"Fix the Debt" is the well-financed bipartisan campaign that's led by the former co-chairs of the president's fiscal commission, Erskine Bowles and Alan Simpson. It's designed to convince elected officials to "step up to solve our nation's fiscal challenges." Fine. But solving those challenges would be a lot easier if we focused first on strengthening the economic recovery and fixing the jobs deficit.
The government reported this week that employers added only 148,000 jobs in September. That would be an adequate pace of job creation if employment were back to normal levels after the Great Recession, but it's not. As the chart shows, job creation since the depths of the recession has been about as fast as in the recovery from the much milder 2001 recession. But because the job losses in the Great Recession were so large, we're still in a jobs hole almost six years after the December 2007 start of that recession.
Private-sector employers have expanded their payrolls every month for 43 straight months, yet total private employment is still 1.3 million jobs short of where it was when the recession began. Contrary to popular perceptions of an ever-growing government, total government employment has shrunk by a half million jobs over the same period, leaving a total (public and private) deficit of 1.8 million jobs.
Meanwhile, the country's population has grown and, hence, so has the number of people who would normally be in the workforce – so merely getting back to where we were six years ago is not good enough. Unemployment, while still high at 7.2 percent, has fallen over the course of the recovery, but that decline overstates improvements in the labor market.
Not only did the recession cost many people their jobs, but lack of job opportunities has kept a rising number of potential jobseekers on the sidelines (and hence not counted in the official unemployment rate). As a result, the share of the population with a job, which plummeted in the recession, has barely budged even as the unemployment rate has fallen (see chart).
Restoring employment to normal levels in a reasonable period of time requires stronger economic growth and faster job creation. But since the economic boost from the 2009 Recovery Act peaked in 2010, fiscal (tax and spending) policy at the federal, state and local level has been marked by austerity measures (spending cuts and tax increases) that have hampered the recovery. Spending cuts have dominated at the federal level, largely in the form of cuts in discretionary (non-entitlement) spending.
There's nothing inherently wrong with the Fix the Debt message about the importance of addressing our longer-term fiscal challenges. In fact, my colleagues and I at the Center on Budget and Policy Priorities agree on the need to do so. It's dangerous, however, if "fixing" the debt is portrayed as so important that it overpowers the need to fix the jobs deficit. It's also dangerous if it feeds public misperceptions that deficits and debt are out of control today and need immediate attention, rather than challenging but manageable in the coming decades.
We don't have an immediate deficit or debt problem. The Congressional Budget Office projects that, "If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years" before it starts rising again. That means we have time to craft a sound longer-term budget deal while, in the meantime, we enact appropriate policies to boost the recovery and restore high levels of employment that entail temporarily higher budget deficits.
Too much deficit reduction, too soon, remains a threat to the recovery and job creation, and a weak economy is not conducive to forging a sustainable bipartisan deficit-reduction agreement. One important thing that helped President Clinton and Congress achieve balanced budgets and declining debt for four straight years starting in 1998 was a very strong economy.
The surge in revenues from strong economic growth put a balanced budget within reach. That gave policymakers an extra incentive to adhere to the deficit-control measures that were introduced in the 1990 budget agreement between Republican President George H.W. Bush and a Democratic Congress.
Reducing the jobs deficit is not incompatible with addressing our longer-term budget challenges. Indeed, it would help.
Chad Stone is chief economist at the Center on Budget and Policy Priorities.