The latest White House effort to boost job growth was an opportunity missed. President Barack Obama chose the dramatic vehicle of a primetime address to Congress on September 8 to present modest proposals that left Americans no wiser about why the great jobs machine has stopped churning.
The result will be continued public frustration with yet another "stimulus" package that at best may keep the economy growing anemically rather than falling back into a double-dip recession.
Obama could have seized the opportunity to spell out the real U.S. job challenge and counter the narrative of Republican opponents. GOP lawmakers say the economy is failing because government has grown too large, and rising deficits are eroding confidence. While the debt problem is a serious long-term challenge, in the short run that analysis is simply wrong. Interest rates are at historic lows, and even record levels of government debt have in no way crowded out private investment.
The president needed to tell a harder story: Jobs have disappeared because the U.S. economy is simply no longer as competitive as it needs to be. As my colleague Michael Spence has shown, the United States has not created jobs in the tradable sectors of the economy for two decades. Job growth has been confined to the less productive, non-tradable sectors of the economy. And as my colleague Matthew Slaughter has shown, real wage incomes have declined for nearly all workers over the past ten years.
Telling that story would call for a different policy response. Trade, for instance, warranted barely a line in the speech. But with the world's fastest growth taking place in the big, emerging economies like India, China, and Brazil, the United States needs a strategy for opening those markets further to U.S. goods and services and boosting exports.
On the plus side, the president had more to say on infrastructure, including endorsing an infrastructure bank to funnel private money into public projects. Infrastructure can be a huge job creator, and with long-term interest rates so low, there has never been a better time for big projects such as modernizing ports, improving transportation, and expanding broadband networks that lower the costs of doing business in the United States.
And while an unemployment insurance extension is essential, as Obama stressed, what is really needed is a new program so that recipients of such aid receive intensive job retraining to put them back into good jobs as soon as possible, an approach taken by most other advanced economies.
Finally, Obama had little to offer to Americans struggling with home debt. Until there is serious mortgage debt relief, businesses are unlikely to invest and hire because consumer demand will not be there.
The top line from the speech will be that the president has again called for government spending and tax cuts--about $280 billion in new stimulus--that will be criticized on the right as too much government and on the left as not enough. It is the wrong debate. President Obama had a chance to change it last night, but failed to seize that opportunity.