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December 3rd, 2009

Can the Jobs Summit Yield a Cost-Effective Solution?

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We just recently read that, according to the critics, the president’s jobs summit — which began earlier this afternoon — “is more about politics than policy.” If you think about it, isn’t most, if not all, policy driven by political pressures?

On one hand, economists like Lawrence Summers feel that “There is no more important priority for the American economy than jobs.” On the other hand, many lawmakers are up for reelection in 2010, and how their home states interpret how their lawmakers handle the unemployment situation could influence whether or not they remain in office, and whether or not the president will continue to have a Democratic Congress on his side. With all that said, the pressure is on from all sides to stem the tide of job loss:

The president’s public approval ratings have dipped as joblessness has grown, alarming members of his Democratic Party who face congressional elections next year. Republicans say his economic recovery policies have failed to deliver.

Democratic losses in next November’s mid-term elections could hinder Obama’s ambitious legislative agenda, especially if Democrats lose control of one or both houses of Congress.

In light of these pressures — not to mention a soaring national budget and several expensive employment measures already in place — the over-arching theme to the summit will most likely be ‘how to restore job growth for pennies on the dollar.’

Yet, just two out of the many proposals we’ve read about so far contain some hefty price tags:

[Alan Blinder, a Princeton professor and former vice chairman of the Fed] is pitching an immediate $60 billion jobs program that would hire two million workers to clean parks, work in schools or fix roads. Such a program, he says, would push the unemployment rate back toward 9%.

The unions, who will be heavily represented at the event, want something much bigger. AFL-CIO President Richard Trumka is proposing a plan that would extend jobless benefits, send billions in relief to the states, open up credit to small businesses, pour more into infrastructure projects, and bring throngs of new workers onto the federal payroll — at a cost of between $400 billion and $500 billion.

At this juncture, there seems to be a divide to how the president should handle unemployment. While some lawmakers and other important figures at the summit (like union heads) are calling for increased action (which usually means increased spending), others, like former Republican House Speaker Newt Gingrich, are pushing for “a lower-tax, smaller-government approach.”

Will the jobs summit yield a cost-effective solution, or is the deficit destined to take another hit?

For more, please read: “Jobs: ‘One of the Great Challenges That Remains’

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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