When President Obama sent his jobs plan to Congress in 2011, he warned that a failure to act would stomp on the recovery. “It’s not okay at a time of great urgency and need across the country,” he said at the time. “Folks are out of work. Businesses are having trouble staying open.”
Congress voted the $447 billion bill down and has since done more to hurt the economy than help it, dragging the country through one self-imposed budget crisis after another. But in spite of it all, the economy has still made slow but steady progress as private hiring, consumer spending, and housing prices have all picked up.
So does it even matter whether Congress gets its act together or not, since the economy is improving anyway?
Rep. Frederica Wilson, a Florida Democrat, still believes there’s far more that the government can do to speed along the recovery. Next week, she’s planning to reintroduce a revamped version of Obama’s original jobs act to boost infrastructure spending, tax cuts, and the safety net, with a new provision that would reverse sequestration’s automatic spending cuts for fiscal years 2014 to 2021.
“We’re going to fight because people are unemployed, and we’re finding this is getting worse with sequestration,” said Wilson, who has 12 co-sponsors for the bill so far, as well as the blessing of the White House. “If we just say, ‘Oh, we’ll we’re not going to do anything,’ there’s no need for us to be here.”
Many economists, however, believe that the country is already past the point where broad fiscal stimulus from the government would be useful. Mark Zandi, chief economist at Moody’s Analytics, estimated in 2011 that the president’s jobs act would create 1.9 million jobs at a time when the unemployment rate was 9.1%. But he no longer believes that passing Obama’s plan in its entirety would be helpful.
“I don’t think a payroll tax holiday, the most costly part of the Americans Jobs Act, is necessary at this point,” Zandi said. “The economic recovery is slowly, but steadily gaining traction, and it is appropriate to wean the economy from any remaining fiscal stimulus.” (Wilson’s new version of the jobs act replaces the payroll tax holiday with a similar Making Work Pay tax credit.)
Given how far the economy still has to go, economists still believe Congress could help by instead passing smaller, select measures to bolster jobs. Zandi, for one, believes an infrastructure bank would be helpful, while former White House economic adviser Jared Bernstein would opt for ready-to-go infrastructure projects and the wage subsidy for new jobs—all of which are smaller components of Obama’s original jobs plan.
But the most important thing for Congress to do, they say, isn’t to create jobs so much as to stop destroying them and stomping on growth.
“The problem in Washington is not the failure to stimulate jobs, but the way they are discouraging job growth. They have forgotten the Hippocratic oath: first, do no harm,” said Ethan Harris, head of North American Economics research at the Bank of America Merrill Lynch.
The impact of sequestration may be diffuse and difficult to pinpoint in certain areas. But its impact on jobs and growth is real, and the spending cuts will only get bigger the more time passes: Starting Oct. 1, there will be $19 billion in additional cuts, on top of the sequestration cuts from fiscal year 2013, according to the Bipartisan Policy Center. That’s slated to happen right as the country is due for another round of fights over raising the debt-ceiling, which could prompt Republicans to push for even more spending cuts.
That’s the first thing that needs to change if Congress truly wants to bolster job growth, economists say. ”They need to stop threatening major fiscal austerities,” said Harris. “The current policy of going back and cutting the same discretionary programs over and over again hurts the economy in the near term, and does not address the long run challenges.”
If such advice feels wearily familiar, that’s because Congress has doomed the country to have the same debate over and over, having agreed to a plan that makes indiscriminate cuts without tackling the fundamental problems with our tax and entitlement system. And until the day that legislators finally agree to change course, the proposed solutions aren’t likely to change very much either.