America in desperate need of a jobs bill

By CHRISTINA D. ROMER

There is no question that the United States faces a severe jobs deficit. We have lost 7.2 million jobs since the recession began more than two years ago and the unemployment rate is currently 10 percent. The Recovery Act and other rescue actions have played a key role in greatly improving the trajectory of the economy. But even so, forecasts indicate that the unemployment rate is likely to remain high for an extended period.

It is for this reason that President Obama has called for action on jobs legislation as soon as possible. Jump-starting private sector job creation has to be everyone’s top priority. This commitment to further action is shown in the president’s budget released earlier this week. At the same time that the president is committed to reining in the budget deficit over the medium and long run, he is committed to taking further emergency actions to help put unemployed Americans back to work quickly. The budget includes $100 billion for targeted jobs initiatives. It includes another $167 billion for additional temporary relief measures to aid those directly harmed by the recession.

The president has made a number of concrete proposals for targeted job creation actions. Last Thursday he announced the Small Business Jobs and Wages Tax Cut. This proposal gives firms a substantial tax cut if they increase their number of employees and payrolls. This is the right policy for this point in the recovery. We learned last week that real GDP grew strongly in the fourth quarter of 2009. At a time when output and demand are growing, firms surely expect to be hiring again in the next year or two. A targeted tax cut may be just what they need to take the plunge and hire right now. We believe this will be a cost-effective policy with potentially big job creation benefits.

The president has also discussed some concrete proposals for encouraging the transition to cleaner energy. One policy involves incentives for homeowners to retrofit their homes for energy efficiency. Such a program could save homeowners money over the long run, improve the environment, and generate jobs in both construction and manufacturing, two industries that have been particularly hard-hit by the recession.

Infrastructure investment

A third priority for targeted job creation is infrastructure investment. The experience of the Recovery Act suggests that spending on infrastructure is an effective way to put people back to work while creating lasting investments that raise future productivity. For this reason, the administration is supporting an additional investment in roads, bridges, airports, transit, rail, and water projects. Funneling some of these funds through programs such as the Transportation Investment Generating Economic Recovery (TIGER) program at the Department of Transportation, which is a competitive grant program, could offer a way to ensure that the projects with the highest returns receive top priority.

There are a number of forms that the final pieces of jobs legislation may take; what the administration has laid out is a series of priorities to be incorporated. The president welcomes input and new ideas from Congress. But what is not acceptable is inaction on further jobs legislation or a weakening of the key priorities that should be included. Unemployed Americans need an effective targeted jobs bill — now.

Finally, it is critical to maintain our support for the individuals and families most affected by the recession by extending the emergency funding for such programs as unemployment insurance and health insurance subsidies for the unemployed. This support not only cushions the worst effects of the downturn, but also boosts spending and so spurs job creation. State and local governments are still suffering from terrible recession-induced budget shortfalls. Continuing the state fiscal relief will help to keep teachers, firefighters, and police employed, and help maintain vital public services. And the Making Work Pay Tax Credit, which has put as much as an extra $800 into the pockets of 95 percent of working families, needs to be continued to help families make ends meet and enable them to buy the goods and services that support employment throughout the economy.

X Dr. Christina D. Romer is chair of the President’s Council of Economic Advisers.