Obama jobs forum to seek growth boost on the cheap

WASHINGTON Mon Nov 23, 2009 8:19am EST

1 of 2. Job seekers look over a list of jobs at an employment center in San Francisco, California November 20, 2009.

Credit: Reuters/Robert Galbraith

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WASHINGTON (Reuters) - President Barack Obama's December jobs forum may be better at serving his political need to show the White House cares about sky-high U.S. unemployment, than discovering new ways to cheaply boost economic growth.

Obama said last week he was interested in measures to speed job creation without spending money and warned that running up more debt could risk a double-dip recession.

The White House has already stressed that the December 3 jobs conference will not be about a second stimulus package.

Obama is under pressure to tackle the highest U.S. unemployment in a generation, which, at 10.2 percent, is dragging down his once lofty poll ratings and could hurt his fellow Democrats in congressional elections next year.

There is a long history of presidents hosting "economic summits" to show their concern about the economy, including Bill Clinton's in December 1992 -- before he had even taken office -- and George W. Bush's in August 2002.

But economists say that by appearing to rule out significant additional spending to lift the economy, Obama will limit what the forum can achieve, and he risks making it look like an exercise in public relations.

"You need more demand for goods and services in order to have people willing to hire people," said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a liberal think-tank in Washington.

"I don't know how you do it without things that are really effective at stimulating demand growth," he said.

Obama signed a $787 billion emergency stimulus bill in February that, among other things, extended unemployment benefits, aided cash-strapped state and local governments to help them avoid laying off workers, and spent money on infrastructure, education and healthcare.

TIPTOEING TOWARD MORE STIMULUS

Stone advocated extending jobless benefits again and continuing to help out the states.

This could be cast as an extension of aid already agreed under Obama's first spending package, rather than a new stimulus bill, although the money involved could add up to $100 billion if all the expiring programs were renewed, Stone said.

Likewise, the largest U.S. labor federation, the AFL-CIO, recommends extending unemployment insurance and aid to states.

It also wants more money for food stamps, spending on schools and infrastructure, and diverting resources from a $700 billion bank bailout fund to help small businesses get credit.

The jobs forum, which will gather business, labor and financial experts, will include six separate so-called breakout sessions on creating green jobs; boosting credit for small businesses; more infrastructure spending; U.S. exports; retraining workers; and a discussion about how to encourage businesses to hire.

Obama has already voiced openness to some of these suggestions. He told Fox News in an interview last Wednesday that he was aware some states need money to help them avoid firing public workers, and that a tax provision to encourage businesses to hire sooner rather than later may have merit.

The Economic Policy Institute, another liberal Washington think-tank, estimates a 15 percent new job tax credit could create 2.8 million jobs in 2010 at a cost of $28 billion.

But critics of this approach worry that the government would inevitably wind up subsidizing some positions that would have been filled anyway, making it difficult to judge how many new jobs had actually been created.

This issue has already caused problems for the Obama administration, which is under fire for overstating the number of jobs saved or created by the first stimulus.

SUPPLY SIDE

Some favor a more aggressive supply-side approach.

"The President should focus and begin by doing no harm," said Glenn Hubbard, dean of the Columbia Business School in New York who was a top adviser to former President George W Bush.

"Proactively, support for training ... and a cut in the payroll tax and corporate tax are the ways to go," he said, arguing that there were ways to stimulate employment without hitting the long-run deficit.

The first Obama stimulus is being delivered against the backdrop of a record $1.4 trillion budget deficit, and more debt-financed government spending may do more harm than good.

Investors could take fright at the threat of the government issuing a flood of Treasury bonds, driving long-term borrowing costs higher and hobbling economic growth. But demand for another fiscal jolt may be politically hard to resist.

"I think the first (stimulus package) was absolutely needed and that stopped the slide. But I do think we are going to need a little more to ensure that the recovery doesn't drag on," said John Irons, research and policy director at the EPI. "We need to make sure the recovery is a strong recovery."

Underlining the political cost of rising unemployment, a recent Quinnipiac University poll showed Obama's job approval rating dropping to 48 percent nationally, the first time it had dipped under 50 percent. His approval rating for his handling of the economy was even lower at 43 percent.

The forum will gather figures from business and labor to examine "all good ideas" to boost job creation, the White house says. Obama will then embark on a national White House to Main Street Tour to escape the Beltway bubble and share ideas.

To his critics, this will be pure political theater.

"Are there any free things to do? Wouldn't that be nice, and why have we not done them before?" said Alex Brill of the conservative American Enterprise Institute.

"I am not aware that there is anything that can be done (cheaply), so that leads me to conclude that this must be about politics," he said.

(Reporting by Alister Bull; Editing by Chris Wilson)

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