From the time the United States hit its statutory debt limit on May 16 until President Obama signed a bill raising the limit on August 2, the Dow Jones industrial average fell nearly 600 points. (By close on Thursday, it was down 512 points on the day.) Lenders foreclosed on some 500,000 homeowners. The Commerce Department reported that the economy grew by just 0.4 percent in the first quarter of the year and 1.3 percent in the second. About 300,000 more Americans went looking for a job and couldn’t find one.
Lawmakers didn’t do a thing about any of that.
In a protracted quest to avoid an economic catastrophe entirely of their own making, members of Congress and Obama spent several months ignoring an actual catastrophe unfolding under their noses—the sharp turn of the U.S. recovery back toward recession. At the end of their tortured negotiations, both sides bragged that they had spared the meltdown of a sovereign default or a massive disruption in consumer spending. No one argued that they had boosted growth or created jobs.
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Economists call that an “opportunity cost”—the price of doing one thing, measured in the value of what you could have been doing instead. Voters might call it negligence. By any name, it’s finally over, and it’s time for lawmakers to make amends. They should start by carrying their urgency from the final days of the debt-ceiling debate into an immediate crisis conversation about jobs.
This is not the time for recess, for fundraising, for catching up on sleep. Certainly not for golf. It’s not time to talk about a “pivot” to job creation, as Obama and Senate Democrats did this week, or to promise action at some unspecified date on some small-scale bills languishing in both chambers. It’s time for Obama to summon John Boehner and Harry Reid and Mitch McConnell and Nancy Pelosi and whatever lieutenants they require back to the White House, day after day, until they can work out a deal to help speed growth and unleash millions—millions—of new jobs. If the leaders can’t handle the details themselves, they could pass the task off to another congressional super committee, like the one they created for deficit reduction under the debt-limit deal, and fast-track its recommendations to the House and Senate floors.
Assuming that Washington actually cares about job creation, as opposed to just talking about it, a bipartisan economic package should be able to attract a supermajority in the Senate and at least 160 Republicans and 90 Democrats in the House—something like the debt-ceiling coalition. It’s clear that this Congress won’t entertain any ideas that cost serious taxpayer money (such as a $100 billion-plus infrastructure bank or a similar effort to rebuild crumbling highways and bridges), no matter how many economists warn that faltering consumer demand is sinking the economy. But plenty of opportunities remain to leverage private investment and spur widespread job creation, in areas where Republicans and Democrats have found common ground in the past.
Here’s a starter list of possible “grand bargains” for the politicians who spent the bulk of their summer arguing about everything but how to get America’s 14 million unemployed back to work.
Open and improve trade. First, because it’s the easiest. Republicans get swift passage of pending free-trade agreements with South Korea, Panama, and Colombia, along with accelerated negotiations toward a Trans-Pacific trading partnership with other Asian nations. Democrats get a diplomatically delicate—but wildly popular among voters at home—law authorizing the administration to retaliate against China for suppressing the value of its currency. Leveling the currency playing field would boost U.S. exports to China, perhaps dramatically (unless it sparks a trade war, which seems unlikely because that would be in neither country’s interest). The total package of freer, fairer trade could support more than 2 million new jobs, according to cumulative calculations from the U.S. Chamber of Commerce and the Economic Policy Institute.
Stabilize the housing market. Housing, the recovery’s biggest drag, has confounded the White House and Congress, and with good reason. The market is still working through a glut of foreclosures that started with homeowners who bought more than they could afford, and then spread to more-responsible borrowers who lost jobs in the financial crisis. An oversupply of cheap, repossessed homes has helped sink housing prices nationwide to their lowest levels in a decade, adjusted for inflation. Falling values have erased trillions of dollars in wealth for Americans who have kept their houses, spurring consumers to save more and spend less and robbing entrepreneurs of a tried-and-true tool—home-equity loans—for starting or expanding a small business. “You don’t have a very good shot at sustained job growth unless you address the largest factor holding it back, which is demand,” says Robert Shapiro, a former Clinton administration economic adviser who now runs the consulting firm Sonecon. “You can’t get demand going until housing prices stabilize.”