Working on a Jobs Bill

Obama Jobs Speech

It has been two months since President Obama’s jobs bill was sent to Congress. The $447 billion legislation was intended to provide a much needed jolt to the American labor force through tax breaks as well as spending on infrastructure, education, unemployment benefits and a number of other key areas. Since it’s unveiling, the American Jobs Act has faced stiff opposition in both chambers of Congress.

After failing to garner the 60 votes needed to pass the Democrat-led Senate, Senate leadership introduced a number of bills made up of components of President Obama’s original jobs bill. The first bill, the Teachers and First Responders Back to Work Act, would have provided $35 billion to states to hire teachers and first responders. It failed by a margin of 50-50 votes on October 20.

Obama Jobs Speech
President Obama delivers his Jobs Speech to Congress | Photo courtesy of the White House (Chuck Kennedy) via Wikimedia Commons

The Senate then took up the Rebuild America Jobs Act focused on a favorite anti-unemployment tool of Democrats, infrastructure investment. The bill would have provided $50 billion to spend on modernizing transportation infrastructure and $10 billion to create an infrastructure bank–an institution that provides low-interest investments to private firms for infrastructure projects. This too failed, 51-49 on November 3.

Finally on Thursday afternoon, the Senate passed a small component of the President’s Jobs Act that provides tax credits to employers for hiring unemployed veterans. The bill, which passed 94-1, was added as an amendment to a House bill that repeals a 3 percent withholding tax on government contractors and will now be sent back to the House for approval before it can reach the President’s desk.

If the House of Representatives passes the new version of this bill it will be only a minor accomplishment for the President and an even more minor accomplishment for the unemployed. While Thursday’s bill is commendable in that it targets a venerable segment of the population, it does little to address unemployment as a whole.

The Republican-led House has yet to vote on the American Jobs Act as a whole, with House Majority leader Eric Cantor (R-VA) calling the bill “dead on arrival,” shortly after President Obama unveiled it. Instead, House Republicans have adopted their own jobs agenda by passing a number of bills that are aimed at dismantling federal regulations which, according to the GOP website, burden small businesses and hinder economic growth. Dubbed the “Forgotten 15” because the Senate has yet to vote on them, these bills remove what the GOP leadership calls duplicative and unnecessary regulations in areas such as environmental issues and filing requirements among other policy areas.

If House GOP Leadership wants to pursue a deregulatory agenda that’s perfectly reasonable–many House Republicans were voted into office on a platform of deregulation and so the public should expect to see this reflected in their legislative agenda. But calling deregulation bills “jobs bills” and chiding the Senate for not taking them up is deeply misleading. The premise behind deregulation creating jobs is the argument that removing regulations allows firms to make greater profits which in turn allows them to hire more workers. Similarly, deregulation proponents argue that government regulation hurts firm profits and forces them to layoff workers.

The first problem with this line of thinking is that it is obviously a long-term process that does nothing to address the immediate concerns of the unemployed. Firms need to wait for deregulatory policies to take affect, then profits must start growing before they finally decide that hiring workers is a worthwhile investment. This means that any positive changes to unemployment would not take affect for some time. It’s worth pointing out that there is hardly a more perfect situation politically for Republican Presidential and Senatorial candidates running for office in 2012.

Secondly, the evidence that deregulation creates any jobs at all is shaky at best. Former Reagen advisor and Treasury official, Bruce Bartlett makes this point clear. He shows that according to a recent report by the Bureau of Labor Statistics, an agency that tracks unemployment figures, only .2 percent of mass-layoffs from 2009 to the first half of 2011 were caused by government regulations. Bartlett also shows that the single biggest complaint among small business owners is poor sales, not government regulation. This implies that if addressing unemployment is truly a concern of Congress, then addressing consumer demand–not government regulation, should be a priority.

Even as small parts of President Obama’s Jobs Act get passed through Congress and the House passes deregulation bills disguised as jobs bills, these pieces of legislation fail miserably to address a crucial intangible factor in developing economic growth, job creation and consumer demand–confidence.

Demand will not increase (people will not buy things), and firms will not make invests in capital or labor if they are not confident that the current economic situation will improve and that the government is working together to help the economy improve.

Prospects do not look good for gaining enough bipartisan support to pass a comprehensive jobs bill aimed at spurring investment but Congress can still play a role. A bill from the Supercommittee will have a number of procedural amendments attached that increase the likelihood of it getting passed. Although recent discussions have shown the members of the Debt Committee are having trouble agreeing on cuts, a deal would have a positive effect on confidence levels. If the Supercommittee members are able to put together legislation that addresses the long term deficit–through tax reform, changes to entitlements and cutting government redundencies, American firms and consumers will see that Congress is able to address the serious fiscal issues facing this country. Firms and consumers will know that the worst of the financial crisis is behind them and they will be far more likely to spend their money.

The failure of Congress to pass a comprehensive jobs bill only serves to undermine the very confidence that is needed to spur investment. Without such a bill, a Supercommittee deal may be the last chance before the 2012 elections to address unemployment and the U.S.’ long-term economic issues.

 

About Ian Moskowitz

Ian is a senior in CAS studying political science.

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