Jobs and the New Growth Agenda

President Obama’s December 3rd jobs summit has drawn attention to the debate over policy options for job creation. The case for intelligent and aggressive public policy to promote job creation, in addition to the helpful but inadequate stimulus package, is overwhelming. The official unemployment rate is currently 10.2 percent, and rises to 17.5 percent when marginally attached workers and those working part-time out of necessity are included.

What some call the Great Recession is no ordinary cyclical downturn to be followed in due course by a normal recovery. The economic emergency combines the effects of a global financial crisis with the bursting of a decade-old bubble economy driven by asset inflation. The recovery period will be protracted and characterized by high unemployment. Instead of a temporary program to be repealed pending recovery, what is needed is a sustained economic growth program in which short-term policies are converted into permanent structural reforms as the economy grows stronger.

An effective program for creating jobs in the short term while laying the groundwork for future growth must meet several tests. First, public spending or tax expenditures must have high multiplier effects. Second, short-term policies should be of value if they are converted into long-term reforms. Finally, the scale should be adequate and substantial, not inadequate and symbolic.

These tests are met by a new growth agenda with three major elements:

• Infrastructure Investment
  
• Public Service Investment
  
• Pro-Growth Tax Reform
  

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