Editorial: Jobs plans won't create jobs

President Obama will detail his ideas Thursday night, and many Democrats are urging him to "go big" by offering a major stimulus measure that would have job creation displace the deficit as the No. 1 preoccupation in Washington. In so doing, the liberals argue, Obama should stop taking so much guff from the Tea Party movement and rekindle his fighting spirit.

Republicans, on the other hand, argue that Obama can't be the solution because he is the problem. They say his regulatory agenda — particularly his health care overhaul and the banking reform law — have killed what little interest companies have had in hiring people. On Tuesday, former Massachusetts governor Mitt Romney became the latest GOP presidential aspirant to offer his own jobs proposal, a 59-point plan centered on deregulation and low rates of taxation.

Which side is right?

The sobering reality is one you won't hear on the campaign trail: Presidents don't have magical powers. There isn't much that Obama — or a Republican successor, for that matter — can do in the short term to replace the 8 million jobs lost during the Great Recession.

Despite the unrealistic expectations fed by those who occupy the White House or want to move there, at best presidents can soften the blow while the world goes through a slow, painful, but necessary process of working through the debts piled up before the credit bubble burst, a process known as de-leveraging.

Presidents these days have limited resources and are fighting powerful economic headwinds. Spooked by economic uncertainty, consumers are cutting back on spending, and corporations are delaying hiring while they hoard their cash. Housing is weak, and the foreclosure backlog is far from being resolved. Europe is in the throes of a banking crisis, and once-booming Asian economies are slowing. Technology has made many jobs obsolete, and globalization means many low-skill jobs will be outsourced to low-cost labor markets.

If all that weren't enough, state and local governments are cutting back. Since May 2010, when aid to states from the 2009 stimulus package began to run out, more than 1 million government jobs have been eliminated. That has erased more than half of the 2million jobs created by private employers, leaving a net gain of just 959,000 jobs.

With the federal government already running trillion dollar deficits, new stimulus — either the spending favored by Democrats or tax cuts embraced by Republicans — simply adds to debt woes. So rather than offering more of the same gimmicky, poll-tested jobs proposals, both parties should focus on strengthening the economy for the long term.

One of the biggest restraints on the economy is rising health costs, both for private employers and the government. Washington alone is expected to spend some $5.8 trillion on health care in the next five years, $880 billion of which will be increases from this year's spending levels. Repealing "ObamaCare" would do little to change that trajectory and might even kill some useful programs aimed at controlling medical costs.

Excessive health care spending not only wreaks havoc on the budget, it also takes capital away from more productive areas. The U.S. health care system spends $6,567 per person a year — twice as much as Canada and Germany — yet still manages to leave 50million people uninsured.

Beyond reining in health spending, another proposal that would help the economy would be a vast simplification of the corporate and individual tax codes. Still another would be to put Social Security on a solid footing.

If Obama and any of his would-be successors are going to claim that they have a bold employment proposal, they need to tackle these long-term issues. If they don't, we suggest that people take these jobs packages, put them back in their wrappers and mark them return-to-sender.