A Democratic Response to Job Loss

George Bush is very vulnerable on the issue of jobs, but any Democratic candidate who wants to do more than just list statistics is going to have to offer a real alternative to Bush's fairly simple message of "make the tax cuts permanent". Accurate or not, it's too easy for Bush to label even a partial repeal of the tax cuts as a tax increase. So what can a Democratic candidate bring to the table when they're asked what they would do differently?

I think there are two good ideas that, when presented together, offer a realistic alternative to the Bush economic plan -- an alternative that would appeal to both the traditional Democratic base and any fiscally conservative swing voters

1. Balance any repeal of the tax cuts with new incentives for investment.

Bush's insistence that deficits in times of economic recession are necessary is, on the surface, hard to refute. Keynes said that much, and any Democrat who comes out against Keynesian economics is going to look fairly foolish. There are two ways for a government to run a deficit: increase spending relative to income, or decrease income relative to spending. But Bush has managed to take a third route by decreasing income while simultaneously increasing spending. This is where he is most vulnerable. All Bush can offer as alternatives to tax increases are more privatization and fewer benefits, neither of which are particularly appealing solutions to the lower and middle class.

The Democratic candidate needs to hit Bush where it hurts: right in the supply side. By reversing the tax cuts on the highest wage earners and simultaneously offering tax incentives on investment in, say, American jobs, the Federal government can both raise revenue and increase job growth simultaneously. Wesley Clark's plan to offer tax breaks to small businesses that hire new workers is spot on. We need to encourage businesses to reinvest, as opposed to simply giving them more money and hope they do the right thing with it.

2. Federally funded wage insurance.

I can't take credit for this idea. I found it here, on The American Street. Nevertheless, it's an idea that I can support wholeheartedly. One of the major difficulties in dealing with job loss during a time of recession is that most new jobs have lower wages than the jobs that are lost. Anyone who's been downsized is presented with the alternative of waiting as long as possible in the hopes that a job with a wage equivalent to their old one will come along, or taking a new job with a lower salary and adjusting their lifestyle accordingly. That lifestyle adjustment can be extremely painful and only hurts the economy further as families spend less.

Wage insurance can play a significant role in making up that difference. It allows families to weather hard times without having to make major sacrifices and, most importantly, encourages the unemployed to find work as quickly as possible. By offering incentives to keep the workforce strong while simultaneously maintaining income levels, the government helps keep demand for goods up, which is exactly what the government is supposed to be doing during an economic downturn.

Bush's insistence that supply side economics is the key to economic recovery is a major weak spot for him, but pointing that out simply isn't enough. The Democratic candidate needs to be able to offer a positive message. A strong economic plan that doesn't rely on reactionary protectionism is about as positive a message as they could send.

Posted by Palabris at February 28, 2004 01:46 PM