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Hagle: Congress has the purse strings

BY GUEST OPINION | OCTOBER 12, 2012 6:30 AM

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The unemployment rate for Americans 18-29 years old is nearly 12 percent. Given the increasing debt that students must incur for a college education, it’s no surprise that jobs is an important issue this election year. It’s also no surprise that both President Obama and Gov. Mitt Romney frequently talk about the issue. The question is, can presidents really do anything to improve job prospects for unemployed Americans? The answer is both yes and no.

In large measure, presidents are at the mercy of economic cycles. Factors outside their control can affect the overall economic situation during their presidencies. For the most part, a president’s policies will operate at the margin. This means that successful policies might get us out of a downturn a bit faster or extend a good economy a bit longer. Unsuccessful policies might make a bad economy worse or begin to slow an economic boom. 

In talking about jobs, one must note the difference between public- and private-sector jobs. Democrats tend to favor bigger government, which is why public-sector unions are an important part of the Democratic base. Republicans argue that expanding the size of government doesn’t help the economy because it’s still tax dollars that pay the salaries of new government workers. The Democrats’ counterargument is that putting money in the hands of public employees increases demand for products and gets the economy going. Democrats and Republicans disagree on whether spending of this type actually stimulates the economy. Either way, it’s certainly true that the size of government is something presidents actually have some control over.

In considering private sector jobs, the general view of Republicans is that it’s not the role of government to create jobs but rather to provide an environment in which businesses can prosper. Business owners argue that burdensome regulations, high taxes, and an uncertain business environment make it hard for them to plan ahead. As a result, many businesses are delaying expansion and hiring decisions.

Democrats, on the other hand, tend to believe that regulations are necessary to stop what they believe to be the excesses and abuses of businesses. This includes large profits made by big corporations, which they would like to tax at higher rates.

Regardless of their policies on jobs and the economy, presidents must work with Congress to pass legislation. This is particularly difficult right now given that the Republicans who control the House of Representatives firmly believe that raising taxes in a down economy is a terrible idea. Obama and the Democrats who control the Senate believe that raising taxes on the wealthy is necessary. Neither side seems willing to budge.

It’s not likely that control of either chamber will change after the November elections. If Obama is re-elected, he will need to find a way work with House Republicans. If Romney is elected, he might be able to make a fresh start with Congress and use his business experience to find a way forward that Senate Democrats will accept.

Regardless of who wins, it’s clear that the next president must find a bipartisan solution to improve the economy.

Associate Professor Timothy Hagle


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