Contrasts between President Barack Obama’s job creation proposals and those of Republican presidential candidates have never been clearer. With Obama’s Thursday address to a joint session of Congress, following Republicans’ Wednesday debate, Americans have a choice of two divergent paths. The president’s path — more government spending — has not led to economic prosperity. The other — lower taxes and regulatory reform — just might.
Obama called for an additional $450 billion in spending, with an extension of payroll tax cuts and unemployment benefits, more infrastructure spending, and additional aid for state and local governments.
These job creation proposals were also part of the $825 billion stimulus, which failed to spur GDP growth and create jobs, despite record low interest rates and monetary stimulus from the Federal Reserve.
“Shovel-ready” infrastructure projects that weren’t, grants to the poor and the unemployed, funds for unionized public sector workers — we saw all this in 2009. Stanford economics professor Michael Boskin calculates that each job created or saved by the stimulus cost $280,000 — five times as much as median wage.
In contrast, Republicans in Wednesday’s debate called for lower taxes and less regulation. The candidates sparred over details, but had major areas of shared agreement on the need to cut taxes, reform regulations and cut both discretionary and entitlement spending.
One area of agreement between Obama and the Republicans is ratification of free trade agreements with South Korea, Panama and Colombia. This would help American businesses that export. The agreements were signed by President George W. Bush in his second term, but have yet to be ratified by the Senate.
The most effective part of Obama’s job creation plan likely came last week, when he instructed the Environmental Protection Agency to refrain from adopting stricter standards on ozone. The new rule would have tightened the requirements for ozone allowed in the air from the current standard of 84 parts per billion to 60 to 70 ppb. The 60 ppb standard would have put 85 percent of American counties with ozone monitors out of attainment.
Counties would have to pursue compliance by restricting industrial activity, such as manufacturing and energy production and infrastructure construction, potentially costing as much as $90 billion a year.
Obama’s action amounted to an admission that imposing costlier new regulatory requirements on business may conflict with hiring additional workers, most Americans’ primary policy goal. Many regulations are unneeded. Our air and water are getting cleaner as new equipment replaces old. And regulatory overload makes America a less attractive place for companies to locate and create jobs.
With zero net job gains in August, a persistently high unemployment rate and a low rate of GDP growth, the economy could likely create more jobs through regulatory reform than through additional spending. How about a look at the remaining thousands of business regulations?
Examiner columnist Diana Furchtgott-Roth (email@example.com), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute.