Bill Clinton on How to Increase Jobs in US

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Bill Clinton made 4 proposals in a Time interview while he was at Davos. He said that we can no longer use fiscal policy to stimulate the economy because we can no longer fund our debt by internal borrowing. This means that our interest payments increasingly go to foreign investors. This seems like a strange argument because we have been able to borrow at very low long term interest rates from foreign investors to fund our debt. This is a reason to take advantage of inexpensive debt in the short-term and grow the economy along with the tax revenues that come with growth to pay the interest on the debt.

His second point is that we should follow Germany's lead and export more to emerging markets like China. Exports certainly would help to grow the economy but it would also help if we had BMW's and Mercedes and sophisticated manufacturing tools to sell to China. Outside of military products, agricultural products and financial services we don't have lots of stuff to export to emerging markets. Moreover, China is able to fund our debt because they have a trade surplus which provides them with dollars that they need to invest. Their trade surplus is partly due to our import of consumer products but it is also due to the outsourcing of production by US firms to China that are imported to the US for sale.

This third point is that we should take a leadership in climate change technology to fuel job growth in a growing market. This is what Obama would like to do but it is politically impossible with GOP opposition.

Lastly, we should encourage immigration of highly skilled workers into the US so that they can build the new businesses that we need to provide jobs. This seems like a strange argument to make because it assumes that we have a structural unemployment problem and not a cyclical unemployment problem. Many of our high tech start ups have been founded by international entrepreneurs but they have not created a large number of jobs. A lot of the work that gets done is outsourced in low-wage countries. If anything, we need to do more to develop the high tech entrepreneurs in our own country instead of depending on immigration. Moreover, most of the high tech immigrants compete with US engineers and do not start up new companies. This is one of the reasons why many of our technical graduates have found better opportunities on Wall Street developing quantitative trading tools and products and why engineering salaries have not grown in production environments.

Clinton does make one innovative suggestion but it seems rather strange as well. He argues that we should put payments that go into unemployment insurance into a trust fund instead of using them to pay unemployed workers. Employers could then use the trust fund to retain workers during a downturn instead of firing them. Obama has tried something similar by giving employers a tax credit for hiring new workers but that has not worked very well. Employers only hire labor when they can't keep up with demand.