Republican presidential candidate Mitt Romney announced his agenda for job creation Tuesday with a bold goal at its core: 11 million new jobs during the first four years of a Romney administration.
Speaking in Nevada, he laid out proposals including tax cuts, reduced regulation, and promoting exports through an emphasis on both expanded free trade (in a new “Reagan economic zone”) and a crackdown on China for alleged failures to abide by its existing trade commitments.
The goal of 11 million jobs is ambitious, and its fulfilment would represent a dream come true for millions of jobless Americans.
Is it realistic?
Some forecasters say that level of job creation is not outside the bounds of possibility, but that achieving it would require many things to go right with the economy.
Specifically, Romney sketched his vision that the economy would grow at 4 percent a year under his watch, if elected in 2012. That would be significantly faster growth than the 3.6 percent pace predicted recently by the Congressional Budget Office for the years 2013 to 2016 (essentially the years of the next presidential term). And many economists say that even 3.6 percent growth may be an optimistic forecast.
Periods with several years of 4-percent growth or better are not unheard of, however. The late 1990s, mid-1980s, and mid-1960s are examples.
In an analysis of the jobs potential of the U.S. economy, the McKinsey Global Institute laid out three scenarios for jobs in the decade ending in 2020. The research group identified an optimistic case (but plausible, in its view) in which some 22 million jobs would be created during the decade.
That pace is not too different from Romney’s goal, especially considering that in the optimistic scenario the middle years of the decade may represent a strong period as the economy begins to snap back.
But without the right policies to encourage business expansion, exports, and innovation, the U.S. may follow a low-growth path with less than half as many new jobs and “persistently high” unemployment, says the McKinsey report, titled “An economy that works.”
It also may depend on factors difficult for U.S. policymakers to control, such as the health of economies on other continents.
And within the U.S., a fundamental question is whether growth can return to something like a pre-recession path, or whether the overhang of challenges exposed by the financial crisis — especially the high debt loads of households and governments — make for a protracted period of sub-par economic performance.
Economic analysts at the Council on Foreign Relations, in a report this week, argue that the Congressional Budget Office appears to be basing its forecasts “on the belief that the United States should return to the trend growth it seemed to be following prior to the financial crisis.”
In economic jargon, the assumption is that there’s a temporary “output gap,” where a recession causes production to fall below its normal capacity. In the 1980s, the U.S. saw a growth spurt that essentially filled in such a gap with new activity as the economy recovered from recession.
But now, according to the council’s report, the U.S. has seen a shrinkage of both its labor force and its industrial capacity. That may mean that a rapid rebound in the economy won’t happen, as it did in the 1980s.
If Romney’s plan hinges partly on optimistic forecasting, his speech emphasized simple points of policy that on many fronts are similar to those of other Republian candidates.
The proposals include:
• Lowering tax rates for businesses and middle-class housholds. Romney said lowering corporate taxes will help lure firms to invest in the U.S., while eliminating capital-gains and dividend taxes for households earning less than $200,000 will encourage saving.
• Reducing government regulation, including a rollback on Obama’s health care law.
• Encouraging domestic energy production.
• Promoting U.S. exports.
Streamlining the federal government, so that rising national debt doesn’t hobble the nation’s potential growth.
“It’s a practical plan to get America back to work,” Romney said of his plan, which includes 59 specific proposals. “America should be a job machine.”