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What Can Obama Do to Spur Job Creation?

September 8, 2011 at 12:00 AM EDT
President Obama will address a joint session of Congress on Thursday evening to outline his plan for job creation and reviving a stumbling economy. Judy Woodruff previews the speech with former director of the Congressional Budget Office Douglas Holtz-Eakin and former economic adviser to Vice President Biden, Jared Bernstein.
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JUDY WOODRUFF: And to the debate over creating jobs and the president’s efforts to frame that agenda during his address tonight.

KWAME HOLMAN: President Obama sets foot in the House chamber tonight for a high-stakes speech that could be crucial to the economy and his presidency.

House Speaker John Boehner said today the country and Congress are eager to hear the plan.

REP. JOHN BOEHNER, R-Ohio speaker of the House: Well, I think it’s important for us to wait and listen to what the president has to outline, and do so in a way where, in my case, I’m going to be looking for where’s the common ground? What is it that we can agree on? We know that the two parties aren’t going to agree on everything, but the American people want us to find common ground, and I will be looking for it.

KWAME HOLMAN: The president’s jobs pitch, a package of tax credits and targeted spending increases, is expected to total at least $300 billion and maybe much more. It’s likely to include, among other things, a continuation of payroll tax cuts for workers, extended benefits for the long-term unemployed, and new spending on public works.

Gene Sperling is director of the president’s National Economic Council.

GENE SPERLING, White House National Economic Council: The president’s task tonight is to make clear to the United States Congress and the American public that when it comes to getting jobs growing and our economy take — getting stronger, no and nothing are not options, that we have to take bold action to get more momentum in the economy, more demand, more customers, more jobs. And we have to do it in the context of also having greater confidence in our long-term fiscal situation. That’s what our economy needs now.

KWAME HOLMAN: Indeed, Mr. Obama will go before the Congress at a critical time, with unemployment still above 9 percent, and new applications for jobless benefits up again last week.

The president’s plan, dubbed the American Jobs Act, will arrive here as legislation next week. In his speech tonight, Mr. Obama is expected to lay out what he’s willing to do to jolt the economy. But White House officials say he will also urge Republicans to join him in helping solve the country’s economic woes.

GENE SPERLING: He’s going to put forward an American Jobs Act proposal tonight that will make very clear that, here’s what we could do together, Democrats and Republicans, the American public, that will have a meaningful impact — and I mean meaningful — on creating jobs, on spurring growth and on lowering unemployment.

KWAME HOLMAN: Congressional Democrats, such as Virginia Congressman Gerry Connolly, complained today the president will not get a fair hearing from the other side.

REP. GERRY CONNOLLY, D-Va.: The president tonight will be putting forward his job creation proposal. Unfortunately, some of our colleagues on the other side of the aisle have already decided that they’re not even going to come and respect the president’s joint appearance tonight. Talk about closed minds.

KWAME HOLMAN: But Senate Minority Leader Mitch McConnell insisted Republicans are standing on principle when they criticize the Obama policies.

SEN. MITCH MCCONNELL, R-Ky. minority leader: There’s a much simpler reason to oppose the president’s economic policies that has nothing whatsoever to do with politics. They simply don’t work.

Yet, by all accounts, the president’s so-called jobs plan is to try those very same policies again, and then accuse anyone who doesn’t support them this time around of being political or overly partisan, of not doing what’s needed in this moment of crisis. This isn’t a jobs plan; it’s a re-election plan.

KWAME HOLMAN: Tomorrow, the president takes his plan on the road, with an appearance in Richmond, Va.

JUDY WOODRUFF: That report from NewsHour correspondent Kwame Holman.

And we get the views now of two economists with long experience in the policy debates and the politics of Washington. Douglas Holtz-Eakin is a former director of the Congressional Budget Office and he served as chief economics adviser to John McCain during his 2008 presidential campaign. He is currently president of the conservative American Action Forum. And Jared Bernstein, who was chief economist and economic adviser to Vice President Biden, he is now a senior fellow at the Center for Budget and Policy Priorities, a left-leaning public policy center.

And, gentlemen, we thank you both.

And, by the way, we are now hearing the White House is confirming that the president’s jobs package that we’re going to hear about tonight is going to total something like $450 billion. We had been hearing over $300 billion. The number has gone up.

But let’s start by asking — and, Jared Bernstein, I will start with you — what — knowing this president, what would you like to hear him say tonight about jobs?

JARED BERNSTEIN, former chief economist to Vice President Joe Biden: I think there are three things, Judy.

First of all, you really want to hear a package that is of a magnitude to really move the needle on unemployment and jobs. And a number in the neighborhood you just mentioned, north of $400 billion, certainly accomplishes that.

Secondly, this is a plan that needs to be plausible, at least in normal times, on a bipartisan level. That is, he needs — if Congress, particularly House Republicans, are to block this plan, he has to be able to go out to America and explain that these measures that he’s proposing — you mentioned some in the clip there — are measures that Republicans would typically support.

And, third, he has to just really convey the urgency of working together. I mean, the debt ceiling is behind us. And these guys are coming back from their recess. They got an earful from their constituents that, you know, enough already with budget deficits and debt ceilings and baselines. What we care about are our jobs, our paychecks, our kids’ economic opportunities. That’s the urgency of working together in the moment.

JUDY WOODRUFF: All right, Douglas Holtz-Eakin, coming from a different perspective, what do you — what would you like to hear the president say tonight?

DOUGLAS HOLTZ-EAKIN, former Congressional Budget Office director: I would like to hear him express a slightly different philosophy than he has in the past, which has really focused very much on temporary stimulus measures, something focused around government programs, and, instead, express a vision for long-term economic growth, with a real commitment to the private sector, something that would be — that has been missing.

And in doing that, I think it’s important for him to take on the single biggest crisis that we face past the immediate jobs crisis, and that is the debt that faces us. So, unlike past efforts, I would like him to talk about how he’s going to pay for this, and how these efforts fit in with the efforts of the deficit reduction committee and the Congress.

That’s crucial for long-term growth. We can’t sail into a fiscal crisis and expect to succeed.

JUDY WOODRUFF: So, just quickly, you don’t see the urgency of a jobs creation plan right now? Because you’re talking about deficit cuts.

DOUGLAS HOLTZ-EAKIN: I believe that, in fact, this has been the problem the administration faces. They view this as job creation plan over here, in isolation from the other problems that face America.

These are not mutually exclusive. And you can do both. And the president needs to express this.

JUDY WOODRUFF: Well, let’s talk about what we do know, at least what the White House is confirming so far that he’s going to talk about.

One thing is extending and expanding, Jared Bernstein, the Social Security payroll tax cut. How likely is it that that move will have an effect on jobs?

JARED BERNSTEIN: I think that it’s significant, because they’re talking about cutting the payroll tax that everybody pays on their paycheck in half on the employee side. So that was 6.2 percent. They are talking about talking that down to around 3 percent.

Now if you earn $50,000 bucks a year — that is about median earnings — this year, 2011, you are getting about a $2,000 — I’m sorry — you are getting about $1,000 from that payroll tax cut. But, next year, if this plan passes, you’re going to get $1,500. Now, families are struggling right now. Their paychecks are falling in real terms. They’re having difficulties making their budgets.

They will spend that money. And that will reverberate throughout the economy, creating more economic activity and creating jobs.

JUDY WOODRUFF: And Douglas Holtz-Eakin, what we are hearing is, this is going to add up to something like $100 billion — more than $100 billion in government spending. Is that likely? What do you see this as — the effect this having on jobs?

DOUGLAS HOLTZ-EAKIN: Part of this will be business as usual. It’s already in place. So it represents no new real change in the economic situation, hasn’t done much so far, unlikely to do much going forward.

The new part comes in two pieces, some exemptions for businesses and some exemptions for businesses with new hires. The latter has been something that has been floated before, and we’re never sure if you’re really able to implement it effectively. We will let that play out the way it does. Yes, I think the bottom line is if you look at private forecasters…

JUDY WOODRUFF: So you sound skeptical.

DOUGLAS HOLTZ-EAKIN: Yes. I mean, Jared has given you the textbook explanation of how this should work in a world where — on a blackboard.

But the reality in the past has been weak. We didn’t get the bang for the buck out of these that we had hoped. When we look at these efforts in some of the private forecasters’ models, they did some estimates of things that look like the president’s policy, and they didn’t do much.

DOUGLAS HOLTZ-EAKIN: So I think, you know, we should look at these. I think the Republicans are going to listen to the president. This is an area where they have worked with Democrats in the past. But we can’t be sure of success. We’re not really changing the playbook.

JARED BERNSTEIN: So, let me speak to that, because Doug raises a critical issue, and it’s a critique I have heard, which is, this stuff hasn’t worked; why do more of it?

If you actually do a very simple exercise and you look at how GDP and jobs were trending right before the Recovery Act came into place, you will find that the economy was just cratering. I mean, the GDP was contracting at a 9 percent rate in the fourth quarter of 2008. Now, in the fourth quarter of 2009, it was growing at 3 percent.

What happened is, as the stimulus began to fade, that’s when we got into the kind of trouble that we’re facing right now. These measures have worked in the past. And they will work again, if Congress gets their act together and legislates them.

JUDY WOODRUFF: Let me ask you about another element of what the president is proposing, Douglas Holtz-Eakin, and that is infrastructure jobs. And we’re told working on highways, working on schools. What is your sense of that in terms of creating jobs?

DOUGLAS HOLTZ-EAKIN: We know that, as a matter of both first principles and experience, that high-quality infrastructure is essential in a modern economy. About that, there is no dispute across the aisle.

What there is skepticism about is whether you can flick a switch, start a new program, spend the money quickly, pick projects in an intelligent fashion, and jump-start the economy. We heard this about the Recovery Act. It didn’t happen. Jared is about to give you a testimonial that says, if we do this in schools, honest, Doug, it really will happen. I would hope he was right. I remain skeptical.

(LAUGHTER)

JARED BERNSTEIN: I was trying — I was working him in the green room.

JUDY WOODRUFF: He has laid it out there for you.

(LAUGHTER)

JARED BERNSTEIN: I was working him in the green room. I almost had him.

(LAUGHTER)

JARED BERNSTEIN: Look, I have been talking about a measure, Fix America’s Schools Today. And it’s not named FAST by accident.

And this is something the president, I believe, is going to speak to tonight, perhaps not by that name, but school repair. We have 100,000 public schools across this country. They all have a maintenance backlog. They have all been squeezed in the budget crunch, and they have got lots of work that’s ready to go.

It’s labor-intensive work, insulation, windows, painting, boilers, roofs. This kind of work could get construction workers, who face very high unemployment right now, back to work quickly.

JUDY WOODRUFF: And you’re — but you’re still skeptical.

DOUGLAS HOLTZ-EAKIN: We heard this in 2009 about the Recovery Act. And anyone who has looked at that has been extremely disappointed by the return on the infrastructure. It just didn’t work.

JARED BERNSTEIN: It’s not that it didn’t work. It’s that the infrastructure — it took about a year for the infrastructure programs to get into place in the Recovery Act.

And, by the way, we needed those programs in 2010, and we got them. We need them in 2012. We are going to need some of them in 2013. FAST, by the way, the — working on the maintenance backlog of those schools, that could be stood up very quickly.

JUDY WOODRUFF: Just — and speaking of quickly…

DOUGLAS HOLTZ-EAKIN: Last thing on this topic. We have 100 transportation infrastructure programs. We have millions more in energy.

JUDY WOODRUFF: You are saying already out there.

DOUGLAS HOLTZ-EAKIN: Yes. So we don’t need more infrastructure programs. Jared is creating a bigger bureaucracy. We need things that work.

JUDY WOODRUFF: One other thing we know the president is going to say is giving money to states and school districts to limit layoffs of teachers and first-responders or either — or to hire those back who have been laid off.

Just quickly, is that something that makes a difference?

DOUGLAS HOLTZ-EAKIN: It always sounds great, and lord knows we need teachers and emergency responders.

But, remember, the philosophy has been targeted. So, veterans deserve some help. Teachers deserve help. Actually, every American deserves help. Why don’t we get a plan that actually raises the economy as a whole?

JARED BERNSTEIN: The target is very important here. Every month, we have been adding private sector job, not enough, but we have been adding them, and laying off our teachers, our police, our firefighters. By targeting those workers, not only can we have important jobs in our communities, but we can avoid layoffs and get some of these folks back to work.

It is one of the programs that worked quickest and most effectively in the Recovery Act.

JUDY WOODRUFF: Very fast, you both know this Congress pretty well. What do you think the odds are that the president is going to get all or just some of this out of the Congress?

DOUGLAS HOLTZ-EAKIN: I think there’s a real chance for some of this to happen. We have seen payroll tax agreements in the past, unemployment insurance agreements in the past, infrastructure agreements.

JARED BERNSTEIN: Yes, I agree.

DOUGLAS HOLTZ-EAKIN: So, there are things out there about which progress can be made.

JARED BERNSTEIN: I think that’s great. And it is a good place for us to sum up.

I think that those measures, payroll tax, unemployment insurance and some of the infrastructure, could clear the political bar. And that is where the president is going to hit very hard tonight, putting all this self-inflicting wounds behind us and start working on stuff that really matters to people.

JUDY WOODRUFF: Jared Bernstein, Douglas Holtz-Eakin, we thank you both.

DOUGLAS HOLTZ-EAKIN: Thank you.