For the last several years in Washington, lawmakers acted like winning the next election was more important than getting the country back to full employment. Tuesday’s election should mercifully end that. Growth remains substandard. Both parties own a solid piece of the federal government. It’s now in both Democrats’ and Republicans’ political and policy interests to juice up job growth.
Right—but how could they possibly do that?
The nation just finished a presidential campaign dominated by fundamental philosophical disagreements over the role of government in fostering job creation. One election does not bridge those differences. To the extent there’s any hope for a “grand bargain” between newly reelected President Obama and congressional Republicans, it figures to center on deficit reduction, not growth acceleration.
Still, there could be enough overlap in policies both parties support to stitch together an immediate and effective — if only mildly ambitious — jobs package that Congress could pass, and Obama could sign, early next year. It could include:
More trade. Cutting America’s trade deficit would bring a bigger economic jolt faster than a reduction in the budget deficit; it so happens that Obama and the GOP, while clashing on some details, share a core belief in trade as a positive economic force.
New trade deals don’t happen overnight, but two pending legislative items would almost certainly help to open markets: permanently normalizing trade relations with Russia, to take full advantage of Russia’s new World Trade Organization membership; and giving Obama “fast track” negotiating authority, which the administration could use to hammer out a multilateral trade agreement with Pacific Rim countries. It’s an idea that would win big support from conservative-leaning business groups such as the National Association of Manufacturers.
Red-tape reduction. If you want Republicans to sign onto a jobs bill, you’ll need to deal with the GOP’s chief concern over growth: tax and regulatory “uncertainty.” The tax part would almost necessarily come in the grand bargain. The fear that expanding regulations are drowning small business in bureaucracy might be easier to tackle on a smaller scale.
Michael Mandel, chief economic strategist at the Progressive Policy Institute, has a plan to create a “Regulatory Improvement Commission,” which, like a military base-closing commission, could “put together a package of regulations for repeal or improvement, to be approved by Congress in an up or down vote.” The desired effect, initially, would be psychological: It would signal to small business that Washington was taking regulatory compliance burdens more seriously.
A mini-bargain. As liberal economists love to point out, government borrowing is cheap right now. Both parties, though they are often loath to admit it, favor policies that could expand the budget deficit in the short term but power deficit-reducing growth for years. Assemble a few of them and you could pack a decent fiscal punch into 2013 growth.
For example, try this “five easy pieces” package from Rob Shapiro, a former top economic adviser to President Clinton:
- Extend the payroll-tax cut for employers
- Approve a new tax credit for companies that hire more workers
- Fund community-college grants to train any adult in information technology
- Spend $100 billion over two years on a new infrastructure bank (for repairing bridges, building roads, etc.)
- Cut corporate income-tax rates—say, to 32 percent, from the current 35 percent—for the next two years
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