Earlier this week I testified before Congressman Barney Frank's committee on the need to do more -- much more -- to create jobs. The unfortunate but unavoidable fact, I told the Committee, is that the private sector won't create jobs in sufficient numbers anytime soon to put a dent in the massive joblessness the country is experiencing.
Republicans on the Committee didn't like what I had to say. They claim the Recovery Act hasn't created any jobs (even though many of them have touted Recovery Act-funded projects in their districts which, they baldly announce, will create good jobs for their constituents). They argue that spending more on job creation would be throwing good money after bad.
They are totally wrong on both counts. As the independent Congressional Budget Office reported this week, the jobs crisis would be far worse without the Recovery Act. And additional properly targeted spending could create millions more jobs.
Still, there are many reasonable people -- Republicans and Democrats -- who are concerned that more spending on job creation will worsen our budget problems at a time when annual deficits already exceed a trillion dollars. I'd urge them to check out this Politico.com opinion piece which I just co-authored with David Walker. It makes the case that job creation is not inconsistent with deficit reduction -- in fact, high deficits will be with us as long as high unemployment is.
Walker is the former U.S. Comptroller General and the President of the Peter G. Peterson Foundation, which focuses largely on long-term fiscal issues. He has been arguing for years that the U.S. is on an unsustainable fiscal path; as a result, he has built up a lot of credibility with deficit hawks. Walker and I come from different philosophical viewpoints; there's probably a lot we don't see eye-to-eye on. Yet in the piece, the two of us agree that "deficits will have to go even higher to help address unemployment." Here's what we wrote:
With more than a fifth of the work force expected to be unemployed or underemployed in 2010, there is an economic and a moral imperative to take action. Persistently high unemployment drives poverty up, makes it harder for families to find decent housing, increases family stress and, ultimately, harms children's educational achievement. For young workers entering the workforce, the current jobs crisis reduces the amount they will earn over their lifetime.
In deep recessions, businesses tend to make fewer critical investments in research and development that can improve our economy's productive capacity over the long term. Entrepreneurs usually find credit hard to obtain if they want to start a new business. These factors hurt U.S. global competitiveness and growth potential.
That's why we agree that job creation must be a short-term priority. Job creation plans must be targeted so we can get the greatest return on investment. They must be timely, creating jobs this year and next. And they must be big enough to substantially fill the enormous jobs hole we're in. They must also be temporary -- affecting the deficit only in the next couple of years, without exacerbating our large and growing structural deficits in later years.
We also point out that the reason we have these enormous deficits is that we're in a severe recession. This should be common sense. But often the deficit is talked about like it's disconnected from what's going in the economy. With fewer people working and paying taxes, government revenues take a nosedive, and bigger deficits are the result.
I'm not sure how to convince lawmakers that we need to do more to create jobs if they're unwilling to see the reality that's right in front of them -- that is, that the Recovery Act worked. But for reality-based lawmakers with a genuine concern about the budget outlook, they should know that there is a way to come to agreement on the need to create jobs now and at the same time come up with a plan for addressing deficits that will persist even once the economy has recovered.
For more information, please visit EPI.org.