Tonight in a speech to Congress, President Barack Obama will unveil his plan to create more jobs. He’s expected to push for increased infrastructure spending, housing aid and unemployment benefits, as well as tax credits for employers to hire Americans who are out of work.
Doug Guthrie, dean of the School of Business, offered his insight to GW Today about the president’s speech, the challenges facing the U.S. economy and his ideas on how to get the nation back on track.
Q: How would you describe the current state of the economy?
A: I think the current state of the economy is much worse than most people realize. There are a couple of basic indicators to think about here. First of all, while the overall unemployment rate hovers at around 9 to10 percent, it underestimates the true rate of joblessness across the country because unemployment only counts those who are actively looking for work within the last nine months. The real jobless rate is probably closer to 18 to 20 percent, though few are keeping good statistics on this. But the issue goes beyond joblessness. It is also about the U.S. government's investment in skilled labor — the evisceration of vocational education over the last 30 years. Replacing skilled labor training with vocational technical training such as computer skills has been a serious mistake. And it is about a lack of vision on state investment in critical industries like renewable energy.
Q: Which industries have been hardest hit by the weak economy?
A: Manufacturing and more specifically skilled-labor, heavy industry manufacturing has fared the worst in recent years.
Q: President Obama will be delivering a major address on jobs tonight. What types of proposals do you expect the president to unveil?
A: Many of these proposals will be about tax credits for hiring the unemployed, payroll tax credits, etc. But none of these will address the true ills of the U.S. economy.
Q: Given the recent political battle over the debt ceiling, how likely are Obama's proposals to be enacted?
A: Not a chance. Congress and more broadly the legislative process in Washington is completely dysfunctional right now.
Q: What types of initiatives would be most helpful in creating jobs?
A: First, we need to open the doors to foreign investment. The U.S. has been so aggressively averse to deals with foreign companies that it is almost embarrassing. The U.S. needs to understand that foreign investment in the U.S. is the only way we are going to attract back all of the capital we have sent out for production over the last 40 years. Second, the government should create a tax holiday for the repatriation of profits. There is nothing better that the Obama administration could do than helping to create the conditions under which U.S. corporations would bring their profits back to the U.S. Third, we need investment in key industries like renewable energy. Right now, the U.S. is assuming that venture capital is going to continue to spur this industry. However, in order for the U.S. to build jobs in this key industry there is going to have to be investment and coordination from above.
Q: One of the centerpieces of the Obama administration's recovery efforts was the stimulus package. How much impact has the stimulus had on the economy?
A: The stimulus package has been more beneficial than Obama typically gets credit for, though it could have done much more. We were in such a hole economically in 2008 that digging out of that hole required a tremendous infusion into the economy. In the Great Depression, the Works Projects Administration provided such an infusion. In 2008, the vast majority of the resources went to the banks, but many of them sat on the new capital rather than making loans to put it back in the economy. It would have been better in this case if the Obama administration had put this money back into the economy directly.