Wednesday, June 02, 2010

Where are the jobs? Where's the jobs bill?

David Leonhardt explains why debates over a job stimulus bill versus deficit reduction is a false one.

Of course, even if the bill is not very expensive, it is worth passing only if it will make a difference. And economists say it will.

Last year’s big stimulus program certainly did. The Congressional Budget Office estimates that 1.4 million to 3.4 million people now working would be unemployed were it not for the stimulus. Private economists have made similar estimates.

There are two arguments for more stimulus today. The first is that, however hopeful the economic signs, the risk of a double-dip recession remains. Financial crises often bring bumpy recoveries. The recent troubles in Europe surely won’t help.

The second argument is that the economy has a terribly long way to go before it can be considered healthy. Here is a sobering way to think about the situation: If the next four years were to bring job growth as fast as the job growth during the best four years of the 1990s boom — which isn’t likely — the unemployment rate would still be higher in 2014 than when the recession began in late 2007.

Voters may not like deficits, but they really do not like unemployment.

Looking at the problem this way makes the jobs bill seem like less of a tough call. Luckily, the country’s two big economic problems — the budget deficit and the job market — are not on the same timeline. The unemployment rate is near a 27-year high right now. Deficit reduction can wait a bit, given that lenders continue to show confidence in Washington’s ability to repay the debt.

As a result, Congress does not have to choose between the problems. It can pass the jobs bill, putting people back to work, and even pass a separate bill to help struggling states. History has shown that state aid, which prevents layoffs of teachers, emergency medical technicians and other workers, is the single most effective form of stimulus.

Such logic, alas, is in short supply in the Senate these days.



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