Apostolos Pittas contributed to this post.
More than three years have elapsed since the onset of America’s worst downturn in nearly a century, and yet high unemployment rates continue to cast a dark shadow over the country. Fourteen million people remain out of work, and the sharp ideological cleavage in Congress over the government’s role in remedying the problem has impeded effective policymaking.
The massive overhang of public and private debt, weak consumer spending, unsettled energy markets, and European financial instability all compound the problem, making recovery an even more challenging exercise.
This is the setting under which the Obama Administration appointed GE Chairman Jeffrey Immelt (a member of the Bipartisan Policy Center’s American Energy Innovation Council) to lead the Council on Jobs and Competitiveness, which has since gathered 27 leaders from business, labor, and academia to contemplate job growth solutions. (Those members include AOL co-founder Steve Case, a co-chair of BPC’s Democracy Project, and Matt Rose, Chairman of the BNSF Railway Company and a board member of BPC’s Energy Project.) As a non-partisan group, they hope to avoid political stalemate, cooperate for the common good, and put forth recommendations that will help return America to economic prosperity.
The Council’s approach includes three phases:
- Stimulating job growth by capturing ”low-hanging fruit” over the short term
- Examining broader options for job creation over a 2-5 year period
- Focusing on factors that influence competitiveness over the next decade
In its first report to the president, the Council’s primary short-term objective was to identify and unlock pockets of growth to speed up job creation. Examples of this low-hanging fruit included doing away with specific regulations that slow construction projects, and some of the red tape that obstructs ”ready-to-spend” tourists from getting here in a speedy fashion. The Council moved on to its second phase last month, and has released a set of recommendations to facilitate medium-term employment. Rejecting the idea that there is a silver bullet for jobs creation and acknowledging the necessity of a multidimensional approach, the Council submits what it terms five ”common sense” initiatives:
1) Accelerate Investment in infrastructure and energy development
Recognizing that U.S. infrastructure has plummeted to 16th place worldwide, as stated in the World Economic Forum’s 2005 competitiveness ranking, the Council stresses that efforts to repair and modernize the nation’s bridges, roads, tunnels, railways, ports, dams, schools, and airports would create jobs in the near term, and increase American competitiveness and productivity in the long term. Various studies have found that smart government infrastructure spending creates jobs (both construction and construction-related). In terms of energy development, the Council notes that there are urgent problems in transmitting energy from sources to the homes and businesses that need it. For example, the wind power industry currently has 275,000 megawatts worth of projects in the pipeline (compared to the coal industry’s total output of 315,000 megawatts), yet only a small fraction can reach urban destinations because of a complex permit process and antiquated energy transmission infrastructure. The Council contends that investments of $12-16 billion dollars would help deliver the electricity created by renewable sources like wind, and would support hundreds of thousands of full-time jobs per year.
2) Nurture high-growth small businesses
The Council points out that the number of small businesses created fell by 23 percent over the past three years. Therefore, the report strongly encourages legislation to lower the regulatory burdens affecting small businesses, and to create a more efficient legal immigration process that would allow talented students to stay and work and entrepreneurs to come and invest.
3) Promote national investment and increase foreign direct investment (FDI)
Related to the small business issue is that the U.S. is attracting a declining share of the global FDI – in fact, the U.S. share has dropped by roughly one-third over the last decade (from 26 percent in the 1990s to 18 percent today). The Council recommends that policymakers set up new partnerships, explore tax reforms, improve visa policies, and upgrade SelectUSA, which is the federal point of contact for companies looking to invest in the U.S.
4) Simplify regulatory review and streamline the project approval process
The Council looked to how Australia – which possesses a similar federal and state system – successfully reformed its cumbersome review and approval process. Based on that experience, the Council suggests setting up multi-jurisdiction ”one-stop shops” that are centralized, transparent, and accountable in order to avoid the duplication and friction created by multi-agency efforts. The report also recommends hiring more examiners at the U.S. Patent Office, to reduce the backlog of applications and assure that small businesses can quickly capitalize on their innovative ideas.
5) Develop talent to fill existing job openings
Maintaining a diverse talent pool from which business can draw is another issue that the Council tackles in its report. Two concerning statistics cited by the report are that the U.S. workforce could be short between 1.5 and 3 million college graduates by 2020, and that over 80 percent of manufacturers currently cannot find people to fill skilled production jobs. The Council acknowledges that “the skills gap may account for one-quarter to one-third of today’s unemployment rate,” and recommends a three-part strategy to encourage the next generation of engineers, including a plan for direct student engagement, better university incentives, and enlisting a group of companies committed to increasing engineering internships.
Ultimately, the Jobs Council recognizes that reliable job growth in the near term is vital for increasing American productivity and competitiveness. The BPC embraces the Council’s spirit – the U.S. is in urgent need of initiatives that will grow the economy and create jobs.
One such policy was proposed by the Domenici-Rivlin Task Force in the form of its full Social Security payroll tax holiday. This tax cut would provide relief to 160 million American workers, immediately adding $3,000 to the average worker’s annual take-home pay, and incentivize employers to hire additional labor.
Yet clearly, no proposal has the ability to singlehandedly jumpstart the economy, so political leaders also should give careful consideration to the menu of policies presented here. The purpose is not to endorse any one of these proposals or the council as a whole, but rather to highlight other potential strategies.
At the same time, policymakers need to phase in spending cuts across the budget and additional revenues to deal with our nation’s long-term fiscal challenge. Without deficit reduction, investments for our future will be crowded out.
This means that from the opposite side of the equation – as president of the American Action Forum Douglas Holtz-Eakin and the RAND Corporation’s Martin Wachs wrote in their BPC National Transportation Policy Project (NTPP) report earlier this year – investments must be productive and focused on future beneficial economic impacts in addition to the short-term boost that they can provide. The current fiscal situation does not allow the U.S. to spend funds on projects that have a weak long-term rationale.
As the Jobs Council rightly states, “It’s time for the government to stop studying the problem.” Policymakers have been provided with bipartisan solutions to fix the economy. Now is the time to implement them, and put America back to work.