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Jobs are always being created and destroyed. Entrepreneurs start new businesses and hire workers and existing companies may grow and hire more people, shrink and fire people, or even go out of business. When we read headlines like “June Jobs Report: U.S. Adds 80,000 Jobs” it means that in June the total number of jobs created was 80,000 more than the total number of jobs lost. From 1980 to 1990, an average of 151,000 jobs per month were created in the United States as the population and economy grew. Between 1990 and 2001 the average increased to 178,000 jobs created per month. From 2001 to 2007 the average decreased to 68,000 jobs created per month. Then in December 2007, the “Great Recession,” a slowdown in economic activity not seen since the Great Depression, began. In 2008 and 2009 an average of 361,000 jobs were lost per month.
Another useful measure of the job market is the unemployment rate. This is calculated by counting the number of people who do not have a job but have looked for one in the last four weeks, then dividing that number plus the number of people with jobs (this sum is called the labor force). The labor force is not the same as the population. Since the 1980s the labor force has been about two-thirds of the population (about 64 percent in 1980, topping 67 percent in the late 1990s, and now back to about 64 percent). Unemployment tends to go up during recessions and down in expansions. Since the 1980s, across all groups, the unemployment number has ranged from about 4 percent to 10 percent. The 10 percent recorded in October 2009 was the highest number since the early 1980s. For African-Americans the unemployment high was 16.7 percent in March 2010 and August 2011, and for Hispanics it was 13.1 percent in both August 2009 and November 2010.
Employment is integral to everything from meeting the basic survival needs of a family (affording food and shelter) all the way to achieving the heights of self-expression, such as by feeling that one is contributing to society. For this reason, politicians are often judged by the quantity and quality jobs in the economy. Both campaigns tie an improved economy to more jobs and hence lower unemployment. The debate about the economy and which candidate has better economic policies depends on such questions as “Is the economy improving or getting worse?” and “What caused the economic collapse?” President Barack Obama cites 28 consecutive months of job growth totaling 4.4 million private-sector jobs as evidence that the economy is improving. Governor Mitt Romney cites 31 consecutive months of unemployment over 8 percent and an increase in long-term unemployment as a failure of the policies of President Obama.
Mr. Romney organizes his plan for jobs and the economy into seven categories: tax, regulation, trade, energy, labor, human capital, and spending. He argues that lower taxes will stimulate entrepreneurship, job creation, and investment. He also argues regulations are like a tax because there are costs for businesses to comply. Regulations also harm businesses by scaring them away from making investments or hiring workers. On the topic of trade, Mr. Romney, like Mr. Obama, thinks more is better, under the right conditions, and believes that Obama has not done enough to foster it. He believes increasing the size of the carbon-based energy economy in the United States can create jobs and that workers need retraining but that retraining should be done by collaborations between the government and private companies, not by the government. He also believes more highly skilled immigrants who have the potential to create businesses, and therefore employ people, should be admitted to the country. He wants a government that spends less, arguing that the current national debt has created uncertainty that prevents or delays investments that could create businesses and therefore jobs.
As an incumbent, Mr. Obama has made decisions and implemented policies that can be evaluated. He argues that the economy continues to struggle because the 2008 financial crisis and the recession that followed were worse than anyone initially thought. By signing the American Recovery and Reinvestment Act (ARRA, commonly known as the Stimulus Act) in 2009, he authorized $831 billion of spending on tax benefits, infrastructure investments, and entitlement programs (such as Medicare, which provides healthcare to the elderly). He argues that this spending — over $750 billion of which has been paid out so far — was necessary and helped prevent the Great Recession from becoming the Second Great Depression.
Like Mr. Romney, Mr. Obama believes low rates of taxation can stimulate the economy — the ARRA reduced taxes for small businesses and 95 percent of individuals. In 2001 and 2003 taxes were lowered in what has become known as the Bush tax cuts, which were to expire at the end of 2010. In December 2010 President Obama signed an act that extended these tax cuts and authorized money to be spent on unemployment insurance. President Obama has signed trade deals with South Korea, Columbia, and Panama, deals that will support an estimated 70,000 jobs. He used the power of the federal government to extend emergency loans to the auto industry, an action that saved the three major auto companies from bankruptcy. Mr. Obama believes a lack of regulation and weak enforcement led to the current financial crisis. As part of the Obama-supported Dodd–Frank Wall Street Reform and Consumer Protection Act, Congress formed the newly created Consumer Financial Protection Bureau. This bureau aims to prevent practices like mortgage lenders making home loans to people who they know either don’t understand or can’t afford the mortgage. This matters to the economy because these loans are grouped together and sold as safe investments (the idea being that even if a few people don’t pay, lenders will still get money from those that do). In 2008, when many home owners stopped paying their mortgages, the owners and the lenders couldn’t tell how much the homes were worth, so lenders stopped lending and both owners and lenders stopped spending, thus precipitating the recession and destroying jobs.
-This article was written by A.J. Carver and appears in full in The IDEA Guide to the 2012 U.S. Presidential Elections.