Government investment in the foundations of a strong economy is the treatment for this economy, which is anything but normal, says Mark Price, a labor economist with Keystone Research Center in Harrisburg.
Because the research center focuses on Pennsylvania and so does Price, I asked him to be part of my panel of experts who opined in the Philadelphia Inquirer on Sunday about the state of the economy and the job market. But there wasn't enough room for all their comments in the newspaper, so I'm finding more space in cyberspace, right here. You can read my Saturday Philadelphia Inquirer story about the most recent report from the U.S. Labor by clicking here.
Is this the new normal?
There is nothing normal about the current job market. The economy is clearly sick, but there are treatments for this illness. For one, elected officials in D.C., Trenton and Harrisburg could choose to invest in the foundations of a strong economy - things like education, workforce training and infrastructure. Instead, they are making deep cuts that are costing jobs and putting a further drag on the economy at a time when the private sector is weak.
What would encourage hiring?
What businesses really need are customers, but consumers strained by the lingering effects of household mortgage debt and high unemployment aren't buying. Meanwhile, deep cuts at the state and federal level are putting more people out of work, further reducing the number of customers in our economy.
Pennsylvania's state budget, for example, held $1 billion in unspent revenue in the bank while making deep cuts to education, health care and other services. This will accelerate the pace of the layoffs we have already started to see in local governments throughout the commonwealth and send Pennsylvania down a trail blazed by New Jersey which continues to underperform the nation in job growth. The more cuts we make, the more we shrink our economy.
To get more people back to work, the federal government should invest in infrastructure, state and local assistance, extended unemployment benefits and direct job creation in cities like Philadelphia and Camden. Then, after the economy recovers further, we can focus on addressing the long-term debt. Some may say this is not politically feasible, but our leaders were elected to be good stewards of our future and our economy. We need them to make responsible decisions that are rooted in economics, not political ideology.
Short of direct federal investments, what can be done to get more people hired? It would probably be easier to squeeze blood from a stone, but here are a few ideas.
As Massachusetts has started to do, the Commonwealth of Pennsylvania should bank at institutions that are not sitting on mountains of excess reserves, creating an incentive and moral pressure for more lending to small and medium sized businesses. Philadelphia has used a version of this strategy to increase lending in underserved neighborhoods.
Pennsylvania should start a "Marcellus Jobs for Pennsylvanians" program to match out-of-work construction workers in the commonwealth with openings in the drilling industry.
Pennsylvania should also use bond financing to create a "buy low construction" program. Given the state of the economy, construction prices are routinely coming in 20% below normal levels, while borrowing costs are below 3%. Future taxpayers are going to end up paying more for new schools, roads and bridges if we fail to take advantage of this once-in-a-generation opportunity.
The pressing need to increase energy efficiency both to address global warming and reduce reliance on fossil fuels could lend support for marrying limited public resources and private capital to scale up energy efficiency retrofits. To get such a program started, Pennsylvania could use some revenue from a drilling tax or fee to scale up investments in green infrastructure. Philadelphia is already trying with limited resources to move in this direction.
Our elected leaders should embrace policies that put working families first. Past generations helped us get where we are today by making the right decisions - to build schools, make college affordable, make communities safe, build up the middle class and create a functioning infrastructure. Abandoning these commitments now will undermine the economy and hold jobs back.
Tomorrow: Tara Weiner, managing partner of Deloitte in Philadelphia.
Here are the other panelists:
Wednesday: Cheryl Spaulding, co-founder of Joseph's People, a multi-church suburban network of support groups for the unemployed.
Thursday: Philip Kirschner, president of the New Jersey Business and Industry Association.