Jobs, not austerity — let’s make America work again

Why, in the midst of economic crisis, is Washington’s entire focus on the nation’s growing deficits and massive accumulated debt? Why is raising the “debt ceiling,” which has been raised 74 times since 1962, suddenly the most crucial issue, when it could have been painlessly dealt with when the economy was doing well and unemployment was negligible?

Where were our national leaders and Congress as the country’s debts mounted above $14 trillion? Why wasn’t something done as we engaged in two wars that have cost over $1.2 trillion? Instead of paying for these astronomically costly undertakings in annual budgets during the past 10 years, as the deficits and debt soared, they enacted huge tax cuts.

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Focusing on the debt ceiling is outrageous when joblessness is officially at 9.2 percent and the underlying rate is really 17.3 percent, which means more than 25 million people out of work! It’s shameful and scandalous. Job creation and robust economic growth, which would actually eliminate the deficits, should be the No. 1 priority of the president and Congress. Austerity now is counterproductive because reducing spending will erode business and consumer demand, and slow or reverse our fragile recovery. Every businessman knows it is demand for his product, not low interest rates or certainty, that inspires him to invest, expand and hire. If he’s operating at 70 percent of capacity, it doesn’t matter how low interest rates are — there is no reason for him to hire. Let demand press his capacity and watch how fast he’ll increase investment and his labor force even in the face of high interest rates. Demand determines his actions. Austerity exacerbates unemployment, raising demand and the cost of government entitlements like food stamps, welfare and unemployment insurance, and reduces tax revenues. The result will be higher deficits, not lower ones. 

We need prosperity, not austerity initiatives, to generate jobs and growth on a large scale. Let’s establish a federal National Infrastructure Bank to provide low- or even zero-interest loans to private companies that will build or rebuild America’s roads, bridges, tunnels, airports, seaports, dams and sewer systems, high-speed rail, low-cost housing, a better electric grid and on and on. The American Society of Civil Engineers says the cost of our decaying surface transportation infrastructure will be $3.1 trillion in forgone economic growth by 2020. The toll for investing only at current levels will be 877,000 lost jobs. Tom Donohue, president of the U.S. Chamber of Commerce, says “the U.S. is missing a huge opportunity to ignite economic growth, improve our global competitiveness and create jobs.”

Sen. John Kerry (D-Mass.) sensibly stated, “We can either build and compete, and create jobs for our people, or we can fold up and let everybody else win. I don’t think that’s America.” President Obama has actually proposed a $30 billion infrastructure bank — hardly enough, especially in light of the fact that the Fed provided $3.3 trillion to foreign entities during the economic meltdown.

There is obviously plenty of work to be done, so legislative and administrative action must eliminate all red tape. (If not, we will be outclassed by China building entire supercities before we can even get approval to start a single project.) Such a national program would create the private-sector construction jobs so desperately needed by an economic sector ravaged by the recession. 

In addition, we should also consider the establishment of a National Bank for Job Creation to provide very low-cost, or even zero-interest, loans to businesses. These efforts, together or separately, would do far more to create jobs and growth, grow government revenues and reduce deficits and debt than has the $2 trillion spent by the Federal Reserve to keep interest rates at record lows, the 13-month extension of unemployment insurance or the payroll tax cut. The NBJC would get every able-bodied American working again and would maximize productivity. 

We have tried just about everything indirect to create jobs and economic growth. We’ve pushed interest rates down to near zero and sent out $600 stimulus checks, paid cash for clunkers and subsidized first-time homebuyers to the tune of $8,000, plus, most recently, cut the payroll tax. All to no avail. Why repeat the same fruitless efforts again and again?

The term “jobless recovery” is an absurd contradiction. When so many average Americans can’t find a job, can’t pay their mortgages and are having their homes foreclosed, suggesting we are in a recovery is clueless and coldhearted. When just about all of the wealth and savings of most Americans was in the collapsed equity of their homes, how can anyone characterize the present situation as a recovery?

Despite gains in productivity, the working class is deriving none of the benefits — neither improved wages nor more jobs. It’s all going to corporate profits. And monetary policy is doing nothing to reduce unemployment. It is job creation, not the failed interest-rate policies of the past, that must now be undertaken. 

The availability of “build America” infrastructure jobs should be considered fundamental to the Declaration of Independence’s promise of insuring every American citizen is entitled to the “pursuit of happiness.”

Let’s enact these efficacious initiatives, which will spark economic growth, which is itself the best prescription to subdue and ultimately eliminate federal deficits. A rising tide lifts all ships. Economic growth produces tax-paying jobs in place of costly government entitlements (unemployment insurance payments alone cost more than $75 billion a year). Economic growth would also boost corporate profits, amplifying their tax payments and increasing government revenues. The result would be no more deficits. 

At the same time, we would be building magnificent, life-enhancing infrastructure for the benefit of all citizens and for generations to come. As Donald Trump asserted, “One must give China credit for the good sense to use U.S. funds [which they derive from their positive balance of trade payments] to build airports, bridges, schools, electrical grids and so much other invaluable infrastructure.” Then he asked, “When was the last time you saw a bridge being built in the United States? You see them falling down all the time. When was the last time you saw an airport being built? We’re like a Third World country.”

When business spends on capital equipment that will do service for many years, accountants treat the costs as investments, to be written off over many years of the equipment’s useful life. Our nation’s expenditures that enhance life and increase our competitiveness should be treated in the same way. All the airports, seaports, electric grid, highways, etc., should be considered investments, amortized over many years and carried on the country’s books as invaluable assets on the other side of our nation’s balance sheet in contraposition to its debt.

Treated this way, the country’s fiscal accounts would be more accurate, showing its assets against the debt incurred in their creation. By contrast, debts that are incurred to pay unemployment insurance or other entitlements, or to wage war, do not create assets. They produce nothing lasting to balance the debt incurred in their creation.

Launching a job-creating infrastructure program is the ideal solution because it’s good for everybody and, unlike austerity, hurts no one. 

Let’s aim directly at the target we actually want to hit, which is job creation. Let’s accept that the indirect methods, such as zero-interest rates, have not worked. Let’s aim at the bull’s-eye with real job-creating growth programs.

J. Morton Davis, a shareholder in The Hill’s parent company, is a Wall Street investment banker and author of Making America Work Again and From Hard Knocks to Hot Stocks.