A New Jobs Stimulus the GOP (and Dems) Can Back

November 2nd, 2010 at 8:25 am | 30 Comments |

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Republicans—should they take hold of the House—will face two simultaneous challenges. The first comes from the economy in the form of a stubborn unemployment number, which, should it remain at 8-9% while the party is in power, will be a significant weight around the neck of any Republican running for office in 2012. The second will come from their own supporters, primarily the Tea Party, who will undoubtedly demand that they live up to the small-government promises they have made for the past year on the campaign trail. In order to balance these constraints, the incoming Republicans will have to solve the first problem and placate the second.

Unemployment, meanwhile, is the result of two trends: an inability to create new jobs, and the destruction of already existing ones. The rhetoric in support of the Obama stimulus was tethered mainly to creating new jobs—a task it has mostly failed at in the eyes of the American public. Creating new jobs is expensive and especially challenging in a sluggish economy. Saving jobs, however, is a more surmountable obstacle. If Republicans wish to improve upon the Pledge to America—and if they’re serious about governing, they’ll have to—then a policy dedicated to saving jobs should be one to pursue.

High unemployment negatively affects both employers and employees, although in most cases the misfortune falls harder on the latter than the former. Nonetheless, employers face their own problems when letting employees go. Kevin Hassett, in a testimony to the House Financial Services Committee, explains why:

When a recession strikes, firms are faced with a dilemma: sales and profits are down, and many workers are idle. But finding skilled workers is costly and time-consuming, involving large fixed costs. If a firm fires workers, it may incur large hiring and training costs when the recession ends and sales turn back up. Thus, a firm would prefer, all else equal, to hoard labor during a recession.

If Republicans happen to be feeling particularly ambitious, they should examine Germany, where a jobs policy has allowed the country’s unemployment number to fall to 7.5%. Germany’s policy is called “Kurzarbeit,” which means “short work,” and, as Hassett explains, “if hours and wages are reduced by 10 percent or more, the government pays workers 60 percent of their lost salary. This encourages firms to use across-the-board reductions of hours instead of layoffs.”

A welfare program, Kurzarbiet is not. It is in fact just the opposite, and it is a program that conservatives should embrace. For the employee, it would allow continuous work, although at reduced hours, which means they would continue receiving most of his wages from their employer. This prevents them from collecting their well-being from the state in the form of far more costly unemployment benefits, which would happen should they lose their job entirely. Meanwhile, employers can retain their workforce yet exercise them at a limited capacity in accordance with their productive capacity. Small businesses would be able to operate at much higher levels than if they had to trim employees. As the government dispenses funds directly into the economy with limited inefficiencies along the way, this jobs program would have a multiplier effect much greater than that of the stimulus package. Finally, because this funding essentially only fills in the margins instead of subsidizing jobs entirely, it is far more cost-effective per job than the stimulus as well. The program would run only temporarily, terminating once the economy and unemployment have improved.

Unfortunately, the reduction in hours and overall pay—despite the government reimbursement—will still cause many households to feel the pain, as they will have to cut back on spending and long-term savings. It will, however, prevent many families from falling out of the middle-class—a story we’ve heard far too often during this recession when families see their household income slashed because of job loss. In addition, families entirely supported by only one working parent won’t face the grim prospects of homelessness and poverty as long as that parent or spouse retains employment, even if it is at a discount.

Of course, like any other policy, there are potential downsides. Paramount among them is the fact that future reduction in unemployment wouldn’t be as rapid as is typically seen in recoveries. Labor agency chief Frank-Juergen Weise believes that Germany “won’t see a mass of new hires as in previous upswings,” and that the country’s employment will grow by only “30,000 to 50,000 jobs.” Yet, the overall number isn’t necessarily what matters; if Americans feel less affected by the economic downturn, then the relative nominal rate of recovery won’t be as salient.

Kurzarbiet will have to undergo an Americanization of sorts. A more palatable name would certainly be first on the list. Legislators will presumably make other changes as well–perhaps more stringent requirements and incentives for both employers and employees, along with an adjustment in the required number of hours cut or the amount reimbursed. Whatever the outcome, there is little doubt that it will be influenced by the demands of constituents and American political culture.

This is the sort of policy that Republicans should be looking for if they wish to show that they are more competent at governing than Democrats. It is uncertain as to whether or not the House leadership will be able to bring the Tea Party Caucus along. But they may not have to; what Democrat could justifiably vote against such a program?

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30 Comments so far ↓

  • sinz54

    I had suggested this idea–a year ago.

    But by the time any such program would be passed by Congress and signed into law by Obama–mid 2011?–it would be way too late to help the current recession much. By then, jobless claims will be slowly declining, so keeping even more people from getting laid off will have only a slight effect. We’ve already hit bottom in the current recession and are very slowly starting to work our way up.

    http://i56.tinypic.com/33dl4qa.jpg

    We’re no longer trying to stop massive layoffs by employers. That ship has sailed.

    The problem now, as you can see, is that we’re not adding enough new jobs to compensate for the high unemployment and rate of population increase. Some of those who are unemployed have been out of work for over a year and a half.

    Still, such a policy modeled after the German approach would be a good thing to add to the social safety net for the next recession (which is inevitable, given the business cycle).

  • Oldskool

    You’re talking about something reasonable that would make a lot of sense. And you think Republicans might go along with it? So what’s the punch line. I hate unfinished jokes.

  • Mark Rosenthal

    I live in Germany. I am an american.

    Kurzzeitarbeit is only part-time temporary work. It pays terribly.
    This whole posting is a bunch of hooey.

    Germany’s Arbeitslosigkeit (Unemployment) is falling because it’s GDP is rising and more FULL time jobs are coming back.

  • Xunzi Washington

    Many of the conservatives around here, however, have argued in the past that “saving jobs” is not really a benefit — only creating them is. Or at least goes one of the major criticisms of the stimulus — that it didn’t lower unemployment, at best it stopped it from getting worse. Although this is a different form of accomplishing this goal, can we agree now that “preventing further damage” is a benefit, and thus the stimulus is not a failure in that respect?

  • mjmtopeka

    This depends on how you approach it. In our individualistic “me first” culture, many would likely be outraged at losing anything at all. But there is a side of human nature that can be appealed to in order to get people to buy into this idea. It happened at the child care center where my daughter works. Last year, the number of children dropped and the parent organization was going to lay off one of the four child care workers at her site. The last hired was a Mexican immigrant who was raising two teenage grandchildren by herself. The other three (all white Americans BTW) approached management, offering to cut their own daily hours to six so the forth could stay on, also at six hours. This was definitely a hardship for the three, considering that childcare workers make barely more than the minimum wage. But the four of them made it. The good news is that their numbers picked up and all four are now back at full hours. It was good for the employees because they kept up their skills, and good for the employer because it maintained productive continuity. This really is a great idea but both parties need to unite in selling it to the public, appealing to our better selves. Thank you so much for putting this idea on the table!

  • balconesfault

    Sinz is right – this is a proposal that needed to be floated in late 2008 … not late 2010.

    And Xunzi is right – if stopping job loss is something to be celebrated, we should be calling the stimulus an amazing success.

    Consider McCain’s economic advisor, Mark Zandi – “Without the stimulus spending, instead of a 9.5 percent unemployment rate, we’d have an 11.5 percent unemployment rate.”

  • Stewardship

    The stimulus not taken is to put a price on carbon. Utility companies are sitting on $200 billion of deferred capital expenditures, waiting for the federal government to definitively set the rules by which we are going to move forward in energy policy. Not a single dime of tax money is required. No green jobs, just construction, manufacturing, bean counting….normal things.

  • pampl

    The President gets most of the credit, good and bad, for the economy. It’s not in the GOP’s interests to see this proposal happen. Granted, it *is* in the interests of individual Republican pols, given that they still get some of the credit for the economy, but we’ve been seeing the party trend towards more conformity and party loyalty, not less. No one will be willing to break ranks to vote for Obamaployment

  • TerryF98

    Why should I bother to go out and vote today. Obama has done nothing for me, right!

    http://whatthefuckhasobamadonesofar.com/

  • balconesfault

    Stewardship – spot on.

    For decades, we’ve had very compelling arguments as to the positive and stimulative effect on our economy that some kind of carbon tax would have. Pair it with trade policies based on the carbon footprint of imports, so that there isn’t an incentive to move manufacturing overseas as a result of the tax, and we have a massive economic winner.

    Pampl – you’ve got that right.

    Terry – that’s cute. I like this list:

    Questions:

    1) What was the average monthly private sector job growth in 2008, the final year of the Bush presidency, and what has it been so far in 2010?

    2) What was the Federal deficit for the last fiscal year of the Bush presidency, and what was it for the first full fiscal year of the Obama presidency?

    3) What was the stock market at on the last day of the Bush presidency? What is it at today?

    Answers:

    1) In 2008, we lost an average of 317,250 private sector jobs per month. In 2010, we have gained an average of 95,888 private sector jobs per month. (Source) That’s a difference of nearly five million jobs between Bush’s last year in office and President Obama’s second year.

    2) In FY2009, which began on September 1, 2008 and represents the Bush Administration’s final budget, the budget deficit was $1.416 trillion. In FY2010, the first budget of the Obama Administration, the budget deficit was $1.291 trillion, a decline of $125 billion. (Source) Yes, that means President Obama has cut the deficit — there’s a long way to go, but we’re in better shape now than we were under Bush and the GOP.

    3) On Bush’s final day in office, the Dow, NASDAQ, and S&P 500 closed at 7,949, 1,440, and 805, respectively. Today, as of 10:15AM Pacific, they are at 11,108, 2,512, and 1,183. That means since President Obama took office, the Dow, NASDAQ, and S&P 500 have increased 40%, 74%, and 47%, respectively.

  • Non-Contributor

    I am not necessarily against this idea but there are some major differences between Germany and the US. One is that housing bubble did not happen in Germany it was a decline in exports that lead to their issues. Secondly it has also been reported that although the Kurzarbeit policy did help it was not the only factor in the decline in unemployment. Additionally, several studies have highlighted the issues of abuse and ineffectiveness of job retention of the program.

    But I agree with most of the comments above. We should not be focused on maintaining but growing the economy.

    It seems rather odd to me that the Republican mantra is smaller government and not a stronger economy. Of course the Democrats wished they had a mantra.

  • sublime33

    I don’t think this is a bad idea. The problem is that it won’t help the deficit, and since the Republicans hitched their wagons to that horse, they are going to have to explain why this program coupled with extending more tax cuts made the deficit even bigger.

  • sinz54

    balconesfault: And Xunzi is right – if stopping job loss is something to be celebrated, we should be calling the stimulus an amazing success.
    The stimulus failed its original goal of reducing unemployment below 8% by now, which both Romer and Biden had touted. Remember “Recovery Summer”?

    So sure, we can move the goalposts and say that the stimulus kept things from getting worse. But Obama didn’t campaign on a slogan of “Let’s Keep Things From Getting Worse.”

    If you want to call the stimulus “an amazing success,” we should also call the Iraq War surge “an amazing success” for helping to stabilize a war effort that was misbegotten in the first place.

  • Xunzi Washington

    “The stimulus failed its original goal of reducing unemployment below 8% by now, which both Romer and Biden had touted. Remember “Recovery Summer”?”

    I don’t mind this, to be honest. The stimulus did not create the jobs to push unemployment below 8%. No problem – I admit it. However, it is hard to imagine what would have done so, looking back at the situation. So I don’t see it as a failure because some other policy would have accomplished the deed.

    That said, we can ask: what would have been realistic at the time? Stopping the bleeding, or slowing the damage rate. Seen in this non-political and realistic way, it worked.

    On the Iraq parallel – I was against the Iraq war, but this being the case I would have no problem calling a later policy like the surge a success. One thing has nothing to do with the other.

  • medinnus

    “So sure, we can move the goalposts and say that the stimulus kept things from getting worse. But Obama didn’t campaign on a slogan of “Let’s Keep Things From Getting Worse.” ”

    The GOP thought it worked for Bush in Iraq… all Obama has to do is keep the wheels on the goalposts that the Bush administration constantly put on them…

  • Xunzi Washington

    “So sure, we can move the goalposts and say that the stimulus kept things from getting worse. But Obama didn’t campaign on a slogan of “Let’s Keep Things From Getting Worse.” ”

    This would be an improvement in the basic honesty of the situation, I think. How many conservatives even agree to this? Instead, they argue as if preventing job loss is not a benefit, only job creation is.

  • trk113

    sinz54 // Nov 2, 2010 at 11:36 am

    The stimulus failed its original goal of reducing unemployment below 8% by now, which both Romer and Biden had touted. Remember “Recovery Summer”?
    —————————————————————————————————–
    It’s at this point that partisanship becomes unproductive. It’s true that the numbers did not match the rhetoric, but that doesn’t mean that the stimulus was without accomplishment as is being implied. No, the unemployment rate didn’t drop to 8%, nor did it spike to 12-14% as many predicted. Credit where credit is due.

    I will use a similar example from the 1980′s Ronald Reagan promised that his policies of massive tax cuts and huge increases in the military budget, coupled with elimination of unnecessary spending cuts would spur the economy so much that it would bring the budget into balance. And it worked, except for the balanced budget. That is a major exception. Are you willing to say that Reagan’s policies were a complete failure as a result?

  • balconesfault

    Sinz – from a political perspective, you might want to make points by arguing that the stimulus hasn’t brought unemployment down under 8%, so it must be a failure.

    From an issues perspective, it very likely kept our economy from sliding off into a depression. That is enough for me to call it a success, and for me to have a label for the Congressmen who were opposed to it back then and who have continued to call it some kind of wasteful socialistic program.

    That label is “dangerously out of touch”. Without the stimulus, our economy would be screwed right now.

    **********

    Oops. Just read trks comments, which make mine kind of piling on. I could have just written “yeah, what he said”.

  • TerryF98

    I just voted 4 times, 3 for my dead relatives, it was tough to get past the posse of Black Panthers though!

  • midcon

    The penchant for keeping score is all about winning and not governing. Look at the energy being spent on the contest, trying to win elections. If only we were able to spend an equal amount of energy on governing think what we could accomplish. But, no after the battle and presentation of the trophy everyone hits the showers and wait for inevitable “I told you show” and “See, I was right, look how brilliant I am” etc and then they start gearing up for the next battle. 2010 is not even over and look how much energy is going into the 2012 election. All this activity and all for naught. Without keeping score it is clear that the stimulus did not create that many jobs and it is equally clear that the money spent kept some folks employed. Next?

  • balconesfault

    Without keeping score it is clear that the stimulus did not create that many jobs and it is equally clear that the money spent kept some folks employed. Next?

    Next? Who should we trust … people who pushed through the stimulus, or people who voted against it?

    Was the stimulus a necessary bill, whether you consider it a necessary good or a necessary evil … or was the stimulus wasteful socialistic spending that we should not have passed? (unfortunately there is no slate of candidates representing the opinion “the stimulus was not big enough”, so we’ll have to make do with what we have).

    These are important questions for people to consider.

    The elections ARE part of governing. It’s the part where “We the People” make our opinions on these matters clear, rather than just sending some rich white guy with pretty hair off to Washington to decide it all for us.

  • blowtorch_bob

    There’s speculation that the corporations are keeping the depression going hoping for a crash so they can rush in and scoop everything up on the cheap.

  • midcon

    balconesfault.

    I will agree that the elections are part of governing. The operative word is PART. But for many, including the current GOP leadership the elections is all they can focus on in the governing. My point is exactly that. It seems to be ONLY about the election and not the actual governing. This is a fault of the two party system that makes everything about the score in the House, Senate and WH. Even if the GOP picks up a majority in the House, it doesn’t change anything. There will be still gridlock. What’s the point of winning? Well, that’s rub. Winning is the point and I am convinced it is the only point.

  • SpartacusIsNotDead

    trk113 writing to Sinz: “I will use a similar example from the 1980’s Ronald Reagan promised that his policies of massive tax cuts and huge increases in the military budget, coupled with elimination of unnecessary spending cuts would spur the economy so much that it would bring the budget into balance. And it worked, except for the balanced budget. That is a major exception. Are you willing to say that Reagan’s policies were a complete failure as a result?”

    Uh oh! Time for Sinz to disappear and pretend he never posted on this thread.

  • TerryF98

    “Uh oh! Time for Sinz to disappear and pretend he never posted on this thread.”

    You noticed that too. Sinz is a serial coward. never defends his positions, writes a post about killing every man woman and child in Pakistan (genocide) and when called on his barbarity just disappears.

  • Xunzi Washington

    “Sinz is a serial coward. never defends his positions, writes a post about killing every man woman and child in Pakistan (genocide) and when called on his barbarity just disappears.”

    Funny thing is, a long while back, he wasn’t like that. He would regularly go reply after reply, and it was mostly well thought out, even if I disagreed with much of it. Moreover, he didn’t have this “libruls this, libruls that” bent that he seems to have nowadays. Perhaps he’s been frequenting RedState too much and it’s rubbing off.

  • pampl

    There’s a few useless left-wing posters who just write mindless, contentless garbage incessantly. I’d wager Sinz got tired of them and doesn’t bother reading comments anymore because of it.

  • Xunzi Washington

    Pampl –

    Sometimes I don’t think he reads the actual blog articles either. I’ve caught him inserting commentary that makes no sense in the context of the article or in the context of the commentary under it. He just comments.

  • sublime33

    “There’s speculation that the corporations are keeping the depression going hoping for a crash so they can rush in and scoop everything up on the cheap.”

    This is totally crazy talk you might hear at an after hours bar. If Target decided to have crappy earnings and overprice goods, do you think Wal Mart would cooperate and do the same? How about GM versus Ford? Capitalism encourages companies to take advantage of the weaker ones, and those who make depression type decisions will wind up out of business. Besides, CEO’s and senior management have vested interests in the stock market in general. Why would they want to underlying stock prices to go down with no guarantee that the decline would never end?

  • balconesfault

    sublime has it right there … there is certainly groupthink at work, where nobody wants to be the company that throws $1 at an asset that turns out to be worth 90 cents tomorrow … but where there’s money to be made, corporate America is going to chase the money.

    The problem is still a worry about shrinking demand, and about whether our government is committed to do things to continue to keep demand up. Until there’s demand, cash is king.