In the midst of a troubled labor market and national economic uncertainty, economists at Harvard have expressed mixed opinions about President Obama’s jobs proposal, which would offer a package of tax cuts and spending projects totaling $447 billion.
In a nationally-televised speech to Congress last Thursday night, Obama called upon lawmakers from both parties to “stop the political circus and actually do something to help the economy.”
Yet even among Harvard professors, there seems to be no clear consensus on whether the jobs bill is what the nation needs to revitalize an economy that saw no net job growth in the month of August.
In an interview on Friday, Economics Professor James H. Stock called the plan “a fundamentally sound proposal” and emphasized the need for Congress to pass the package in its entirety.
“Right now there’s tremendous uncertainty, and that has a substantial dampening effect on the economy. Increasing employment and output through proactive measures like this will decrease uncertainty and change people’s outlooks about economic performance,” Stock said.
Joining Stock in his support of the bill is Harvard Economist Lawrence F. Katz.
In a New York Times editorial published two days prior to Obama’s jobs speech, Katz outlined several federal measures he believed were necessary to reinvigorate the economy, including a payroll tax credit and increased federal spending in the hundreds of billions—two defining features of the plan which Obama ultimately offered.
“These initiatives could start us down the road to a sustained jobs recovery with more broadly shared prosperity,” Katz wrote in the editorial.
However, others Harvard economists have said they are significantly less pleased with the potential stimulus package.
Last Friday, Jeffrey A. Miron, the director of undergraduate studies for Economics and a noted libertarian, criticized the “centralized top-down” strategy of the jobs proposal.
Specifically, Miron disapproved of increased spending on infrastructure as well as the proposal to allocate federal money to states and cities to support the retention and rehiring of teachers.
In another New York Times editorial, published after Obama’s speech, Economics Professor Robert J. Barro called for austerity and long-term solutions, rather than short-term stimulus.
Barro criticized Obama’s plan to reduce payroll taxes, and said that such measures have transient effects and do not result in significant hiring increases, a view shared by Miron.
“I don’t think the cost of hiring more labor has been the main negative facing employers. They’re more concerned that they don’t expect to sell a lot,” Miron said.
Miron went on to say that Obama’s proposal on Thursday was part of the administration’s misguided approach to fixing the nation’s woes.
“The focus should not be on the unemployment rate, but making the economy more efficient, more productive, like eliminating existing bad policies,” he said, citing a need to improve the tax code and cut down on excessive regulation.
“Even more broadly, the economy is more likely to start growing again if the President and Congress are clearly sympathetic to capitalism, as opposed to being sympathetic to soaking the rich.”