Revised and updated July 9, 2009
Today's release of the nation's employment figures by the
Department of Labor (DOL) show that the nation is still waiting for
even a few of President Obama's 3.5 million jobs saved or created,
or his 600,000 jobs saved or created, or even his 150,000 jobs
saved or created. So far in his term in office employment has
dropped by about 2.6 million jobs, while the unemployment rate has
hit 9.5 percent, the highest in almost 26 years.
No one knows for sure how many of these job losses are due to
the recession Obama inherited and how much is due to his own
policies whether executed, enacted, or proposed. He does bear the
responsibility for the ineffectiveness (at best) of those policies
in restoring the economy and the immense damage those policies will
do to the economy in the longer term. This responsibility was
memorialized in the President's repeated pledge to create 3.5
million jobs by the end of 2010. His jobs promise means total
employment should be at least 138.6 million in 2010, leaving him
with a total deficit to close that now stands at 6.9 million
Unfortunately, the President's policies will more likely
decrease employment than help to reach his target. Policies like
higher tax rates on small businesses, sustained massive budget
deficits, doubling the national debt and the consequent upward
pressure on interest rates, and the building threats of government
meddling in companies the Treasury Department has decided it likes
managing are eroding the foundations of the economy today and for
The Growing Jobs Deficit
Perhaps reflecting his focus on accountability, President
Obama's jobs target was chosen carefully. The original target, set
in the fall of 2008, was 2.5 million jobs, but as employment fell
by 1 million at the end of 2008, the President increased the
employment target by 1 million to 3.5 million in December 2008.
At the time, the U.S. economy employed about 135.1 million
people according to the DOL's most commonly used measure of
employment. According to the latest jobs report, total U.S.
employment fell 467,000 in June to 131.7 million.
The President's original jobs claim was soon followed by a claim
that the economic stimulus had saved or created 150,000 jobs in the
first half of the year, this at a time when employment fell 1.6
million. This claim was followed by another that
economic stimulus would save or create 600,000 jobs this summer, an
outcome that, under the circumstances, would be nothing short of
Much has been made of the President's carefully chosen wording
that jobs would be "saved or created." As Senator John Ensign
(R-NV) argued in his cross-examination of Treasury Secretary
Timothy Geithner on March 4, the reference to jobs saved is a
sophistry that cannot be taken seriously:
You created a situation where you cannot be wrong. If the
economy loses 2 million jobs over the next few years, you can say
yes, but it would've lost 5.5 million jobs. If we create a million
jobs, you can say, well, it would have lost 2.5 million jobs.
You've given yourself complete leverage where you cannot be wrong,
because you can take any scenario and make yourself look correct.
The President's promise with regard to employment is meaningless
if it cannot be verified, and it can be verified only against a
standard of job gains.
From where the economy stands today, employment would have to
grow by 6.9 million jobs by the end of 2010 to reach the
President's target. Another perspective is provided by charting the
progress employment would need to make over 2009 and 2010 to reach
the target of 138.6 million against actual employment to date. As
the chart below indicates, there is a yawning gap between the
President's hoped-for trajectory and actual employment levels.
Reaching the Jobs Target
The June jobs report underscores how the U.S. economy continues
to weaken. The latest estimate indicates the economy contracted at
a 5.7 percent annualized rate in the first quarter, almost matching
the 6.3 percent rate of decline in the fourth quarter.
While the economy is exhibiting pockets of somewhat greater
strength, further contraction in the second quarter is likely.
Further, the U.S. recession is now part of a deep, synchronized,
and worsening downturn in much of the rest of the world, making
recovery in the U.S. economy that much more difficult.
The President has said he intends to close his jobs deficit
through his various tax, spending, housing, and financial markets
policies. To that end, he advocated and signed legislation to
balloon the budget deficit by $787 billion. He then released a
budget for 2010 and beyond that raises taxes, stimulates government
spending to new heights, and doubles the national debt.
At this point, the only measure growing faster than the
President's jobs deficit is his budget deficit, which is expected
to increase by almost $1.4 trillion compared to 2008.
The budget also calls for a massive new cap-and-trade system to
allow the government to micromanage the economy while raising
hundreds of billions in new taxes on American businesses.
He provided the outline of a plan to strengthen the housing
industry and another to deal with financial markets, and details of
both plans continue to trickle out to little enthusiasm from the
Unfortunately, the President's policies announced thus far will
weaken the economy in the near term rather than strengthen it.
President Obama will need to change course quickly toward true
pro-growth tax and spending policies to close his jobs deficit. An
effective policy would abandon efforts to grow the government and
focus instead on improving incentives for individuals and
businesses to grow the economy. Here again, the President's budget
goes the wrong way.
Under the President's budget, the economy today faces massive
tax hikes beginning in 2011, especially on small businesses,
investors, and savers. While the tax hikes would take effect in
2011, their consequences are felt now as businesses and individuals
reduce investments today that will face the higher rates tomorrow.
The President should commit to opposing any tax increases at least
until 2013 so market forces can focus on recovery without the
near-term threat of higher taxes.
The Right Path to Job Growth
Effectively stimulating the economy requires more than not
depressing it, however. It requires Congress passing legislation
the President signs to reduce impediments to starting new
businesses, hiring, working, and investing. That means:
- Further reducing statutory tax rates,
- Reducing regulatory burdens where possible, and
- Cutting spending to take pressure off of interest rates and
leave more of the nation's productive resources in the hands of the
more productive private sector.
This is the path President Obama must pursue now to close the
jobs deficit and make good on his promise to drive employment to
138.6 million jobs by the end of 2010.
J. D. Foster, Ph.D., is Norman B. Ture Senior
Fellow in the Economics of Fiscal Policy in the Thomas A. Roe
Institute for Economic Policy Studies at The Heritage