New York Times Magazine
November 3, 2011
Can Anyone Really Create Jobs?
By ADAM DAVIDSON
The current economic downturn has been called a housing crisis, a financial crisis and a debt crisis, but the simplifying logic of the political season has settled on what is really more a result than a cause. We are now, according to nearly everyone running for office, in a jobs crisis. Every politician currently has a "jobs plan," very often a list of vague proposals filled with serious-sounding phrases like "budget framework" and "regulatory cap" that are designed, for the most part, to mean both everything and nothing at all.
Starting this week, I'll be writing a regular column in the magazine that tries to demystify complicated economic issues ? like whether anyone (C.E.O.'s, politicians, people running for the presidency) can actually create jobs. The fact is that creating them in a far-too-sluggish economy is practically impossible in our current capitalist democracy. No corporate leader is rewarded for hiring people who aren't absolutely required. Most companies hire only when its workforce can no longer keep up with the demand for its products.
Even with all the attention on hiring, the government's ability to create jobs is pretty dispiriting, no matter who is in charge. The most popular types of jobs programs involve state tax breaks or subsidies that seek to seduce a company from one state to another. While this can mean good news for "business-friendly" states like Texas, such policies don't add to overall employment so much as they just shuffle jobs around. This helps explain Rick Perry's claim that more than one million jobs were created under his watch in Texas while the rest of the country lost more than two million.
The federal government does something similar when it decides, for instance, to regulate oil drillers and subsidize windmill makers. Such a policy might help the environment but it just moves jobs from one sector to another without adding any. And while both Perry and Mitt Romney propose that further oil and gas drilling in the U.S. will transform the jobs picture, only 30,000 Americans work in oil and gas extraction, and about another 125,000 in support occupations. With more than 25 million Americans unemployed or underemployed, it's unlikely that any changes in that part of the energy sector would make a real dent.
One reason we have so few ideas about job creation is that up until recently, the U.S. economy had been growing so well for so long that few economists spent much time studying it. (They're trying to make up for it now. See this chart.) With no new theories, Democrats dusted off the big idea from the Great Depression, John Maynard Keynes's view that government can create jobs by spending a lot of money. The stimulus, however, has to be borrowed, and it has to be really, truly huge ? probably something like $1.5 or $2 trillion ? to fill the gap between where the economy is and where it would be if everyone was spending at pre-recession levels. The goal is to goad consumers into spending again. And President Obama's jettisoned $400 billion jobs package, hard-core Keynesians argue, is nowhere near what it would take to persuade them.
Many Republicans follow the more fiscally conservative University of Chicago School, which argues that Keynesian stimulus can't heal a sick economy ? only time can. Chicagoans believe that economies can only truly recover on their own and that policy interventions only slow the recovery. It's a puzzle of modern politics that Republicans have had electoral success with a policy that fundamentally asserts there is nothing the government can do to create jobs any time soon.
Of course, Romney, Perry, Herman Cain and the rest won't come out and say, "If elected, I will tell you to wait this thing out." Instead, Republican candidates fill their jobs plans with Chicagoan ideas that have nothing to do with the current crisis, like permanent cuts in taxes and regulation. These policies may (or may not) make the economy healthier in 5 years or 10, but the immediate impact would require firing a large number of America's roughly 23 million government workers.
How bad might that be? The U.K., as part of its austerity measures, is in the process of firing about a half-million government workers under the notion that the private sector would be so thrilled by low taxes and less regulation that it will expand and snatch up all those laid-off public servants. But this plainly isn't happening. The British economy continues to grow slowly, if at all, and few former government workers have found new jobs in the private sector.
Keynesians and Chicagoans, however, do agree on two important points. First, in economics, unlike politics, there's no middle ground: You can't simultaneously cut and increase government budgets. The only shot we have at truly transforming our economy is a one-party sweep in the 2012 elections that would lead to radical legislative changes. Still, either path ? lots more debt or lots of fired government workers ? will only inflame more Americans.
The second area of agreement is the most important: an economy is truly healthy only when its people know how to make and do things that others will pay them a decent amount for. Jobs, in other words, are not the cause of a healthy economy; they're the byproduct. And that's another thing most national politicians know but will never say.
So perhaps instead of (or, at least, in addition to) arguing over plans that aren't going to happen, we should focus on what almost certainly will come true. The economy that emerges from this recession is going to be different. Without the distortion of a credit bubble, it is clear that far too many Americans don't know how to do anything that the world is willing to pay them a living wage for. No economic theory offers them easy salvation.
We don't need to become a nation of app designers. An economic downturn is a great time to learn things ? carpentry, say, or aerospace engineering ? that others will eventually pay for: high-school dropouts should get their degrees and a year of specialized training; high-school grads who can't afford a four-year school should get a community-college degree. Life will be tougher for liberal-arts majors if they don't get training in how to apply a humanities education. Those who can't find a job where they live should consider moving to places where there are more jobs than applicants ? the Dakotas, Nebraska, Wyoming.
When this crisis ends, we'll also be faced with other deep problems. Our tax code is a complex mess; we need a more effective education system; it's hard to picture a healthy United States in 2050 without some major change in health care. Unlike the short-term jobs crisis, these are areas where we can find compromise. Let's not do what we usually do by spending the bad times arguing over things that won't happen and the good times ignoring the things that should.
Adam Davidson is the cofounder of Planet Money, a podcast, blog, and radio series heard on NPR's Morning Edition, All Things Considered and on This American Life.