Interesting read. I couldn't agree more!!!
As we approach Labor Day 2008 with the nation's economy and job market continuing to weaken, how do the two major party presidential candidates propose to create jobs? Would there really be any substantial differences between them, in terms of labor market effects?
As an economist, I tend to think separately about policy effects over shorter and longer periods of time. In the short term -- which likely lasts about two to four years -- we need policies to create more jobs by stimulating more spending among consumers, businesses or the government. In the long run, the economy will recover one way or another, and job growth will resume (in most places).
In the short term, we should focus on job quantity; in the longer term, on job mix and quality.
Sen. John McCain's economic proposals center on tax cuts, which he says would stimulate the economy. The Republican candidate would permanently extend all of President George W. Bush's tax cuts, especially those for high-income families, and he would enact a range of new cuts for businesses, including a corporate tax cut and several designed to spur new investment.
Never mind that these cuts overwhelmingly help the exact same people who have benefited enormously in the past eight years while earnings for the average American family have stagnated or, in Michigan, declined. The question here: What would the cuts mean for jobs?
The McCain tax cuts would likely not create many new jobs in the short term, or better jobs in the long term. In the short term, high-income families are the least likely to spend tax rebates, as they already have enough income to finance whatever purchases they want to make. And business investment spending is not heavily affected by tax cuts, especially during recessions, when product demand is weak and revenues are down.
Over the long term, corporate tax cuts may modestly spur investment. But we have learned this decade that investment and productivity growth alone do not necessarily mean better paychecks for most Americans. In any event, the extra investment is unlikely to materialize -- because of the rising interest rates that would be caused by the government deficits that those tax cuts will generate.
Sen. Barack Obama proposes a more aggressive set of policies to spur job creation in the short term and improve job quality in the long term. For one thing, the Democratic candidate supports a second "stimulus package," which would include more tax rebates to families, additional unemployment insurance to the jobless, and aid to states hit hardest by the downturn. With money going directly to those in greatest need, these funds would likely stimulate more spending and more jobs within a short time frame. And Obama has supported legislation to stabilize the housing market, which would help limit the economic downturn and stem further job loss.
Over the longer run, Obama proposes a range of policies that would likely affect where job growth occurs and how much those jobs pay. By proposing significant new investments in worker education and training, he would enable more workers to gain the skills needed to obtain higher-wage jobs in a variety of still-growing sectors, such as health care. By investing more in infrastructure and the transition to a "green economy," more high-paying jobs would appear in the construction and manufacturing sectors -- where they have recently disappeared in large numbers. This would be particularly welcome in Michigan.
By raising the minimum wage and making it easier for workers to organize into unions, wages in the service sector and elsewhere would rise directly -- but not by so much that job growth would be threatened. And by addressing the nation's health insurance crisis -- especially through public funding for health insurance -- one enormous payroll cost on employers would be reduced.
http://www.freep.com/apps/pbcs.dll/article?AID=/20080829/OPINION01/808290327/1069
As we approach Labor Day 2008 with the nation's economy and job market continuing to weaken, how do the two major party presidential candidates propose to create jobs? Would there really be any substantial differences between them, in terms of labor market effects?
As an economist, I tend to think separately about policy effects over shorter and longer periods of time. In the short term -- which likely lasts about two to four years -- we need policies to create more jobs by stimulating more spending among consumers, businesses or the government. In the long run, the economy will recover one way or another, and job growth will resume (in most places).
In the short term, we should focus on job quantity; in the longer term, on job mix and quality.
Sen. John McCain's economic proposals center on tax cuts, which he says would stimulate the economy. The Republican candidate would permanently extend all of President George W. Bush's tax cuts, especially those for high-income families, and he would enact a range of new cuts for businesses, including a corporate tax cut and several designed to spur new investment.
Never mind that these cuts overwhelmingly help the exact same people who have benefited enormously in the past eight years while earnings for the average American family have stagnated or, in Michigan, declined. The question here: What would the cuts mean for jobs?
The McCain tax cuts would likely not create many new jobs in the short term, or better jobs in the long term. In the short term, high-income families are the least likely to spend tax rebates, as they already have enough income to finance whatever purchases they want to make. And business investment spending is not heavily affected by tax cuts, especially during recessions, when product demand is weak and revenues are down.
Over the long term, corporate tax cuts may modestly spur investment. But we have learned this decade that investment and productivity growth alone do not necessarily mean better paychecks for most Americans. In any event, the extra investment is unlikely to materialize -- because of the rising interest rates that would be caused by the government deficits that those tax cuts will generate.
Sen. Barack Obama proposes a more aggressive set of policies to spur job creation in the short term and improve job quality in the long term. For one thing, the Democratic candidate supports a second "stimulus package," which would include more tax rebates to families, additional unemployment insurance to the jobless, and aid to states hit hardest by the downturn. With money going directly to those in greatest need, these funds would likely stimulate more spending and more jobs within a short time frame. And Obama has supported legislation to stabilize the housing market, which would help limit the economic downturn and stem further job loss.
Over the longer run, Obama proposes a range of policies that would likely affect where job growth occurs and how much those jobs pay. By proposing significant new investments in worker education and training, he would enable more workers to gain the skills needed to obtain higher-wage jobs in a variety of still-growing sectors, such as health care. By investing more in infrastructure and the transition to a "green economy," more high-paying jobs would appear in the construction and manufacturing sectors -- where they have recently disappeared in large numbers. This would be particularly welcome in Michigan.
By raising the minimum wage and making it easier for workers to organize into unions, wages in the service sector and elsewhere would rise directly -- but not by so much that job growth would be threatened. And by addressing the nation's health insurance crisis -- especially through public funding for health insurance -- one enormous payroll cost on employers would be reduced.
http://www.freep.com/apps/pbcs.dll/article?AID=/20080829/OPINION01/808290327/1069
