Sunday, December 06, 2009
Tackling a jobless recovery
From The Hindu
Even as the Obama administration pushes forward with its Af-Pak and healthcare reform policies this month, joblessness in United States will increasingly dominate the attention of the President, Congress and the ordinary Americans. Unemployment may have fallen marginally in November after touching a 26-year high of 10.2 per cent in the month before, but the Federal Reserve has projected that even with positive economic growth it will hover around 8.3-8.7 per cent during 2010. Over the coming months, President Obama will worry that four states that are all Democratic bastions — Michigan, Nevada, Rhode Island, and California — will see the highest rates of unemployment. He will have to also struggle with the limited room for manoeuvre in public finances implied by staggering levels of public debt and the overall budget deficit. Given the elevated spending commitments in the Af-Pak region and subsidies for the proposed healthcare reform, there is practically no fiscal leeway to tackle America’s jobless recovery through further stimulus-like measures.
Yet the deterioration in labour market conditions for middle-class Americans is an ominous threat to President Obama’s already-falling popularity. With the entire House of Representatives and a part of the Senate facing elections next year a decisive strategy to create jobs quickly has become imperative, even urgent. The government has a range of relatively inexpensive policies to choose from. For example, the House will soon pass a bill that may include an extension of transport-related spending, a tax credit for expanding company payrolls, and incentives for credit to small businesses. Some Senators have proposed a plan, at an estimated cost of $600 million, whereby the government could share employers’ labour costs temporarily in a bid to avoid layoffs. If a financial transactions tax is introduced to address the issue of excessive risk-taking by financial institutions, the additional revenue could be productively deployed via local government to create new jobs. Public services such as education would benefit from this type of support. Additionally, policies of the last one year are likely to begin producing results: literally thousands of job-creating projects financed by the $787 billion stimulus package are still in the pipeline. Even the flourish of fiscal dexterity may not, however, save President Obama from politically motivated accusations of profligacy, typically from conservative lobbies opposing big government. The President needs to hold his nerve and soldier on regardless, only ensuring that he is transparent in outlining his plans to those who stand to gain from them.
Even as the Obama administration pushes forward with its Af-Pak and healthcare reform policies this month, joblessness in United States will increasingly dominate the attention of the President, Congress and the ordinary Americans. Unemployment may have fallen marginally in November after touching a 26-year high of 10.2 per cent in the month before, but the Federal Reserve has projected that even with positive economic growth it will hover around 8.3-8.7 per cent during 2010. Over the coming months, President Obama will worry that four states that are all Democratic bastions — Michigan, Nevada, Rhode Island, and California — will see the highest rates of unemployment. He will have to also struggle with the limited room for manoeuvre in public finances implied by staggering levels of public debt and the overall budget deficit. Given the elevated spending commitments in the Af-Pak region and subsidies for the proposed healthcare reform, there is practically no fiscal leeway to tackle America’s jobless recovery through further stimulus-like measures.
Yet the deterioration in labour market conditions for middle-class Americans is an ominous threat to President Obama’s already-falling popularity. With the entire House of Representatives and a part of the Senate facing elections next year a decisive strategy to create jobs quickly has become imperative, even urgent. The government has a range of relatively inexpensive policies to choose from. For example, the House will soon pass a bill that may include an extension of transport-related spending, a tax credit for expanding company payrolls, and incentives for credit to small businesses. Some Senators have proposed a plan, at an estimated cost of $600 million, whereby the government could share employers’ labour costs temporarily in a bid to avoid layoffs. If a financial transactions tax is introduced to address the issue of excessive risk-taking by financial institutions, the additional revenue could be productively deployed via local government to create new jobs. Public services such as education would benefit from this type of support. Additionally, policies of the last one year are likely to begin producing results: literally thousands of job-creating projects financed by the $787 billion stimulus package are still in the pipeline. Even the flourish of fiscal dexterity may not, however, save President Obama from politically motivated accusations of profligacy, typically from conservative lobbies opposing big government. The President needs to hold his nerve and soldier on regardless, only ensuring that he is transparent in outlining his plans to those who stand to gain from them.
Labels: Af-Pak, economic downturn, Obama administration, recession, stimulus package, unemployment
# posted by Narayan Lakshman @ 5:58 PM 
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