Politics & Policy

How Washington Is Impeding Economic Recovery

You can’t encourage job creation by punishing job creators.

The president has signaled that this week he intends to once again pivot to focus on the issue that has plagued his administration — how to create more jobs for unemployed Americans. This month’s jobs report was indicative of how his previous attempts to solve the problem of unemployment have failed.

The July jobs report showed that 195,000 net jobs were created in June. Typically, 195,000 jobs per month would be healthy: It would roughly match the number of jobs needed to absorb the growth of the working-age population. But with millions of Americans still out of a job, we have to do more than simply keep up.


Looking behind the numbers explains why the report was so disappointing.

First, while 195,000 net jobs were created last month, the number of Americans working part-time jumped by 432,000, which means the number of Americans working full-time actually fell. Much of this shift is a predictable result of Obamacare, which inadvertently encourages employers to shift their employees to part-time work in order to avoid expensive new health-care mandates.

Investor’s Business Daily recently reported that retailers have begun cutting employee hours at a rate not seen in three decades. They call it “a sudden shift that can only be explained by the onset of Obamacare’s employer mandates.”

Cutting worker hours will not show up in the unemployment rate, yet it represents another barrier for families struggling to make ends meet. The president’s announced delay of the employer mandate until after the 2014 election may only delay the law’s resulting shift to part-time work.

And that is not the only job-killing impact of this law. Its expensive new burdens apply to businesses with 50 or more employees, which is creating a new class of businesses known as “49ers.” Don’t expect these employers to create new jobs as long as Obamacare is on the books: The government fines would be too large.

Secondly, even if we were gaining full-time jobs, 195,000 would be inadequate to put people back to work in an economy that lost 8.7 million jobs during the recent recession. Producing enough jobs for the new workers entering the labor force is not good enough. As has been the case after every recession since the Great Depression, a strong recovery is also needed to put Americans back to work.

Steep recessions like the one we experienced a few years ago are typically followed by sharp recoveries. For example, during the last equally deep recession, in 1982, the 10.8 percent unemployment rate exceeded the unemployment rate of even this past recession. Yet just a year later, confident businesses were investing, and the economy created 1 million jobs in a single month. And by this point after that recession began (66 months), the economy had recovered all its lost jobs and gained 9.1 million additional ones.

Similarly, at this point after the shallower 1990 recession, the economy had recovered all job losses and gained an additional 8.4 million jobs. At this point in the so-called jobless recovery after the 2001 recession, the economy was up 4 million jobs.

Yet today, 66 months after the recent recession began, the economy is still down 2.2 million jobs. This makes it the worst economic recovery since the Great Depression.

Dive deeper into the numbers and you’ll find that the average unemployed person has been searching for a job for eight months. Many more have simply given up looking. In fact, under President Obama, for every net job created, five other people have given up looking for a job.

Why has this recovery been so poor? It’s certainly not a lack of “stimulus.” President Obama’s staggering $1.7 trillion in stimulus initiatives have only proven once again that governments cannot borrow and spend their way to prosperity. And the Federal Reserve has shown that endless monetary stimulus can be a policy dead-end as well.

Instead, the president’s policies have contributed to the sluggish recovery.

The single largest predictor of job growth is business investment. In fact, over the past several decades, the link has been nearly perfect: Every 1 percent increase in business investment leads to a 0.27 percent increase in private-sector jobs. The more businesses invest and expand, the more employees they will hire, and the stronger the economy will grow.

Yet four years since the recession was declared over, business investment remains sluggish because entrepreneurs lack faith in the economy. Business surveys reveal that the impact of Obamacare, a surge in regulations, the threat of cap-and-trade, and trillions in new government debt have led to less investment and more caution. In this uncertain environment, investing, expanding, and hiring new employees are simply too risky.

Washington cannot encourage job creation by punishing job creators. Instead, lawmakers should simplify the tax code, replace Obamacare with patient-centered health reforms, encourage energy exploration, and rein in runaway spending. Entrepreneurs want to expand, and millions want to work. Washington should remove the shackles and unleash the economy’s potential.

— Rob Portman, a senator from Ohio, serves on the Senate Finance and Energy and Budget Committees, and in 2011 led Senate Republicans in the creation of the Senate Republican Jobs Plan.


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