For people who could afford to stay in their homes if they found jobs, the government could set up a sort of bridge-loan program to stave off foreclosure.
Therein lies another possible bargain: Obama and Republicans could agree to try a double-barreled attempt to get foreclosure rates back to historically normal levels. They could reverse the administration’s recent efforts to slow the foreclosure process for delinquent borrowers and, instead, take steps to shuttle the most-troubled homeowners—the ones who borrowed beyond their means—out of their houses and into rental units as fast as possible. Keith Hennessey, a former economic adviser to President George W. Bush, compares that effort to removing a Band-Aid: “Policies for several years now—including under the administration I worked for—have focused on trying to keep people in their homes,” says Hennessey, now a research fellow at Stanford University’s Hoover Institution. “That stretches out the problem,” pulling the bandage off slowly. Maybe now, he says, it’s time to “rip it off really fast. Stop trying to help keep people who can’t afford to be in their homes stay in their homes.”
For people who could afford to stay in their homes if they found jobs, the government could set up a sort of bridge-loan program to stave off foreclosure—money to cover mortgage payments for a year or two, until the economy improves and the borrower finds a job and pays back the money. Those loans could help stabilize home prices, restore consumer demand, and, hopefully, trigger job creation. “If you can get that virtuous cycle going,” Shapiro says, “then the loan only has to be temporary, and they’ll be able to handle their own mortgage” very soon. Double bonus: The cycle would help lift the rest of the economy, and hiring too. The political and policy challenge will be finding a best-fit formula for determining which homeowners can afford their loans and which ones are in over their heads. But the rewards of stabilizing housing outweigh the political risks. Top economists such as Stanford’s Robert Hall and the University of Chicago’s Amir Sufi contend that housing woes and their effects on consumers are key factors in stifling growth and job creation.
Drill, responsibly, drill. Obama has tried an expanded oil-exploration bargain before, but the massive spill in the Gulf of Mexico scuttled it. BP’s summerlong gusher last year exposed serious flaws in how the government polices deepwater drilling, including an insufficient corps of safety regulators and an embarrassing failure to anticipate that new technologies to drill several thousand feet below the ocean surface might also bring new risks. While the Interior Department revamped its oversight procedures, permits for Gulf drilling slowed and, with them, job-creation potential.
Accelerating Gulf oil and gas permitting would result in 230,000 new jobs in 2012 and leverage $19 billion in capital investment over the next three years.
Interior has completed its safety review and requested $358 million for fiscal 2012 to hire more regulators and implement stricter drilling standards, a $119 million increase from fiscal 2010. Republicans should grant the request. In exchange, Obama should turn up the heat on Interior to fast-track permitting as much as the oversight infrastructure allows. The energy consulting group IHS CERA estimated last month that accelerating Gulf oil and gas permitting “to levels that support the oil industry’s capacity to responsibly explore and operate” would result in 230,000 new jobs in 2012 and leverage $19 billion in capital investment over the next three years. Government royalties from the increased production are estimated at $6 billion a year, which would pay for the most gold-plated safety regime Interior could ask for—and maybe even help fund some of those housing bridge loans.
Welcome a new wave of immigrants. If you take McConnell’s Machiavellian creativity on the debt limit—the idea to let Obama ask Congress for more borrowing authority, for Congress to reject it, and for Obama to veto that rejection—and apply it to America’s consumer-demand problem, you just might find a clever agreement on one of Washington’s most polarizing issues. Bonus: You’ll create a lot of jobs.
A persuasive body of economic research suggests that one of the easiest ways to boost consumer demand would be to allow a couple of million additional consumers into the United States. A flood of immigrants would boost growth; economists who have studied immigration and its economic impact suggest that the newcomers wouldn’t drive down wages or employment for everyone else. Adam Ozimek, an economic consultant and blogger at Econsult in Philadelphia, wrote recently, “Immigrants buy stuff; that means businesses sell more, and they need to expand and hire new workers.” The big economic lift would stem from the simple fact that all of those immigrants would need to live somewhere, thus boosting the housing market. A Swiss National Bank study from last year found that an immigrant influx equal to 1 percent of the population in a given Swiss region created a 2.7 percent increase in housing prices.
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