State of the Union speeches provide a chance for the President to look forward. Given the great recession of the last two years, President Obama had more-than-average reasons to focus his speech squarely on the future, particularly in the area of jobs creation.
With unemployment still stubbornly above 9 percent, the big question for most Americans is, "Where are the jobs? Does President Obama or the Republicans have the best plan for getting America back to work?"
Listening to the State of the Union speech and the Republican response, you couldn't have asked for a more clear difference in policy, at least when it comes to jobs.
President Obama's key program for growing well-paid jobs is based on federal investments in biomedical research, information technology, and clean energy research. The plan seems to be, "if we invent it, the jobs will come." Obama said he believes this is "an investment that will strengthen our security, protect our planet, and create countless new jobs for our people."
How good are biotech, IT, and green jobs? The first two sectors generally pay above average wages, and clean energy is likely to be similar. Jobs like, biotech quality control analyst (53,000/year), IT project manager ($81,800/year), and solar energy system installer ($39,300) are typical and pay solidly middle class wages.
However, the reason these industries pay well is that they demand above-average skills: most of the jobs require strong analytical thinking and math skills, and often a college degree or higher.
And, that leads us to Obama's second prong in his plan for more jobs: improve our education system. This can be seen as an investment in the people. This is clearly a longer term plan than the industry investments, but is intended to make sure America has the workers to take these better jobs.
Finally, Obama proposed investments in rebuilding infrastructure like road, rails, and communications. The idea here is that, just as the railroad 100 years ago allowed steel to be made in Pittsburgh and delivered anywhere in the country, by improving transportation and communication, new businesses can be created anywhere and yet sell to the world.
All of these investments can also be called what they are: federal spending programs which have to be paid for with either taxes, borrowing, or cuts in other programs. This was the crux of US Representative Paul Ryan's Republican response to the State of the Union.
The Republican plan is simpler: shrink government, reduce taxes, and the people of the United States, through private enterprise, will figure out where it is best to spend money to grow the economy and create jobs.
Ryan's key point is that private enterprise is responsible for the vast majority of the US economic activity. Of the roughly $14 trillion in production that happens in the US annually (about $45,000/year for every man, woman and child), all discretionary federal spending outside defense represents only a little over 2 percent of that number.
The Republicans would rather see all efforts go to reigning in the whole federal budget, which totals more than 20 percent of the gross domestic product (GDP.) The Republicans fear that continued deficit spending will cause either inflation, drive up the cost of borrowing, or require much higher taxes, all of which will stifle the growth of the economy and the creation of jobs. President Obama also talked about getting spending under control, but it is telling that it was his last, not first item.
Obama's plan of targeted investments aligns with a common business rule of thumb of $1 investment for research and $10 for development leads to $100 in sales. The Republicans are also right: if the debt gets too large, simply paying the interest will become a burden on the economy.
Which is the better plan for jobs? If we could predict that with certainty, we wouldn't need politicians.
Filed under: Employment News & Trends, Employing America 2011
By Al Lee
