June 28 (Bloomberg) -- For two years, polls have shown that the American people have two strongly held beliefs. First, they think the president should do more to create jobs. Second, they believe federal spending should be cut, and the government should shrink.
To the progressive economists who form the cadre of President Barack Obama’s advisers -- and indeed, to most mainstream economists -- these two views are mutually contradictory. In the classical Keynesian playbook, the way the federal government can create more jobs is by spending more: investing in public works projects, providing fiscal aid to state and local governments, sending stimulus checks to taxpayers, and even just hiring people directly. Demands that the government spur job creation while also reducing spending are, in this view, as unrealistic as the Pharaoh’s punitive directive to his slaves to “make bricks without straw.”
How and why the public soured on Keynesian economics is a topic that we’ll be debating for a generation. What is beyond debate, however, is that for the past two years (including the final year of Democratic control of the U.S. House), traditional stimulative policies to create jobs have lacked support among the public and the majority in Congress. Indeed, in Washington today, the debate isn’t about how much more the government should be spending to create jobs, but rather how deeply federal spending should be cut to reduce the deficit.
2010 Tax Cuts
As a result, the administration has been stymied in its attempts to put forth an aggressive job-creation initiative. In late 2010, as part of the legislative compromise that extended the George W. Bush-era tax cuts, the administration won congressional approval of a $120 billion payroll tax cut designed to help spur employment. That was a positive measure, to be sure, but it must be frustrating to a progressive administration that the only job-creation idea that has gained traction is a tax cut.
Put another way: If voters come to believe that the sole way the federal government can create jobs is by cutting taxes, that doesn’t bode well for the future of progressive governance or progressive candidates.
Hence, as a political and economic matter, it is vital that the administration put forward a comprehensive, multifaceted job strategy -- one that is defined more by its creativity and pragmatism, and less by a large price tag or Keynesian logic. It needs to overcome the policy gridlock that the anti-spending impulse has created in White House policy councils related to job creation, and propose measures (beyond more tax cuts), even if they have some cost.
This means the administration needs to get past its justifiable pride in the measures enacted in the first two years, and overcome any inertia created by the belief that these policies will produce results over time.
For it isn’t the unemployment rate itself that creates political risk for the president’s 2012 re-election effort. Voters know that turning things around takes time. Americans also sense that some fundamental changes are taking place in our economy that make a return to stable and robust employment difficult to achieve.
The greatest risk to the president will be if the American people believe the administration isn’t trying hard enough to tackle the jobs problem. That is why it is imperative for the administration to do more -- proposing new ideas, initiatives and job-creation programs -- and without delay. It may not succeed, but it must get “caught trying” to do more to spur job creation.
Array of Proposals
The good news is that there is an array of ideas for the administration to draw from in devising a job-creation plan. Former President Bill Clinton has offered his own 14 point proposal in a recent issue of Newsweek; it includes more investment in green power, painting black rooftops white (to put people to work and conserve energy), and new job training initiatives.
The policy journal Democracy recently published a set of job-creating ideas, from commercializing federally financed research, to immigration law reform, to creating “entrepreneurship clusters” in targeted regions. The administration, led by National Economic Council Director Gene Sperling, has policy innovators who doubtless have their own ideas -- and can rely on outside groups and advisory panels for suggestions.
What’s needed is not so much new thinking but a decision by the White House to package those proposals in a presidential initiative on job creation, one that can then be championed in the face of congressional resistance and public anxiety over spending.
In doing so, the administration shouldn’t be shy about price tags: Spending on policies that obviously and directly create jobs will garner support, even in these budget-conscious times. But at the same time, the administration shouldn’t fall into the political trap of equating more spending per se with more job creation. And some ideas that are favorites with policy wonks (even when they are effective job creators), like more state and local fiscal relief, shouldn’t be part of the administration’s package because they are political nonstarters.
The president should put forward a half-dozen job-creation ideas in July, and call on Congress to come back early from its August recess to give these proposals up-or-down votes before Labor Day. Then, he could propose a half-dozen more, and demand votes on those before Congress finishes its session this year. The administration may lose some of these votes; and ideas that win approval by Congress in fall or winter of 2011 may have limited impact on the employment rolls before Election Day 2012, but the American people will be grateful for the president’s determination.
(Ron Klain is a Bloomberg View columnist. The opinions expressed are his own.)
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