What is the Democrats’ Jobs Plan?

By all accounts, tomorrow is going to be a really bad jobs number. Instead of convergence to full employment, it’s likely to be more stagnation. It’s time to rethink where we are on jobs in the short-term.  But what do the parties currently think?

For good reason, a lot of people are beating up on the Republican jobs plan (see Ezra Klein, Andy Kroll, Steve Benen). We’ve spent plenty of time here pointing out the incoherence of expansionary austerity, monetary tightening and supply-side arguments the GOP have cobbled together to fix the economy. But at least it has a 1-2-3 logic to it.  What’s the Democratic alternative?

It tough to find a lot of public discussion.  My read is, and this could be wrong and if so throw out some evidence, that Democrats are thinking that addressing the medium-term budget challenge will kick the recovery into high gear. One of the few 1-2-3 plans I’ve seen is former OMB director Peter Orzag laying out an approach to what Democrats should ideally do to get the economy started. From Sailing the Wrong Way with QE2?, October 2010:

To bolster the economy, we need a three-part shift in policy:

· more fiscal expansion (read: more stimulus) now;

· much more deficit reduction, enacted now, to take effect in two to three years; and

· an improvement in the relationship between business and government (the current antagonism, even if not the primary explanation for slow hiring and sluggish investment, does seem to be affecting hiring and other business behavior).

And I think this has been the Democrats’ approach. More fiscal expansion as a result of the December compromise over the Bush tax cuts – keep them all in place in exchange for keeping unemployment benefits in place, an additional payroll tax cut (what I described at the time as moderate GOP stimulus) and a few other important programs.

Second step (though third listed) would be to work to stop the “antagonism” by bringing in people to cool relationships between the White House and industry, like Daley, which works with Obama’s move to the center this year.  And the third step is to get serious about the medium term deficit, getting reductions enacted as quickly as possible that starts cutting in two to three years.  The first two have been accomplished through the mechanisms we just described, and that third step of deficit reduction is all that is left.

As a fun aside, here’s how Orzag made the case to be against QE2 and other unorthodox monetary policy:

Ironically, QE2 could make the right policy mix less likely. In particular, any substantial additional stimulus will probably not (and should not) be enacted without a medium-term deficit reduction package — and that medium-term deficit reduction package is less likely to be enacted when interest rates on long-term government bonds are so low.

In other words, by perpetuating an artificially low 10-year government bond rate, the Fed may be delaying (even if very modestly, given the modest impact of the action on long rates) the very fiscal policy action that the nation most needs, while doing little to boost an economy whose principal problem is not high long-term interest rates.

Orzag thinks that QE2 and other monetary games distracts us from the real solution – getting the deficit in check ASAP.

It certainly seems to me that these are the ideas generating the current discussion for Democratic circles.  However the situation has changed, and they need to be rediscussed immediately. The stimulus wasn’t enough to keep the economy going. The whole business confidence thing is completely dubious. QE2 still has ammunition in the gun and cutting deficits too quickly are likely to sink a fragile recovery. We aren’t even projected to be at full employment for several more years.

But that’s my read.  What do you think the Democrats are thinking on jobs?

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8 Responses to What is the Democrats’ Jobs Plan?

  1. foosion says:

    A rational jobs plan would be fiscal stimulus, such as rebuilding infrastructure. If nothing else, it’s better to do it today when it can be done inexpensively (available labor, low interest rates) than later when things will be more expensive.

    What specifically is government doing that is hindering business from hiring and growing?

    How is getting the deficit in check ASAP going to help the economy today, unless by ASAP you mean once the economy is on firmer footing?

  2. JW Mason says:


    Do you have any sense what the mechanism is that people like Orszag imagine links medium-term inflation reduction to increased demand? Is it lower long-term interest rates, or is it greater investment demand (“confidence”)? I think there are serious — fatal, in fact — problems with both of those stories, but it would be good to be clear what we’re arguing against.

  3. Mike says:


    My guess is that it is majority “confidence” leading to investment demand. Some probably put a fair amount of emphasis on “nonlinearity” – or by the time it becomes a problem it is too late. Notice how Orzag wants to cool problems between government and the business community, which is another way of saying we need to remove confidence issues to get investment demand up.

    That could also explain how all the major problems in the mortgage securitization and foreclosure processes are ignored as a matter of economic policy (outside of all the other reasons it is being ignored). That would definitely not improve relationships between the government and finance. (Though it would eventually reduce the uncertainty over one of the largest parts of the economy.)

    You (and me, and everyone) should point out flaws in that confidence part of the problem. From making friends at the Chamber of Commerce to the GOP expansionary austerity arguments, it is a large part of the theory for how we get out of this mess used by many.

  4. PeakVT says:

    The best thing Democrats can do for the economy is to concentrate on taking back the House and holding the Senate. Right now, the Federal Reserve and the Obama Administration are the only two actors that have any kind of freedom to implement different policies. The FRB should clearly be trying to raise inflation to over 4%, and both the administration and Congressional Democrats should be making this clear either publicly or privately. The adminstration should be trying harder to lower the dollar. I don’t know if the Treasury has the tools to do this without cooperation from the FRB. The administration should also be working on housing and mortgage issues. There may be other microeconomic policies that the administration can work on as well, though I suspect there isn’t much that can be done that doesn’t involve reducing environmental or consumer protections. More stimulus, which is the economically correct thing to do, requires Congressional action, and it’s just not going to happen. I’m sure Republicans would agree to further tax cuts, but that would be incredibly bad policy at this point.

  5. Comma says:

    If by Democrats you mean Obama, then the present jobs plan is to do whatever Repubos want you to do and then pray that you are charming enough to get a second term despite the fact that you’ve ignored the plight of 25 million people, and have likely caused a permanent blemish on two generations of Americans (those approaching retirement and those approaching graduation). How was that for a sputnik moment?

    A real jobs plan would involve: 1) infrastructure, 2) retraining – free community college tuition, 3) a renewable energy independence “man on the moon” moment — shut down nasa if need be, 4) Government as employer of last resort, 5) fair trade laws, 6) prosecution of banksters, 7) mortgage modification and cram down, 8) student loan discharge in bankruptcy — why are we enslaving a generation of coffee barristas?, 9) smart growth planning, 10) labor laws that take into account the Temp Culture, 11) anti-outsourcing movement through tax cuts/grants/contracts/etc.

    Long term debt: the qualifications for the medical field need to be lowered, opened and expanded.

  6. LosGatosCA says:

    The stupidity of any talk about anything but jobs is simply stultifyingly amazing.

    With the malign neglect policies in place now, it’s going to take at least 10, more likely 15 years to reach 5% unemployment with labor participation rates equal to those under Clinton.

    People talk about the looming lost decade, but we’ve already experienced a lost decade. We’re heading into lost decade number two. There are so many contributors to the complete absence of economic leadership it’s appalling to even try to catalog them.

    Business confidence fairies are fighting the last war, bond confidence fairies simply make no sense, the Laugher Curve budget balancing fairies are hallucinogenic. Yet these are all given a place at the discussion table.

    Folks, we’re in the aftermath of a Great Depression where the New Deal mechanisms prevented the most extreme peaks of misery for equity holders, for businesses, and for the labor force. But that’s yesterday’s news. Now it’s later in the cycle but plenty of work remains to be done.

    But just as 9-11 was exploited by the military-industrial-media complex to maximize their profit making opportunities, the Great Recession and the fears of the public are being exploited by the monied, creditor class to make structural changes to lower their costs, increase their flexibility, and consolidate their advantages in a more clearly defined class structure that favors money over labor.

    In the longer run, the lesson of this era will be similar to the pre-WWI period where the scale and necessities of good governance and leadership were far greater than the people responsible for it were capable of delivering. Consequently they were overrun by events that they had no control over. It’s not just an American or just an economic problem.

    When unemployment is still well over 8% with low labor participation rates this time next year all the Democrats will be ‘shocked’ when the highly fearful, fully exasperated, low information voting public completes the 2010 house cleaning because they don’t ‘understand’ the value of intermediate term deficit reduction programs that will inspire business confidence in 2013-14, a mere 6 years after the 2007 start of the Great Recession.

    Oh, the urgency.

    Peter Orszag is a complete incompetent ass of a public leader if he believes even half the tripe that comes out of his mouth.

  7. dsoares64 says:

    Democrats should think about pressing for a dramatic increase of the minimum wage. This is a very popular issue with the public and would take away a lot Republican momentum for deficit cutting. This would give workers more money to spend since businesses are sitting on aproximately 1 trillion in unused capital and business will not use it until consumer demand increases.
    Republicans would reflexively look to defeat any attempt to raise the minimum wage arguing that it is anti-business. Business interests would eventually agree to a small increase, but only after a protracted fight,since this would allow Democrats to have an issue that can truly be negotiated on with Republicans. At that time a jobs bill could be enacted simultaneously allowing both sides of the aisle to have issue “both” can win and use during the coming elections. It would also allow establishment Republicans a way to extricate themselves from the budget cutting wars(cutting Medicare,Social Security, Military,Local Programs) that may hurt them in coming election cycle.

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