"Obama has Lost his Way on Jobs"

Jeff Sachs:

Obama has lost his way on jobs, by Jeffrey Sachs, Commentary, Financial Times: ...The Obama administration’s stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides are missing the key fact: the US economy needs structural change that requires a new set of economic tools.

Consumer and investment demands are too low for full employment. ... Following a Keynesian approach, the Obama administration has focused on restoring consumer spending. ... During the previous bubble, the US consumer was encouraged to over-borrow. Recreating a new bubble is like offering just one more drink, on the government’s account, to overcome a mass hangover. ...

The Republican alternative is equally fatuous. For every problem there is a single Republican answer: tax cuts. Simple arithmetic reveals the stunning shortsightedness of this proposition. ...

There are three parts of a long-term solution. The first is to promote greater exports, partly through dollar depreciation and partly through expanded government support for export financing, for example extended to credit-constrained low-income countries that want to purchase US-produced technology. ...

A second component is a massive expansion of education spending and job training. The unemployment rate ... is 15.5 per cent among those without a high-school diploma. The US woefully under-invests in education outlays for the poor, who drop out of school and then cannot find gainful employment. ...

The third component is to spur an investment boom in areas of high social return... The conversion to a low-carbon economy would create jobs in the short run, a more productive economy in the medium run, and US technological leadership in the longer run.

The same is true with the overhaul of America’s ageing infrastructure at a time when cutting-edge technologies can dramatically improve the efficiency of resource use ... and the sustainability of our ecosystems.

During the Obama campaign we were told about a green recovery... We were told about ... complex multi-state projects that would employ huge numbers of workers while building a cutting-edge economy.

Little bits of these efforts are strewn through the stimulus legislation... But the administration has not done the hard work to bring these complex initiatives to reality. Intercity rail does not just appear by itself. Direct-voltage transmission lines require a new federal and regional power grid strategy. Nuclear power requires presidential leadership to get moving again. Carbon-capture and storage requires a partnership of science and industry, backed in early stages by public technology funds.

The president has lost the economic initiative, weighed down by a tedious fight between two outmoded ideologies: Keynesianism and supply-side tax cuts, as well as by the president’s excessive deference to Congress. ...

Move now, Mr President, or we will spend our time digging out of the next consumer bust and buying our technology from China.