The Big Question: How can lawmakers address rising unemployment?

Some of the nation's top political commentators, legislators and intellectuals offer some insight into the biggest question burning up the blogosphere today.

Today's question:

What policies could Congress or the president promote that would improve America's unemployment numbers?


Rep. Keith Ellison (D-Minn.) said:

"We have to focus our attention on massive job creation, and I think we need to invest in our infrastructure.  I have a bill which would basically provide 625 billion extra dollars to build our infrastructure.  We also need to step back and focus on an industrial policy that will strengthen manufacturing in America."


Paul Kawika Martin, policy and political director of Peace Action, said:

One step in creating more jobs could be dealing with a bloated Pentagon budget. The U.S. spends around half of its discretionary budget on the military and nearly more than every country in the world combined. Recently, economists at the University of Massachusetts concluded that military spending creates fewer jobs than nearly any form of government activity. Their findings showed that a tax cut or investing in education, mass transit or energy efficiency would create far more jobs. Sen. John McCain (R-Ariz.) echoed these sentiments when he said that we cannot look at military spending as a jobs program right before voting to stop the F-22 jet.

Even if you believe that the current level of military spending is appropriate, you would probably agree with current and former military leaders in cutting Pentagon pork — weapons systems that benefit military contractors and congressional campaign coffers not American's security. A former Assistant Secretary of Defense under Reagan and others urge the cutting of several wasteful programs including the DDG-1000 naval destroyer and "missile defense." This would allow the United States to inject billions into higher job producing programs.


Rep. Jeff Flake (R-Ariz.) said:

"Abandon the government takeover of healthcare.  That's got a lot of small businesses in particular very worried about hiring because they realize that if they support additional employees, they may be socked with a huge surtax from the healthcare bill."


Rep. Bobby Scott (D-Va.) said:

"We passed a stimulus package that is working, but working slower than I like.  It's gradually reduced the number of lost jobs, but we're still losing jobs.  We're headed in the right direction and making progress, but not enough.  We need continued support for the stimulus package, which still has a lot of money.  It was designed to pay out over two years.  Economics have indicated that the stimulus package has made a huge difference in the economy."


Dean Baker, co-director of the Center for Economic and Policy Research, said:

Instead of trying to spend money to increase GDP, the government should instead pay workers to work shorter hours. The mechanism can take the form of a tax credit to employers. The government can give them a tax credit of up to $3,000 to shorten their workers’ hours while leaving their pay unchanged. The reduction in hours can take the form of paid sick days, paid family leave, shorter workweeks or longer vacations. The employer can choose the method that is best for her workers and the workplace.If take home pay is left unchanged as a result of the credit, then demand should be left unchanged. If workers are putting in fewer hours and demand is unchanged, then employers will need to hire more workers.

This logic is as simple as it gets. The process is also quick and cheap. In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job, far less than the cost per job saved through the stimulus package. Germany has used this policy to keep its unemployment rate at 7.6 percent, about the same as it was before the recession. Imagine workers in the United States, like workers in Germany, were dealing with the recession by putting in four-day weeks (while getting paid for five) or getting an extra two weeks of paid vacation. This sure beats being unemployed.

Seventeen states already have a “work-share” program in place that allows employers to use unemployment insurance money to cover a reduction in work hours, without a corresponding reduction in pay. More than 100,000 layoffs have been prevented as result of this program. Senator Jack Reed (D-RI) has a bill that would increase funding for work-share programs and remove some of the bureaucracy. The bill also provides start-up money for the states that don’t have programs. The Reed bill would be a big step towards following the Germany model, taking advantage of a program that is already in place. It could quickly make a big dent in the unemployment rate, by preserving many of the jobs that are now being lost.

In this respect, it is important to clear up a common confusion about the economy. The monthly job growth number is a net figure. Approximately 4 million people leave their jobs every month, half involuntarily. We have job growth if we either create more than 4 million jobs or reduce the number of jobs lost below 4 million.If a work share program reduced involuntary job loss by 20 percent, or 400,000 per month, it would have the same effect as adding 400,000 new jobs. Over a full year, this would generate nearly 5 million new jobs. This would be a quick and effective way to reduce unemployment.


Glenn Reynolds of Instapundit said:

The biggest problem so far has been "regime uncertainty," as businesses forego investment and hiring because they're not sure what's happening with ever-shifting stimulus, healthcare, and carbon-tax talk. In addition, a growing sense that financial success depends more on connections than on business acumen is shifting investment into the political sphere. That's good news for lobbyists, but not so much for the economy as a whole.

Furthermore, politicized efforts to ensure that the stimulus didn't benefit white males too much mean that the money didn't go to the sectors, like construction and manufacturing, that have been shedding jobs the fastest. All in all, exactly what one would expect of a politicized economic plan from an inexperienced administration.

Simple, predictable regulations, low taxes and freedom from political pressures on capital allocation produce economic growth. Corrupt, bureaucratized, constantly-shifting regulatory regimes do not. As we've moved toward the latter, we've seen less employment. Moving back toward the former would probably fix things.