How Not to Create Jobs

by Jonathan Cohn | June 10, 2011

Congress wants to focus on jobs. Hooray! And that means focusing even harder on deficit reduction. Hooo--wait, what?

The Washington Post's Lori Montgomery explains in her article about the ongoing, bipartisan talks over the debt ceiling:

“The news on the economy and on the jobs front of the last several days, I think, underscores the importance of this meeting we just came out of,” House Majority Leader Eric Cantor (R-Va.) said after emerging from the talks at the U.S. Capitol. “We believe that much of the problem surrounding the lack of job creation and growth for this country has to do with the fact that there isn’t a credible plan to manage down the debt and deficit.”
Private-sector job creation slowed in May, and the unemployment rate ticked up to 9.1 percent — the first increase in eight months. The slowing recovery has given rise to talk of a new round of economic stimulus, including discussions at the White House about allowing employers to take advantage of a temporary payroll tax holiday that currently benefits only workers.
That idea gained little traction on Capitol Hill, where lawmakers said the country would be better off with a long-term plan to manage government spending than more stimulative sweeteners to boost economic activity in the short term.

Ugh. In this political environment, a payroll tax holiday is probably the best, and perhaps the only, opportunity to boost the weak recovery. But all the talk is about reducing deficits, which is absolutely the right thing to do in the long term and absolutely the wrong thing to do in the short term.

Remember, both the Bowles-Simpson and Domenici-Rivlin commissions called postponing deficit reduction until after the recovery was well underway. And both called for enacting stimulus, in the form of a payroll tax holiday. (Yes, we've already had one such holiday. But the sluggish recovery suggests we need another.)

Last night I quoted administration critics who think Obama could be doing more to promote these ideas. But Montgomery's report, which is consistent with everything I've heard, suggests the Republican leadership and even many Democrats refuse to go there -- although I see, via The Hill's Alexander Bolton, that some Democrats are pushing in the other direction.

Update: Time's Michael Scherer has a well-reported account of the latest White House thinking and games out how it might get a payroll tax break with yet another last-minute deal. But he's not optimistic, given Republican resistance.

Source URL: http://www.newrepublic.com//blog/jonathan-cohn/89776/cantor-biden-debt-jobs-payroll-tax