Not Much Hope Politicians Will Solve Employment Problem

A few days ago the president unveiled his $447 B jobs initiative and between what he had to offer and the reaction to it from opposing politicians I have to say that the outlook for our employment problem is not good at all. With two different stimulus packages throwing about $1.2 trillion dollars combined at the problem the outlook is still pretty bleak.
First let’s look at what the president proposed. I grouped his initiatives into 4 buckets:

  • Shifting money around – basically giving people more money or letting them keep more money to spend in hopes of it generating jobs. This is consumption focused and has no return to taxpayers.
  • Infrastructure – actually investing in projects that have both short and long term returns to society. Also immediately creates jobs.
  • Long term investments – investing in projects that immediately create jobs and have long term returns to society.
  • More spending – additional government spending that doesn’t seem to have a lot of value

Here is how the money breaks down into these 4 buckets.
Obama jobs program
As you can see the vast majority of the program falls into what I call either shifting money around (e.g. tax cuts, unemployment benefits, etc…) or government spending. I guess the hope here is that people are going to go out and spend this money and create more jobs. But that may be wishful thinking as people could use the extra money to pay down the huge amounts of debt they have accumulated over the past decade instead of spending it (this is the current trend). Best case scenario is that the money does get spent on consumer goods that may create some jobs in the short run but will provide no lasting return on investment like infrastructure projects would.
Last week I wrote about my disappointment in the original stimulus package. Only 8% of that money went into infrastructure investments and a lot of that money went to projects that would have been undertaken without the stimulus dollars – i.e. it only freed up money for states and cities to spend on other things. I had truly hoped that more of this new jobs initiative would focus on investments instead of pointless spending but, alas, it was not to be. In the end they only allocated 13% of the pie to infrastructure and the Republicans even complained about that small sliver. Perhaps the anticipation of that backlash motivated the administration to dial back those investments and allocate more dollars towards tax cuts.
Finally, another 7% of the jobs package is going towards initiatives that provide longer term paybacks – e.g. education. While that’s worthwhile it doesn’t provide an immediate return on investment and things are so bad right now that we need some quick hits.
With the two political parties both pulling in the wrong direction I don’t see how the government is going to make any meaningful dent in the employment problem the nation is facing.

Leave a Reply