The stubbornly high unemployment rate is due to slow global growth, a structural mismatch between jobs and job applicants, and huge uncertainty due to political gridlock in Washington and Europe.
The biggest problem right now is uncertainty about what Washington will do about the budget. Both public and private sector executives are reluctant to hire new employees until they have a better sense of what is coming. The prospect of a political deadlock leading to across the board tax increases in January is unnerving to say the least.
It does seem unlikely we will get any relief before the elections. The parties are polarized to the point that sensible cooperation is not possible. Each side is counting on the voters to ratify its position and expand its representation in Washington. Right now we would be hard put to rally bipartisan support for motherhood and apple pie.
But after the election, a lame duck session of Congress could work wonders. It could begin with affirmation of the wonderfully sensible, balanced, bipartisan plan offered by the Bowles-Simpson National Commission on Fiscal Responsibility and Reform. That proposal is as good as it's going to get in terms of long-term deficit reduction - tackling Social Security and Medicare. It also begins the process of eliminating tax provisions that are no longer justified in terms of growth and jobs. Tax reform should enable a three-to-one ratio between spending cuts and revenue increases, which is about right.
It is almost impossible to overstate what a powerful impact a plan like this would have on financial markets. It would be in a stroke cutting the proverbial Gordian Knot. In a moment it would eliminate the deadly uncertainty that is stifling expansion and lay out a credible blueprint for the future that everyone can believe in and help make happen.
On the micro level there are other things we can do to gain bipartisan support for the policies to stimulate growth and create jobs:
· A bold energy production program to move further toward energy independence - offshore drilling, approval of Keystone Pipeline, and environmentally safe expansion of natural gas.
· Repatriate foreign earnings without taxes provided they are used to create U.S.-based jobs.
· Create a national infrastructure bank with a capital budget that will enable us to modernize our highways, waterways and ports to stimulate growth.
· A new initiative to jumpstart the housing market by modifying existing loans and encouraging refinancing.
· Expand and make permanent the R&D tax credit. Our greatest strength is application of emerging technologies.
· Most important, to address the structural mismatch between jobs and job applicants, we need a full-fledged skill improvement program, especially for the skills needed in advanced manufacturing.
Once the elections are over, I am confident we can do this.
Jerry Jasinowski, an economist and author, served as President of the NationalAssociation of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.