by Gary H. London
President Barack Obama recently offered up his “jobs” recovery plan. I am eager to support the president in his efforts to put Americans back to work. Infrastructure should play a key role. The nation would benefit for generations by building new roads and bridges or repairing the old ones. We need plants and pipes for water and sewer systems; we need rails and runways for high-speed rail and airports.
That’s the short list.
With unemployment at 9.1 percent and a rate possibly double that in “under employment,” big stimulus could be helpful. When he took office, the president created the economic stimulus program, which infused $787 billion and took the nation back from the precipice of even greater economic turmoil.
It’s time for the government to try it again. Here are a few things that could — minimally — be achieved (in no particular order).
Confidence in the system could be restored, confidence that is desperately needed after Congress and the president mismanaged the debt ceiling debate.
Jobs could be created — which, in turn, would put money into our economic system at a time when most people and corporations are holding onto cash, being cautious about spending and investing.
Sending a Message
Such a program — even its announcement — would send the correct messages, signaling that this president and this Congress intend to do what is necessary to help restore jobs and repair America.
This program should not be pitched to Americans under the assumption that it is going to solve any immediate problems. It won’t. If rushed, it is likely to be bungled. Our federal government has a great history of that. A federal infrastructure program must be well thought-out.
Americans should be told the truth about what the government can and cannot accomplish. In truth, there is not much that policymakers can do to pull us out of this economic lethargy.
The “Great Recession” and this stagnant, lingering, postrecessionary period are what economists term a “structural” event. National economies are transforming. The global picture is changing.
The key reason that high unemployment lingers at the same time as many corporations are stashing cash is because companies do not need to hire employees to conduct business. Companies have found other ways of providing or making their products. Technology replacing humans, foreign workers replacing U.S. workers and shifting demand for products are all contributing to this economic event.
Recently the National Bureau of Economic Research released a survey suggesting that people who are currently out of work spend just 1 percent of their time looking for a job. (The rest of their time was divided among watching TV, doing household chores or sleeping.) This doesn’t suggest to me that 13 million Americans are lazy. Rather, they are disconnected from the job market, such that they have mostly determined that it is not beneficial to bother looking for work.
Throw in a little demographic information: There are many young Americans entering the workforce trying to establish a foothold on their careers in these difficult times; and there are many Baby Boomers, a great many of whom have outdated job skills or expectations that don’t match with the new economy. These factors stress society.
There is also a geographic “disconnect” between where the jobs are located and where many of the people live —
often stuck with a home they can’t sell, limiting their ability to move.
All of these factors have contributed to a great downward economic spiral which started with the collapse of the financial system, and probably won’t end until a greater “clearing” takes effect. It is a painful process. And neither the Republicans nor the Democrats have the tools to make a lasting fix. The economy must mostly fix itself.
However, there are things that could help such as something akin to the Works Progress Administration, the Franklin Roosevelt administration’s idea of using government to put the unemployed back to work. While most economists would now argue that it didn’t take America out of its Depression in the 1930s, it accomplished enough of its mission to help thousands of workers. Look around at the legacy of fine buildings, bridges and roads that the program built. It created jobs, stimulated the economy and enriched people’s lives and those of future generations.
These programs mostly create confidence in our leadership. Policymakers can give a shout-out to Americans that there is a national purpose even amid our often divisive political debates.
Putting Politics Aside
I hope that this is a nonideological point that I am making, although I suspect that many of you will see it differently. Some of you will see jobs stimulus as being further government expansion.
Well, the most rational people I know — regardless of their party affiliation — are all for smaller government or at least less spending. The problem is that we often can’t agree on the particulars.
I think a convincing case can be made that it should be government’s role to take care of the things that only government can do — such as roads and big infrastructure. Now is a good time to put an economic “care package” together because it has to be done anyway, regardless of whether or not it does stimulate the economy.
In San Diego, we have had a good infrastructure improvement run. Military spending alone between 2009 and 2014 will account for more than $4 billion in economic stimulus, building military hospitals, housing and infrastructure.
If this program were extended so that local agencies could use federal money for projects now planned and waiting — from fixing potholes to the more elaborate tasks such as rebuilding bridges or expanding mass transit — I suspect more “shovel ready” projects could be found. The San Diego Association of Governments compiled a list of 1,043 shovel-ready projects totaling $7.5 billion back in 2008, but the region’s cities and agencies subsequently received only $1.87 billion.
We should extend the program to private projects. In San Diego we have calculated that approximately two-thirds of our commercial building inventory is classified as “Class B or C.” That is about 80 million square feet of commercial office space and this doesn’t count retail or industrial. These classifications mean that spaces will remain at the cheapest lease rates and likely stay empty for a longer period, recovering only at the most robust point of a strong economic cycle.
Why not give these buildings a helping hand by putting the construction industry to work to modernize at least the energy management systems so that the buildings become more attractive to tenants and of greater value to owners?
The value in this is more than just job creation. It better positions the buildings to attract new and expanding companies in San Diego. We could put old inventory to a better use by converting it to residential rental inventory.
To create programs to work on private buildings is just a good way for government to participate in a process that inevitably must play out anyway. I am not weighing in on the particulars. The usual variety of approaches can be creatively applied including tax breaks, direct subsidies and other kinds of incentives.
Most economists agree that now is the time for government to spend, as long as such a program is accompanied by the serious discussion — which presumably is now taking place through the bipartisan “Super Committee” on debt reduction — for long-term deficit reduction implemented as the economy improves.
What we can’t afford is more waffling by our elected representatives on any level, from the Congress to the president. We need to act now.