How to Grow Jobs Without Growing the Deficit
Good news: economic activity is picking up. Not so good news: economic growth remains anemic and the pace of job creation too slow to make a meaningful dent in the unemployment rate. And there are potential external shocks - the fiscal crisis in Europe or an oil crisis in the Persian Gulf -- that could stall the modest recovery now underway.
What's really needed is a "grand bargain" - near-term stimulus focused on investments in infrastructure, R&D, and human capital, accompanied by a credible long term plan to reduce the federal deficit to sustainable levels. But, in the current political environment, the prospects for a deal are next to nil. What does seem likely - a further temporary extension of the payroll tax cut - is at best a palliative. So, can anything be done to stimulate job growth?
Yes. Here are seven policy initiatives, most of which have bipartisan support, that could catalyze job growth without raising taxes or adding to the deficit:
Recruit Foreign Talent and Entrepreneurial Capital. The U.S. lags behind other nations in attracting top professionals, investors, and entrepreneurs. We shoot ourselves in the foot with low limits on H1B visas for highly-skilled workers, with impractical country-quotas, and with cumbersome rules for immigrant entrepreneurs.
America educates the world's brightest students at our universities, but then insists that they return home. We should be granting permanent residence for graduates from accredited science and technology programs, providing strong incentives for foreign entrepreneurs to invest in America, and making it easier for highly-skilled workers to obtain visas. While it doesn't go far enough, the bipartisan Startup Visa Act of 2011 (S. 565), sponsored by Senators Kerry, Lugar and Udall, would be a step in the right direction.
Expand Free Trade Agreements. In a rare display of bipartisanship, Congress approved the Korean, Colombian, and Panamanian free trade agreements last year. The International Trade Commission estimates that the Korean agreement alone will create at least 250,000 jobs. But, progress on parallel initiatives has stalled. Congress needs to renew the "fast tracking" that requires trade agreements to be subject only to an up or down vote, push to complete the Trans-Pacific Partnership, kick-start US-EU talks, and pursue other significant multilateral agreements, notably a Free Trade Agreement of the Americas, to widen access to U.S. exports.
Promote Tourism. The cumbersome visitor visa application process largely explains why our share of the global tourism market has shrunk from 17% to 12% over the last decade. The average Chinese visitor to the U.S. spends approximately $7,000, but many never come because, on average, it takes 120 days to process their visas. According to the U.S. Chamber of Commerce, restoring our share of the market to previous levels would generate $860 billion in spending over the next decade and create a million new jobs. Streamlining the visa process and expanding the list of 36 countries qualifying for the Visa Waiver Program could help get us there.
Modernize Export Controls. Notwithstanding some liberalization, U.S. regulations still limit the export of some high-technology products that are legally available from other countries (including NATO members). While there is a need to balance national security with commercial interests, our policies often drives allies closer to competitors. For example, because India was historically denied access to top U.S. military technology, it developed close ties with Russia to gain access to comparable equipment. Milken Institute research indicates that further liberalization of export controls would increase GDP by $64 billion and yield 340,000 new jobs by 2019.
Create National Enterprise Zones. While states offer a variety of incentives to induce companies to build new plants, we lack a national strategy to attract foreign businesses. Washington should create national (or broad regional) enterprise zones that would encourage non-financial companies to build new production facilities in the U.S. by providing investment tax credits and accelerated depreciation of new equipment. Done properly, this would not reduce tax revenues since the incentives would build new facilities that don't currently exist.
Increase Capital Access for Start-ups. The financial crisis exacerbated existing capital-access problems for just the sort of enterprises that create jobs. This financing "valley of death" is due in part to outdated securities regulations that inhibit new methods of raising capital and deter sophisticated angel investors from deploying capital. Innovative financing approaches - for example, the Entrepreneur Access to Capital Act (H.R. 2930), which passed the House by an overwhelming bipartisan majority - could help streamline the process for getting growth capital to entreprenuers.
Revitalize the Housing Sector. The overhang of unsold houses - a quarter million foreclosures and estimates of two million more in the pipeline -- continues to depress home prices, curtail new construction, and depress spending on many durable goods. The sooner excess inventory is cleared and home prices stabilize, the sooner builders will return to the market, and the sooner consumers will resume spending. The expected initiative by the Obama Administration to package and sell foreclosed properties owned by the government could be a step in the right direction. Another would be to grant visitor visas to qualified immigrants who buy high-priced houses here, along the lines of legislation sponsored by Senators Schumer and Lee.
The grand bargain may be a bridge too far now. But moving forward on initiatives that don't require new taxes or spending would not only improve the jobs picture, it might also restore some confidence in government.