
October 8, 2012

In the next two installments of Solve This, NPR’s series on the major issues facing the country, we’ll examine each presidential candidate’s approach to boosting employment. First, President Obama’s strategy.

Job creation is the centerpiece of President Obama’s campaign speeches.

“We need to cut our oil imports in half, create thousands more jobs in clean energy,” the president said during an appearance in Virginia. “We need to use the savings from ending the wars in Iraq and Afghanistan to help pay down our deficit and put people back to work doing some nation-building right here at home.”

His ads highlight the issue, too.

“The president’s jobs plan would put teachers, firefighters, police officers and construction workers back to work, right now, and it’s paid for by asking the wealthiest Americans to pay a little more,” one ad runs. “But Congress refuses to act.”

Those examples of potential job creation are based on proposals in the American Jobs Act — the most detailed description of the president’s strategy. Two big pieces of the $450 billion program were enacted by Congress: a one-year extension of the payroll tax holiday and an extension of unemployment benefits.

Economists generally agree those measures helped support job creation. But Congress refused to pass other provisions that the American Jobs Act called for, like more spending on infrastructure, a tax cut for firms that hire new workers, aid to state and local governments, and a program to rebuild schools.

A Focus On Infrastructure

Austin Goolsbee, a professor at the University of Chicago’s Booth School of Business who headed Obama’s Council of Economic Advisers, says there’s a fundamental disagreement between Obama and Republican Mitt Romney about what drives growth and creates jobs.

“You’ve got the Romney campaign saying the drivers of growth are cutting taxes for high-income people and companies,” he says. “And you’ve got the president saying the drivers of growth are strengthening the middle and having investments that help the private sector stand up.”

Among the investments aimed at helping the private sector is government support for fixing the nation’s infrastructure, like roads, bridges and airports.

Joel Prakken of Macroeconomic Advisers has studied the two presidential candidates’ jobs plans. He says in this era of low interest rates — with borrowing costs so low for the government — it’s probably a good idea to spend money fixing the infrastructure now.

“It will have to be repaired sometime down the road,” he says. “What better time to do it [than] now, when the borrowing costs are very, very low and the economy could use the jolt of the construction spending that would go along with that?”

Prakken says that could create lots of construction jobs. In fact, the economic research firm Moody’s Analytics says the infrastructure program could create up to 400,000 jobs.

Spending Vs. Cutting

But Prakken says other provisions of the president’s jobs plan are less potent.

“The other parts of that plan, having to do with job training programs and special incentives to hire certain types of people — to be honest, they’re something of a mixed bag. It’s not clear that they would have very large effects,” Prakken says.

This willingness to spend on what the president sees as job-supporting investments stands in contrast to Romney’s belief that cutting government spending and cutting taxes sharply is the key to creating growth and jobs.

“Gov. Romney’s tax plan is modeled after the successful tax plans of the past, and it would generate growth because it would increase the incentive to do things that are good for America’s economy and America’s workers,” says Romney economic adviser Kevin Hassett of the American Enterprise Institute.

Obama says that Romney’s plan is more of the same — like the big tax cuts that failed to boost job growth during the Bush administration.

NPR’s John Ydstie will take a closer look at Romney’s jobs strategy Tuesday on Morning Edition. [Copyright 2012 National Public Radio]

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