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Debt Ceiling Decision Could Hamper Job Growth

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Debt Ceiling Decision Could Hamper Job Growth


Debt Ceiling Decision Could Hamper Job Growth

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Every day spent bickering about the debt ceiling is a day lawmakers are not tackling other problems. Some see the current debate as a distraction from the serious problem of unemployment. For others, slashing government spending is the first step towards a better economy. As NPR's Scott Horsley found, a deficit reduction deal could actually make the jobs picture worse.

SCOTT HORSLEY: With unemployment at 9.2 percent, there's no shortage of remedies the government could try. As President Obama told a Latino civil rights group yesterday, he'd like to extend the payroll tax cut to put more money in circulation, ink new trade deals to boost U.S. exports, and put idle construction crews to work rebuilding roads, schools and bridges.

BARACK OBAMA: My number one priority every single day is to figure out how we can get businesses to hire and create jobs with decent wages.

HORSLEY: But Mr. Obama can't do any of that right now. As he bluntly told a group of mayors on a conference call recently, until the debt ceiling debate is resolved, any steps to encourage job growth are on hold.

SLY JAMES: He shared with us that until we get beyond this current acrimonious conversation that we are going to find it difficult on the federal level to focus on anything but that conversation.

HORSLEY: Kansas City, Missouri, Mayor Sly James is one of a bipartisan group of mayors who met with the president last month to talk about steps the government could take to encourage job growth. The mayors are still talking amongst themselves. But James says Washington now seems preoccupied with a different conversation.

JAMES: While Washington seems to be focused on the issues of debt ceilings and reducing the deficit, the folks that we as mayors meet every day will walk up to us and ask, where do I find a job?

HORSLEY: Pennsylvania Senator Bob Casey hears the same frustration from his constituents.

BOB CASEY: We've got to get off this subject. People are disgusted. And they have good reason to be disgusted. And one of the implicit messages they're sending is you're not dealing with what is bothering me the most. You're not dealing with job creation.

HORSLEY: Casey spoke this morning at a breakfast sponsored by the website Politico. The topic was supposed to be jobs of the future, but the conversation was dominated by the debt ceiling debate instead. Former White House economist Jared Bernstein complained that as serious as the budget deficit may be, the jobs deficit is a more urgent problem.

JARED BERNSTEIN: It's an extremely unfortunate time to be obsessed with a completely manufactured crisis - the debt ceiling debate - and a discussion which is leading us to more austere measures which, if anything, will lead to economic contraction and fewer jobs.

HORSLEY: Indeed, cutbacks in government spending, especially at the state and local level, have already cost more than half-a-million jobs since President Obama took office. Economist Nariman Behrevesh of IHS Global Insight says if deficit reduction is done the wrong way - with too much cutting, too quickly - it could throw more people out of work and weaken the economy further.

NARIMAN BEHREVESH: Already the government sector is a net drag in terms of employment on the economy and the worry, of course, is that that would increase quite substantially if we were to start slashing spending right away.

HORSLEY: That's not to say the government doesn't need to get control of its deficits. But Behrevesh says deep cuts can wait, at least until 2013, when it's hoped the economy will be stronger. Even then, most forecasters think the unemployment rate will still be painfully high. Scott Horsley, NPR News, Washington.

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