Tags: Blinder | policymakers | jobs | government

Blinder: Policymakers Should Be 'Running Like Their Hair Is on Fire'

By    |   Wednesday, 12 June 2013 08:05 AM

Washington should in no way be satisfied with the 0.6 percentage point drop in unemployment to 7.6 percent over the past year, says former Federal Reserve Vice Chairman Alan Blinder.

"Any complacency is misguided," he writes in The Wall Street Journal. "Rather, policymakers should be running around like their hair is on fire."

One problem that while the private sector created 6.56 million net new jobs during the past three years, there has been a 1.1 million reduction in government jobs over the past three years created by spending cutbacks, Blinder says.

Editor's Note:
Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

"Never before in postwar history has government employment declined during a recovery. Compared with historic norms, we're down over 2 million government jobs," he explains.

"Congress could make a good start on faster job creation simply by ending what it's doing — destroying government jobs."

Blinder, now an economics professor at Princeton, also recommends:

• A tax credit for businesses that raise their payrolls. "Companies might be offered a tax credit equal to 10 percent of the increase in their wage bills over the previous year," he writes.

• A partial reduction in the 35 percent top corporate tax rate. This idea "may hold more political promise," Blinder notes. Congress could enact a partial tax holiday allowing companies to repatriate profits held abroad at a rate of say 10 percent. But in return, companies would have to raise wages by an amount equal to its repatriated cash.

"My general point is that the fiscal cupboard is not bare," he concludes. "There are things we could be doing to boost employment right now. That we are not doing anything constitutes malign neglect of the nation's worst economic problem."

Economists have a raft of ideas on how to address stubbornly high unemployment and sluggish economic growth. Larry Summers, a former top economic adviser to President Barack Obama, says the government can start with a 10-year plan to spend $1 trillion on infrastructure.

"While this is a correct solution, the $100 billion annually will likely provide only several hundred thousand jobs annually, or 58,000 jobs a month," energy expert Alfred Guntermann writes on his blog, guntermannpost.com.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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Economy
Washington should in no way be satisfied with the 0.6 percentage point drop in unemployment to 7.6 percent over the past year, says former Federal Reserve Vice Chairman Alan Blinder.
Blinder,policymakers,jobs,government
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2013-05-12
Wednesday, 12 June 2013 08:05 AM
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