What else can the government do?

With the federales quick to bail out the banks – and maybe the Big 3 – it’s only natural to wonder if the fine folks in Washington will bail out the jobless. Don’t hold your breath. Short of extending unemployment benefits (which they’ve already done), legislators can’t to do much to ease the direct pain of being unemployed.

But they can do something. President-elect Barack Obama proposed last week to invest $150 billion in technology development and job creation over the next decade. And there are more immediate things the government can do to increase demand – which increases jobs – sooner.

“What the government must do to have a positive impact is ‘shock’ demand,” explains Ed van Wesep, assistant professor of finance at the UNC Kenan-Flagler Business School.

One way to do that is through infrastructure projects, as proposed by former Secretary of Labor Robert Reich and the president-elect, who last week announced a massive $25 million road and school-repair program.

“This is a good time to invest, given the state of the construction industry,” Van Wesep says, but a program like this “usually takes a while to clear the bureaucracy and, once it does, it’s too late.”
A faster solution, he says, is to provide cash directly to those who will spend it, like state governments and less-wealthy individuals. That could come in the form of tax cuts and rebates.

Though the Obama-Biden campaign promised middle-class tax cuts and the quick repeal of President George W. Bush’s tax cuts for the wealthy, no firm plans for putting cash in the hands of those who need it most have been announced. Stay tuned. — Margot C. Lester