Saturday, September 8, 2012

Politicians To Blame For Weak Job Growth, Economists Say

Five years after the economic downturn began, the unemployment rate is nearly double what it was in 2007. According to some economists, politicians are to blame.

"It's a failure of leadership," said Joseph Brusuelas, senior economist at Bloomberg LP. "After close to four years of Obama administration policy and two years of GOP rule, there's enough blame to go around."

After stabilizing in 2009, the job market has been adding only enough jobs to keep up with population growth. Friday's jobs report proved no different: The economy added only 96,000 jobs in August.

Both conservative and liberal economists agree that elected politicians have the ability to change the situation, but are failing to do so.

"Two years of Congressional inaction in the face of high unemployment and with interest rates at the zero lower bound is inexcusable," said Justin Wolfers, an economics professor at the University of Michigan.

President Barack Obama can take credit for implementing a $787 billion stimulus that saved or created more than 3 million jobs, according to the Congressional Budget Office. But many economists argue that the hurried law did not go far enough.Obama made another attempt at job creation last year when he introduced a jobs bill to Congress that economists estimated would create roughly 2 million jobs if passed. Congressional Republicans have blocked the bill, advocating austerity instead.

Some economists highlighted what they see as the government's failure to take action as the economy continues to struggle. Wolfers said that the government should unleash another round of fiscal stimulus and retrain the long-term unemployed. He also said that the Federal Reserve should tolerate higher inflation and make a credible statement that it will do whatever it takes to bring down the unemployment rate. Such policies, he said, would spur hiring by creating "confidence that this recession won't be allowed to continue."

In terms of its own hiring practices, the government has been cutting jobs largely at the state and local levels. Though the government typically adds jobs, there now are 639,000 fewer government workers than in January 2009, when Obama took office, according to the Labor Department.

"What we’re doing is a radical departure from historical practice," Wolfers said. "We've ended up with Tea Party economic policy."

Businesses are not hiring because there is no clear sign that the economy will improve, according to some economists.

Brusuelas said that both political parties need to make sacrifices, but they have been unwilling to meet halfway to address the jobs crisis and make the budget more sustainable. As a result, Brusuelas said, $1.7 trillion in corporate cash is sitting on the sidelines.

"Growth has to be part of the strategy. It can't just be austerity," Brusuelas said, referring to Republicans. He said that meanwhile, Democrats need to stem the long-term growth of entitlement spending. "Regardless of anyone's political preference, it is a lack of policy leadership," he said.

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