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Job creation divides Dems, GOP

A worker guides a steel beam into place at the Love Field modernization project construction site Thursday in Dallas. Democrats and Republicans alike agree jobs will heal America's economy, but how to create them is another story. (AP Photo by LM Otero)

By Tom Raum
Associated Press

Washington — America’s sickly economy can be healed with jobs, jobs and more jobs. On that, everyone agrees. Figuring out how to produce them is what’s stumping everyone.

Other than letting time take its course, Washington lacks a clear answer on how to create permanent new jobs on a national scale. Forecasters suggest it will take 20 million new jobs over the next 10 years just to repair recession damage and to keep pace with adult population growth.

Recent streams of bleak employment and economic data drive home the difficulty of the challenge.

As President Barack Obama prepares to tackle jobs issues in a speech to Congress at 7 p.m. Thursday, deep divisions persist among economic policymakers on just how to spur job growth. The speech comes as national polls show a clear majority of those surveyed say they disapprove of the way Obama is handling the economy.

Lots of schemes have been tried or floated — first under Republican President George W. Bush and now under Democrat Obama. More than $2 trillion has been plowed into stimulus spending, loans and bailouts to banks, auto companies and other corporations, tax cuts for individuals and businesses, mortgage refinancing assistance and aid to state and local governments.

President Barack Obama walks on the South Lawn of the White House in Washington on Labor Day. Obama will tackle jobs issues in a speech to Congress at 7 p.m. Thursday. (AP Photo/Charles Dharapak)

But so far, the needle barely has moved on unemployment, which has stayed near or above a frightening recession-level 9 percent for 29 months. It was 9.1 percent in August, same as the month before, with zero net job gains during the month.

“Neither side can make a definitive case that they really know what they’re doing,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and top economic adviser to 2008 GOP presidential nominee Sen. John McCain.

Holtz-Eakin said that while different theories abound, economists have yet to satisfactorily explain business cycles, predict the duration of recessions or explain why some nations’ economies grow while others do not. “It’s complicated by the fact that we don’t live in a textbook world and that, in fact, the government’s capacity to do stuff is not infinitely wide.”

Obama favors a mix of new short-term deficit spending on tax breaks and jobs programs, including ones for roads, bridges and other infrastructure, to keep the economy from falling into a recession, combined with longer-term steps to trim ballooning deficits.

The need for infrastructure jobs is one of the few areas where there’s anything approaching consensus. The concept has won the support not only of Obama, but such rival groups as the U.S. Chamber of Commerce and the AFL-CIO. The differences come in how to pay for it.

The administration is running out of ammunition to invigorate the economy before the November 2012 presidential election, especially with a Congress that seems geared to block any Obama measures that increase government spending. The Federal Reserve also has few options left, having kept interest rates at near zero for more than two years.

Republicans, who now control the House, overwhelmingly oppose further stimulus measures and are emphasizing deep spending cuts and eliminating regulations they claim discourage business expansion and job creation.

On Obama’s left, liberal Democrats are clamoring for even more anti-recessionary spending than he has supported, saying measures enacted thus far have fallen short, given the magnitude of the downturn.

Citing unexpected weaknesses in the economy, White House forecasters a few days ago said unemployment would persist around 9 percent well into the 2012 election season, revising their contention as recently as June that it would drop to about 8.3 percent next year.

Getting back to pre-recession jobless rates of below 5 percent — last seen in 2007 — might be a thing of the past.

“I think we’ll get down to 5.5 to 6 percent unemployment and that will be the ‘new normal,'” said economist Mark Zandi of Moody’s Analytics.

But Zandi said it also “depends on policymakers getting it roughly right.”

It’s the getting it right part that’s such a tall order.

Read more on the jobs picture

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