Contrasts between President Obama’s job creation proposals and those of Republican presidential candidates have never been clearer. With Obama’s Thursday address to a joint session of Congress, following Republicans’ Wednesday debate, Americans have a choice of two divergent paths.The president’s path, more government spending, has not led to economic prosperity. The other, lower taxes and regulatory reform, just might. As this column went to press, CBS reports that Obama will call for an additional $400 billion in spending, with an extension of payroll tax cuts and unemployment benefits, more infrastructure spending, and additional aid for state and local governments. These job creation proposals were part of the $825 billion stimulus, which failed to spur gross domestic product growth and create jobs, despite record low interest rates and monetary stimulus from the Federal Reserve.
“Shovel-ready” infrastructure projects that weren’t, grants to the poor and the unemployed, funds for unionized public sector workers … we saw this in 2009. Stanford economics professor Michael Boskin calculates that each job created or saved by the stimulus cost $280,000 — five times as much as median wage.
Since the stimulus passed, wrote Boskin in the Wall Street Journal on Sept. 8, America has seen the first downgrade of American sovereign debt in history, the highest level of Federal spending since World War II, the lowest percent of Americans employed since 1983, and the highest level of long-term unemployment since the 1930s.
In contrast, Republicans are calling for lower taxes and less regulation in Wednesday’s debate. Republicans sparred over details, but there were major areas of shared agreement on the need to cut taxes, reform regulations and cut both discretionary and entitlement spending.
Former Massachusetts Gov. Mitt Romney has published a detailed economic plan that would cut the corporate tax rate, encourage domestic energy production, devolve federal government training programs and funding to states, and cut non-security discretionary spending by 5 percent.
One area of agreement between Obama and the Republicans is ratification of free-trade agreements with South Korea, Panama and Colombia. This would help American businesses that export. The agreements were signed by President George W. Bush in his second term, but have yet to be ratified by the Senate.
The most effective part of Obama’s job creation plan likely came last week, when he instructed the Environmental Protection Agency to refrain from adopting stricter standards on ozone.The new rule would have tightened the requirements for ozone allowed in the air from the current standard of 84 parts-per-billion (ppb) to 60 to 70 ppb. The 60 ppb standard would have put 85 percent of American counties with ozone monitors out of attainment.
Counties would have to pursue compliance by restricting industrial activity, such as manufacturing and energy production and infrastructure construction, potentially costing $20 billion to $90 billion a year, according to EPA.
Obama’s action amounted to an admission acknowledged by Republicans in the debate that imposing new, more costly regulatory requirements on business may conflict with hiring additional workers, most Americans’ primary policy goal.Many are unneeded. Our air and water are getting cleaner as new equipment replaces old. And many regulations make America a less attractive place for companies to locate and create jobs.
The president has the power, today, to put a hold on more agency regulations, all listed at www.reginfo.gov.EPA leads the agencies in regulations, with 308 rules pending on its docket.
With zero net job gains in August, a persistently high unemployment rate, and a low rate of GDP growth, the economy could likely create more jobs through regulatory reform than through additional spending. How about a look at the remaining 307 EPA regulations?
Examiner Columnist Diana Furchtgott-Roth ([email protected]), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.
