How Can the Government Reduce Unemployment?

Nouriel Roubini says the federal government has to be much more aggressive on the unemployment front:

There’s really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.

I’m sympathetic, but I’d note that the low-hanging fruit has already been picked, when it comes to “labor-intensive, shovel-ready infrastructure projects”, with the first stimulus, and I’m not sure that there are actually any left. Instead, might I suggest arts subsidies?

Comments

[DormRoom:]

it's easy.. more investment, and incentives towards green technology. By doing so it'll reduce the U.S, and world dependecy on middle east oil, and support energy independence from terror-sponsor states.

China is already doing so. They have the world's largest deposit of Rare Earth Elements (REE), and can use this resource base to build the supermagnets for wind/electric cars, and materials for thin film solar, and high-technology devices. Thus the recent reduction in REE exports to the rest of the world. The Chinese need this resource base for the Great Green Leap Forward.

The Chinese can jump ahead of the industrial value chain within this decade with a green revolution, and improve the living condition of its people. And they have the resource to do so.

Also, Wen Jiabao, China's Premier was a geologist before joining the People's Party. I'm assuming he's fully aware of China's potential to the world's leader in green technology, and manufacturing.

America can do the same.

Nov 16 12:00 PM

[Tom E.:]

Job growth has been decoupled from GDP growth by globalization.

To re-couple them, labor arbitrage must be curbed and domestic investment must be favored by the tax code versus Americans investing overseas.

Nov 16 12:32 PM

[Donald Ingram:]

Shovel ready is a misnomer. Most of the stimulus/porkulus that went to the city/county/state governments went to offset their budget short falls. The only "shovel ready" I see stems from the shovelling of BS from the Wall Street bulls asking for more 'free' money to keep coming so they can leverage up on everything in sight to chase a few percent profit. Can you say 'crash'?

Nov 16 01:40 PM

[User 353732:]

The best thing Big Govt can do to reduce unemployment is to shrink in scale and scope.

Nov 16 02:12 PM

[ldgregg:]

The govt can stimulate job creation through a package of investment tax credits for businesses that hire and make capital investments. Big incentives. The govt should refrain from throwing large wads of cash at failing banks and car companies and offer big tax credits to companies across all industries based on job creation and capital investments. Especially critical now. Many businesses are starting to see increases in business, but after downsizing are hesitant to add more employees back. Tax credits are great incentives.

Nov 16 02:29 PM

[Davewmart:]

If the Government got on with charging the fraudsters under the Rico act and stopped standing in between the financial system and it's losses then money would be available to actually do something for normal people.
The confiscated assets of Paulson et al should go a great way to paying for back to work programs.
Weatherisation of houses would employ very large numbers of people and permanently reduce bills, freeing more money for consumption.
Americans ought to take note of how workers are treated elsewhere, with Germany and France for instance protecting their workers and putting them on short time, made up by the Government rather than throwing them on the scrapheap.
It is not that everything is rosy elsewhere, but the stupidity of the present version of capitalism that the US is running is almost unique.
That frees more resources for socialising the losses of the powerful, of course, which is it's point, but when Obama et al claim that they can do nothing else they are lying.

Nov 16 02:59 PM

[derryl:]

Pretty much every city could usefully spend billions repairing and rebuilding its water and sewer lines, roads and bridges. This is the invisible and unglamorous maintenance work that municipal politicians shun, preferring to waste their ratepayers' money on new arts centers and other monuments for the social enrichment of their wealthy friends. Maintenance doesn't earn profits but it does save money that is lost due to unexpected downtime when these systems fail. It is a necessary investment that would be a good use of federal stimulus funds. Combined with a Buy American provision it could be a significant industrial and employment generator. The US doesn't need another cash for clunkers to buy imported cars. The stimulus has to stay onshore.

The government could pay for or subsidize the conversion of vehicles to natural gas. This provides a new market for the new supplies of US shale gas while eliminating some of the demand for imported oil. It also provides labor intensive work manufacturing and installing the vehicle conversion kits and the at home refueling kits. Pickens would approve.

Why will the Chevy Volt cost $40k? Is it all the R&D recovery? Does it really cost that much to put an electric motor and a battery on a car chassis? GM already had a popular electric car in the 1990s so they didn't have to reinvent the wheel. Government Motors could put some money into making a domestic electric car affordable, another way of reducing oil imports. Of course Ford will probably come out with a superior and affordable electric car while GM diddles with the overpriced Volt so this may be a nonstarter.

There are lots of useful places the government could spend money to put people back to work. The best way to find those places is to ask people. Governments seem to believe that if politicians or bureaucrats didn't think of an idea then there must be something wrong with it. The opposite is true. Ask people. Ask them what improvements could be made if there was money to spend where they live and work. People know stuff. Ask them.

Nov 16 09:46 PM

[Roger Knights:]

Here's what I suggested, in one of my Instablogs:

"I think the gov't should offer to pay for home-improvement projects for home-owners, in exchange for a share of future profits on the sale of the house. There are certain desirable home improvements that wouldn’t require skilled labor, such as adding fencing, home security, and earthquake protection. Millions could be hired to do these tasks after a bit of videotaped training.

"This technique could also be used to fund purchase and installation of insulation, attic fans, south-side awnings, white-painted roofs, and heat pumps. The US needs to cut its energy consumption, and a little governmental nudging is OK to get us there.

"These initiatives would stimulate lots of economic activity; upgrade the country's housing stock; make life pleasanter for home-owners and their neighbors (who'd live in an upgraded neighborhood); reduce crime; and be a good investment for the gov't. in the long run. They would also be politically popular."

Nov 17 12:06 AM

[jeff jones:]

contrary to some perceptions in the business community, municipal governments have public outreach programs at various levels and we do receive useful suggestions and other input from the citizens of the community. And, the projects which are undertaken to put tax dollars to work involve building and maintaining more than simply art museums. They include parks and recreation, landscaping streets and medians, books and other media for the libraries, public transportation vans, buses, and rail cars for the persons who do not have automobiles, bike routes and lanes networking the city. Many of the projects involve private contracts let for their implementation.

Nov 17 01:29 AM

[Gregman2:]

Short of a 15 year industrial policy, the U.S. Gov't really can do very little to mitigate unemployment. As it stands, the military-as-employer does as much good as anything else. Unfortunately, America's laissez-faire industrial system leaves it open to be eaten away by massive foreign powers, like China. (I'm not a lone wolf on this...read Pat Buchanan.)

Nov 18 02:19 AM