The chatter of the day here is whether the president's jobs plan should be big and ambitious or small and politically pragmatic.
As much as I care about this part of the administration's agenda, I can't get wound up about this type of late-August noodling. The president and his team must weigh what the economy needs, what will work quickly, what the political market can bear, how the public will react, and, in this case, staying under the debt ceiling.
He cannot be wholly constrained by the political market -- to craft a plan acceptable to House Republicans would be a waste of time, as demonstrated by their "jobs plan," which Jon Cohn convincingly dispenses of here.
Nor should he let the fact that the Republicans may block much of anything he proposes keep him from fighting for a plan that meets the moment. He doesn't have the budget room or popular support for another Recovery Act, but he does have the airspace for a set of targeted jobs ideas that will significantly move the needle on unemployment, while tapping some particular pressure points in the economy:
- Renew the payroll tax holiday and unemployment insurance extension;
- A fast-acting infrastructure program, hopefully something closer to FAST! than say, the infrastructure bank (the latter is a great idea, but it won't move the needle in the near term);
- A tax credit for employers who expand their payrolls;
- Some kind of on-the-job training for the long-term unemployed;
- Something to incentivize more mortgage refinances.
I suppose that's more medium than big or small, and not everything in there will appeal to everyone. Job training doesn't create any jobs but targeting something at the long-term unemployed makes sense. The average number of weeks spent unemployed just topped 40 for the first time in the history of a series going back the 1948, where the average for the whole series is 14 weeks.
Economists worry about the effectiveness of the new hires tax credit in a period of weak employer demand, but I suspect it will pull some hires forward, and if the timing is right -- if growth picks up a bit when it comes on the scene -- it could end up with a nice bang for the buck.
All told, were a program like this to become law, it could easily shave a couple of points off of the unemployment rate over the next couple of years. Like I said, it may go nowhere in a Congress where too many members are drawn toward policies that inflict wounds rather than cures. But it's the right fight to undertake.
This post originally appeared at Jared Bernstein's On The Economy blog.