A Six Point Job Plan Leaves Questions Unanswered

The following is reproduced from an article posted by David Wessel at The Wall St. Journal's Real Time Economics blog earlier today:

Robert Reich, the Berkeley professor who was Labor Secretary in the Clinton administration, responded to today’s bad news on jobs with a flurry of tweets from his @RBReich twitter handle, calling on Washington to drop its fixation on deficits and turn to jobs.

“The national jobs emergency is growing worse,” he wrote in a series of tweets. “[Obama] must come up with a jobs plan, and now. The battle over how to reduce the ten-year budget deficit is a distraction from the #1 priority of jobs and wages now. Mr. President: At least come up with a jobs plan and fight for it. If R’s reject it, then campaign on it.”

His plan, as tweeted:

Jobs plan #1: Exempt first $20K of income from payroll taxes for a year. Jobs plan #2: Recreate the WPA and Civilian Conservation Corps. Better to put millions to work directly. Jobs plan #3: Fed govt should lend money to states and locales so teachers, firefighters, police, and others can be rehired. Jobs plan #4: Amend bankruptcy laws to allow distressed homeowners to declare bankruptcy on primary residence. Jobs plan #5: Enlarge and extend the Earned Income Tax Credit Jobs plan #6: Provide partial unemployment insurance to people who have lost part-time jobs.

Reich was viewed by many as a success in his public service role, mainly because the economy was chugging along very nicely during his appointment. Therefore it may be futile for a humble blogger to argue too strenuously against such a plan point by point. However, his plan does beg a few questions.

First, and despite his seeming nonchalance about the issue, with a debt ceiling fight in progress and with the debt burden at all-time highs, just where would the dollars for government spending and tax cuts come from at this point? Also, what will be done about the write-offs banks would undoubtedly have to take if primary residence mortgages could be written-off? Also, with states already drained of federal unemployment funds, where will funding for part-time unemployment insurance come from?

With all due respect, we would say that a plan with a few more points addressing some of those issues might have been more valuable. Unfortunately, it is more than likely that the questions above are simply too tough to answer with mere tweets...the economic situation has become far more complicated than that.


  1. Anonymous14/7/11 12:26

    I strenuously disagree with extending unemployment insurance. Just as foreclosures will ultimately end the dire situation of under-water mortgages, desperation will be what forces job seekers into productive but less-than-desired jobs. I do support expansion, temporary or permanent, of programs like Aid to Families with Dependent Children, because I'm not a heartless monster.

    And as to national debt, clearly Reich is the last Keynesian standing. I happen to agree with him that this is the wrong time to cut government spending & borrowing. Gov't spending is an economically inefficient but highly effective way to create jobs, which are desperately needed.

    However, the national debt needs to be tackled, and the country appears ready to stomach it. Perhaps because voters are tightening their own belts, they want the gov't to tighten its, as well. I'm beginning to think that Keynes underestimated the role of voter psyche when suggesting that democracies spend in recessions and pay off debt in the flush years.

  2. Josh Sturtevant15/7/11 08:16


    Thanks for the comments, all valid ones in my mind. Reich may be the last Keynesian standing right now, but it wasn't so long ago that presidents representing both parties were pushing through massive spending programs in the name of recapturing lost growth. Maybe as someone with no horse left in the political arena, he is just saying what many, particularly among Democrats, are still thinking but afraid to say aloud as the winds are turning against spending as a panacea.

    I agree with your comment regarding Keynes on voter psychology. If he did consider voter sentiment (I have not read anything to suggest that he did or didn't) he at the very least misjudged how fickle the masses can be when the economy is in rough shape. It is clear that the tide has turned in the direction of austerity...but maybe people needed to see spending not working before bad-tasting medicine could become acceptable and even desired.