President Obama kicked off the start of his jobs summit at the White House yesterday by challenging participants with the question, “How do we get businesses to start hiring again?” What he is interested in, of course, is what the government can do to facilitate the process of boosting hiring in the private sector. (What the government can do itself to boost hiring in the public sector is an entirely different question.)
He got the predictable responses from business leaders. Disney’s CEO wants to flood the country with immigrants to boost attendance at Disney World. To a man, he and other CEO’s want tax breaks. Only Teamsters’ leader James Hoffa raised the issue of trade policy, a suggestion that surely fell on deaf ears.
Putting all of the self-serving suggestions aside, what really would be an effective way to address the president’s question? The following is a simple flow chart that explores the various options that would boost hiring by private business:
There are two broad approaches. The first is to boost sales. The second is to boost hiring without boosting sales – in effect, reducing productivity. There are four options that could accomplish the goal of the first approach and two options to accomplish the goal of the second. Those options are high-lighted in green, yellow and red to indicate those actions that would be effective (green), marginally effective (yellow) and either ineffective or counter-productive (red).
The only two highly effective approaches would be to (a) impose tariffs to drive a dramatic boost in sales for domestic businesses (option number “1” on the chart), and (b) to legislate reductions in productivity (things like a shorter work week, more holidays, more overtime pay, etc.) – (option number “6” on the chart). This latter approach, however, would also have to be combined with the first approach to prevent making domestic manufacturers uncompetitive relative to imports.
It’s the latter approach that is employed by many developed nations around the world. The workers of most developed nations enjoy more leisure time than American workers.
However, presidents who are more interested in being remembered as world leaders and diplomats instead of effective leaders of the American people(and Obama has already proven himself to be one of these by refusing to address our failed trade policy), is unlikely to opt for either of these approaches. Instead, we continue to pursue option 3 – growing our population, which is perhaps the worst choice of all – while considering only those other options which will be marginally effective and which will all increase the deficit.
In the end, though, this jobs summit will prove to have been nothing more than political theater. Nothing will come of it that wouldn’t have been done anyway – more deficit spending, probably the result of tax breaks. As this morning’s unemployment report has demonstrated, deficit spending has already begun to reverse the unemployment trend and so it is deficit spending that the government will continue to rely upon. All the while they will say, “We need to get serious soon about cutting the budget deficit, but now is not the time.” Without fixing our broken trade policy, that time will never come.