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Industry leaders offer ideas on how to jump-start nation’s economy

JustFoley an employee George Sollitt Constructiworks inside new school being constructed next door Gompers Junior High School 1501 Copperfield Avenue

Justin Foley, an employee of George Sollitt Construction, works inside of the new school being constructed next door to Gompers Junior High School at 1501 Copperfield Avenue in Joliet, IL on Thursday April 7, 2011 | Matt Marton~Sun-Times Media

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Updated: November 5, 2011 1:43PM

More than two years after the Great Recession ended, some 14 million Americans are out of work, nearly half of them for six months or longer.

What’s worse, this bleak picture shows no signs of brightening soon. Economic growth is expected to plod along at a lackluster 2.5 percent pace next year, leaving the jobless rate hovering at 9 percent by the end of 2012.

On Friday, the government reported that employers stopped adding jobs in August, an alarming setback for an economy that has struggled to grow and might be at risk of another recession.

Total payrolls were unchanged in August, the first time since 1945 that the government has reported a net job change of zero. Economists warned that the economy can’t keep growing indefinitely if hiring remains stalled.

And so for the second time since early 2009, the government is looking to jump-start a job market caught between tight-fisted consumers and wary businesses.

President Obama on Thursday is expected to propose more government spending on construction projects, aid to budget-strapped states and new tax credits to encourage hiring, among other strategies.

Republicans have signaled they’re firmly opposed to another large economic stimulus that adds to the $1.3 trillion deficit. They prefer less-costly steps to promote job growth long term, such as cutting the corporate tax rate and streamlining regulations.

It would be no surprise if the job-creation debate bogs down in political wrangling. But Ross DeVol, chief research officer for the non-partisan Milken Institute, says any viable plan must include both.

“We can’t allow ourselves just to be in one or two camps and believe those are the only prescriptions that will work,” he says. “Think of it as portfolio of stocks and bonds. You wouldn’t want to have all your investments in one particular area.”

What can Washington do to get America back to work again? In interviews with more than a dozen think tanks, economists, industry groups and lawmakers, these suggestions emerged:

† Repair roads, bridges, schools: Fixing the nation’s aging infrastructure would create jobs more quickly than tax cuts — in as little as a few months — and meet critical needs that must be addressed eventually, some believe. It would take $2.2 trillion over the next five years to upgrade the country’s roads, highways, seaports, rail lines and bridges, the American Society of Civil Engineers estimates.

With yields on 10-year Treasury bonds at about 2 percent, borrowing costs for the U.S. government are as low as they’ve ever been. “There’s never been a more opportune time to invest in infrastructure,” says Andrew Fieldhouse, policy analyst for the liberal Economic Policy Institute (EPI).

To make a tangible impact, Congress could go big, spending $200 billion each of the next two years. Fieldhouse says that would create more than 2 million jobs and reduce unemployment about 0.8 percentage points.

A broad jobs bill by Chicago Rep. Jan Schakowsky, (D-Ill.,) calls for spending $100 billion to create 650,000 school construction and maintenance jobs in two years.

“The worst deficit this country faces isn’t the budget deficit. It’s the jobs deficit. We need to get our people and our economy moving again,” said Schakowsky. “If we want to create jobs, then create jobs. “

In all, Schakowsky’s bill would spend $227 billion to create 2.2 million jobs in two years, at a per-job cost of about $50,000 a year, all through existing funding programs that can disburse the money within weeks to states and localities. Besides the school repair projects, her plan would hire about 350,000 teachers, police officers and firefighters, 40,000 health care workers and 100,000 youths to spruce up parks.

† Lower corporate taxes: Many economists call for cutting the average 35 percent federal corporate tax rate to make the U.S. more competitive in a global economy. The average tax rate in Europe is 23 percent. Chris Edwards, senior fellow at the conservative Cato Institute, calls cutting the rate to 25 percent “the single best thing we could do” to grow jobs. Obama has said he wants to reduce tax rates while eliminating loopholes and deductions.

Trimming the rate to 22 percent would cost the government $81 billion in lost revenue but create 350,000 manufacturing jobs directly by 2019 as it prompts U.S. and foreign companies to open factories here instead of overseas, the Milken Institute says. An additional 1.7 million jobs would be added as benefits ripple through the economy, Milken says.

† Add workers, at a discount: If you want to boost sales, cut the price. That’s basically the idea behind a tax credit for each new employee a business hires over its staffing level the previous year. To make an impact, the government should offer a per-employee credit of $10,000 as well as 10 percent of increased wages for two years, says Michael Greenstone, a senior fellow at the Brookings Institution.

† Give states a helping hand: Since early 2010, budget-crunched state and local governments have cut 425,000 jobs even while private employers have added 2.3 million. States face budget shortfalls totaling $103 billion in the current fiscal year, helping to force an additional 300,000 state and local layoffs by the end of 2012, according to the Center for Budget and Policy Priorities and Mark Zandi, chief economist at Moody’s Analytics.

The government could provide up to $20 billion to states to save about 200,000 teaching and other government jobs.

† Share jobs to save jobs: Perhaps the least expensive way to bolster payrolls is through work sharing, a program that encourages employers to avoid layoffs by cutting all workers’ hours instead. For example, instead of laying off 20 percent of its staff, a company could trim all workers’ hours by 20 percent. The government then would make up half the workers’ lost pay with unemployment insurance — so it’s basically a wash or a small expense for state and federal coffers.

† Train the jobless: At least part of the reason for the high jobless rate is that many laid-off construction and manufacturing workers, for example, lack the skills for growing jobs in heath care and technology. Thirty percent of companies surveyed by McKinsey Global Institute say they have had positions unfilled for six months or longer.

Darlene Miller, CEO of Permac Industries and a member of Obama’s Jobs and Competitiveness Council, is helping spearhead a 16-week course in advanced manufacturing at two Minnesota colleges. Officials hope to expand the initiative across the country in three to six months, Miller says.

The council, she says, also wants to help schools graduate 10,000 more engineering students each year to meet a dire shortage of engineers. The panel aims to raise $100 million in private funding for scholarships, launch a media campaign to trumpet engineering careers and encourage schools with high graduation rates to share their strategies.

† Cut red tape: The Chamber of Commerce calls regulatory roadblocks that delay construction, environmental and other permits “the most significant obstacles to new hiring.”

The McKinsey Insititue says “inconsistent and sometimes lengthy” reviews can add months or years to project development, discouraging foreign firms from locating in the U.S.

Susan Lund, McKinsey’s research head, says the government should allow one-stop shopping so companies can secure various permits from a single agency as well as enterprise zones in which many permits would be pre-approved.

Gannett News Service with Sun-Times staff

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