Jobs and America’s recovery

The Dow climbed back to 10,000 but there is no bull market for American jobs, which continue to be shed at a rate of about a quarter-million every month. The national unemployment rate stands at 9.5 percent and large pockets of America are suffering even more, with 14 states reporting unemployment rates higher than 10 percent.

Weakness in the job market has the most extreme impact on those at the margins.  According to one report, the unemployment rate among black male teenagers is 50.4 percent. That is unacceptable.

Although it’s politically unpopular to do a new stimulus, some influential economists believe that economic conditions are such that doing nothing at all could impede the budding recovery just as the effects of the first stimulus begin to wane in the second quarter of 2010. The fiscal and monetary policies implemented over the past year have acted as a ventilator for a very sick patient, the American economy; removing the ventilator too soon would have devastating consequences.

 Putting Americans back to work is the key to a full recovery. Here’s how I propose we accomplish this:

First, we should concentrate on the quickest, hardest-hitting way to relieve employers’ payrolls while also boosting paychecks — a two-month payroll-tax holiday.

The $8,000 homebuyer’s tax credit expires on Nov. 30 and should be extended. To give businesses an incentive to resume hiring, Congress should expand a provision that allows companies to carry back tax losses from the current two-year period to five years. They should also extend the accelerated depreciation tax deduction for business purchases of new equipment.

 Second, we should focus on strategies that have worked.  For example, the “cash for clunkers” program stimulated consumer spending and provided much-needed help to the nation’s auto dealers, all while taking 700,000 cars off the road and replacing them with vehicles that get an additional 10 miles per gallon on average.

To boost sales before the holidays, the “clunkers” model should be expanded to provide incentives such as a voucher with a rebate that consumers could use to purchase energy-efficient household appliances like refrigerators, televisions and computer equipment. This approach has been used in China and has been enormously effective, with retail sales of consumer goods increasing by 18 percent over the last year.

Third, Congress must extend unemployment benefits. This is not a typical cycle of recession and recovery. Long-term unemployment is the highest in 60 years.

Relief is needed, not only to allow people to meet basic needs until they can reenter the workforce, but also to prevent a further tide of mortgage foreclosures.

 To ensure deficit neutrality, Congress should adhere to its “pay as you go” rules to pay for the new spending associated with these programs. They should also consider using remaining funds from the Troubled Asset Relief Program (TARP) to pay the cost of the stimulus package.

 Last, and perhaps most importantly, Congress must pass healthcare reform that will not add to the deficit. Healthcare costs are the fastest growing cost for employers and the single biggest disincentive to hiring. Our healthcare system may also be the biggest obstacle American firms competing globally. U.S. manufacturers, for example, pay more than twice as much to cover their employees as their global competitors. As The Wall Street Journal reported, healthcare costs falling directly on employees’ will rise by 10 percent next year — despite the fact that just about everything else, including wages and Social Security benefits, will be stuck in place. This is because employers are passing more of the cost onto their workers. Reining in healthcare costs is not only a fiscal responsibility issue; it is a jobs issue.

Now that healthcare reform has passed the major committees in Congress, policymakers should consider not only the individual components of reform, but also the overall impact of the bill on job creation. Healthcare reform must rein in runaway costs while also not creating new disincentives to hiring workers. Senate Finance Committee Chairman Max Baucus (D-Mont.) should be commended for gaining bipartisan support for a healthcare bill that expands coverage while reducing the deficit. However, one provision in his bill needs to be fixed. Currently, the bill’s “pay or play” provision requires employers to pay a penalty if they hire low- or middle-income workers who take advantage of the new healthcare subsidies and purchase healthcare outside of the workplace. This creates a disincentive to hiring the very workers who have been hit hardest by this recession.

 Too many Americans are struggling without jobs or with low-paying jobs and enormous healthcare costs. We have a responsibility to help them now, so as a country, we can meet what are certain to be tremendous challenges in the years to come.

Former Rep. Ford (D-Tenn.) is chairman of the Democratic Leadership Council and a visiting professor of public policy at New York University.