Tyson Warns of Need to Step Up Job Creation but Slow Down Deficit-Reduction Plans
- Oct 15, 2010
The economy still has a way to go, and the federal government is limited in what it can do to make things better, according to Laura D’Andrea Tyson. There are measures it can pursue, but it will take some time to see real improvement, and the private sector will need to be involved, the University of California Berkeley global management professor, economic recovery advisor to President Barack Obama and former advisor to President Bill Clinton told her audience at the Urban Land Institute Fall Meeting.
“We are caught in a very slow recovery,” she said, noting that the unemployment rate is actually 17.1 percent with the inclusion of people who want a job but are unable to obtain one. And even the official rate has stood above 9 percent for the longest period in history. With job creation at about half of what it needs to be to bring the rate down, it could take 24 years to replace lost jobs—never mind addressing the new jobs needed for graduates entering the workforce. Creating 200,000 jobs per month would replace lost jobs in 12 years, she noted, while “if we do better it would take more than four years. That’s why most forecasts say the U.S. is going to have quite a high unemployment rate for quite a long time.”
The jobs market being what it is, the country will have to stop relying on consumer spending to prop up the economy, she cautioned. Instead, it will have to shift to an emphasis on investment. And the government can help encourage this and provide its own support in the form of monetary and fiscal policies, she said.
The Federal Reserve is likely to continue its interest rate measures, but with rates already so low further measures are limited to buying up securities to help reduce borrowing rates and support the economy. On the fiscal side, tax credits can help businesses and consumers alike, such as that already introduced for first-time home buyers, the Cash for Clunkers program and others. Consideration is currently being given to further payroll tax relief to encourage new hiring, following last year’s hire credit. Aid to state and local governments is another possibility, as are incentives to attend college, which would benefit the country in the long term by increasing the percentage of college graduates to meet the requirements of today’s new jobs and decrease the number of people on unemployment.
Infrastructure investment likewise presents a double benefit, both providing a sustainable infrastructure for the country and at the same time creating jobs. Tyson recommended a public-private approach to this, with a government-funded National Infrastructure Bank jump-starting the program and supplemented with private money and with projects limited to those of national significance and selected by real estate experts and others who know about land use.
“Can we afford any of this?” Tyson asked. “The government is broke.” She believes there are possibilities but cautioned against some of the hasty proposals that have been made. While the government will no longer have some of the big recessionary expenses like TARP providing a drag on its budget, it will need to focus on some of its biggest-ticket areas to stabilize the budget, she said. She noted that 20 percent of the federal budget is spent on defense and security, 20 percent on Social Security and 21 percent on healthcare, with just 6 percent going toward interest, 14 percent toward safety net programs and the remaining 20 percent covering everything else. Pulling from that remaining 20 percent will not achieve the $250 billion in budget cuts that are needed, she warned, and there is time to study the problem and come up with the right solution. In fact, she emphasized that the country should not rush to a solution, affirming that it is possible to stabilize the nation’s debt-to-GDP ratio—what’s really needed—by 2015.
The keynote followed the presentation of this year’s J.C. Nichols Prize for Visionaries in Urban Development to Chicago mayor Richard Daley.