Jobs: Comparing the Obama and Romney Plans

By Toni Vranjes

October 26, 2012

During political campaigns, candidates promise the world. If you just vote for this person, we’re told, all the country’s problems will be solved, and sunny days will be here again.

After the election is over, though, reality eventually sets in.

In this year’s presidential race, both candidates insist that they know how to improve the economy. Both President Barack Obama and Mitt Romney say their plan will create jobs and help the unemployed.

While there are many differences between the plans, and the nation is very divided over these approaches, there are also similarities in certain areas. That might come as a surprise, because candidates typically emphasize differences and gloss over similarities. Despite the heated campaign rhetoric, the differences between the two aren’t as huge as many people think.

“They’re not as far apart as is often portrayed,” Moody’s Analytics economist Brian Kessler said in an interview.

To get a better sense of just where they agree and where they differ, here’s a look at their policy positions.

Obama’s Jobs Record

Not surprisingly, the two candidates have sharply different assessments of Obama’s track record on jobs.

The nation’s unemployment rate in September was 7.8 percent – the same level as when Obama took office in January 2009. But Romney says that the jobless rate would be about 11 percent, if it took into account all the people who have left the labor force since Obama became president. Romney claims that Obama’s policies, such as his healthcare-reform law, are stifling job creation.

In defense of his policies, Obama says his 2009 stimulus law saved the economy from collapse. The president also says the economy is making gradual, steady progress. He touts the private-sector job growth that has occurred in recent years, although he adds there’s still a lot of work to do.

Obama highlights the 5 million jobs that the private sector has created during the last 30 months. While that is true, the president is starting the count more than a year after he took office, excluding job losses from his first year, according to PolitiFact.

The president also has criticized House Republicans, saying they have hurt job creation by obstructing his proposals.

Last year, Obama unveiled a new jobs plan, called the “American Jobs Act.” As noted in an NPR story, Congress approved two parts of the bill: a one-year extension of the payroll tax holiday, and an extension of unemployment benefits. But Congress refused to pass other parts of the bill, such as more spending on infrastructure, tax incentives for companies that hire new workers, aid to state and local governments, and a school-rebuilding program.

Spurring Job Creation

President Barack Obama emphasizes the need for government spending to spur job creation.

Obama’s approach: Obama emphasizes the need for federal spending to boost employment. One of his priorities is government spending on infrastructure, such as roads and bridges. In the NPR report, Joel Prakken of Macroeconomic Advisers said it makes sense to spend the money now, when interest rates are low — and the government’s borrowing costs would also be low. He also cited the potential for boosting construction employment.

However, Prakken is less enthusiastic about other elements of the American Jobs Act.

“The other parts of that plan, having to do with job-training programs and special incentives to hire certain types of people — to be honest, they’re something of a mixed bag,” he told NPR. “It’s not clear that they would have very large effects.”

Obama’s second-term agenda (PDF file) also includes the creation of 1 million manufacturing jobs nationwide. He says he can achieve this goal by taking several steps, such as reducing corporate tax rates, giving tax incentives to create jobs in the United States instead of overseas, challenging China’s controversial trade practices, and improving job-training programs.

Another key goal is recruiting 100,000 math and science teachers. Hiring them would improve the education system, which would in turn lead to a better-trained workforce, he says.

On tax policy, Obama wants to let Bush tax cuts for high-income taxpayers expire. This would affect individuals who earn more than $200,000, and couples who make more than $250,000.

Obama wants to extend the Bush tax cuts for those who make less than that amount.

In addition, both candidates want to reduce the top corporate tax rate, although Obama’s plan calls for a smaller reduction. The president wants to reduce it from 35 percent to 28 percent.

On energy, Obama advocates an approach that balances fossil fuels with renewable energy, such as solar and wind power. He has been an enthusiastic supporter of “green jobs,” but his opponents say that the promise of those jobs has been overhyped.

Another prominent campaign issue has been trade relations with China. A major concern is that China’s undervalued currency is hurting employment in the United States, and Obama has been highlighting his efforts to solve the problem. But Romney says Obama hasn’t been tough enough, and they continue to clash over their different strategies for dealing with China.

Despite the clashes over China, their trade agendas actually have many similarities.

Obama also differs with Romney about how to reduce federal deficits — although analysts have criticized both plans.

Meanwhile, the impact of “ObamaCare” on job creation is still being debated. While the National Federation of Independent Business insists that the healthcare-reform law is a job killer, some argue just the opposite.

ObamaCare could cut both ways, according to Kessler. Although the law potentially could discourage hiring at some companies, it might encourage other employers to hire because of the subsidies they’ll receive for offering health insurance.

Republican presidential candidate Mitt Romney says that cutting taxes and red tape will create jobs.

Romney’s approach: Romney focuses on cutting taxes, reducing regulations, and improving government efficiency.

Romney vows that his plan would create 12 million jobs in his first term, including:

  • 3 million jobs stemming from his energy policy, which emphasizes fossil fuels
  • 7 million new jobs arising from his tax-reform proposals
  • 2 million jobs stemming from trade policies, tough measures on China, and job-training programs

For Romney, a key goal is extending the Bush tax cuts for everyone. He blasts Obama’s proposal to let tax cuts for the wealthy expire, insisting that the move would hurt small businesses that file their tax returns as individuals. However, Kessler notes that only about 3 percent of small businesses would be affected by Obama’s plan. Although Romney claims that raising taxes on these small businesses would lead to much less hiring, Kessler isn’t convinced by Romney’s argument.

Romney not only wants to extend all the Bush tax cuts, he also wants an additional 20 percent reduction in individual tax rates. All of Romney’s tax proposals would cost an estimated $5 trillion, but he says that would be offset by limiting deductions, exemptions and credits for high-income taxpayers. However, Obama says the math for Romney’s tax plan doesn’t add up.

In an NPR story, Prakken said it would be difficult for Romney’s plan to work without ending some popular deductions, like the mortgage-interest deduction.

On corporate taxes, Romney wants to slash the top rate from 35 percent to 25 percent.

With all of the gridlock in Washington, however, there are doubts about whether any major proposals could pass Congress in coming years. Regardless of who wins the election, the economy is expected to add nearly 12 million jobs over the next four years, Kessler says.

Help for the Unemployed

Obama’s approach: In recent years, Obama has repeatedly urged Congress to extend unemployment benefits. Another challenge is coming at the end of the year, when federal emergency unemployment benefits are set to expire. But neither campaign has been talking a lot about this issue recently, and Obama’s current position on extending jobless benefits is unclear, Kessler says.

On the issue of job training, the two campaigns have some similarities. Both candidates want the states to have flexibility to design programs that best suit their needs.

For instance, the Obama Administration has granted several states waivers to provide flexibility in meeting the work requirements of the 1996 welfare-reform law. But Obama’s flexible approach actually backfired as a campaign issue, Kessler noted. Romney has blasted Obama for granting the waivers, saying that the president weakened welfare work requirements. A Romney ad claimed that, “Under Obama’s plan, you wouldn’t have to work and wouldn’t have to train for a job. They just send you your welfare check.” However, fact-checkers have concluded that Romney’s claims are false.

Although both candidates favor giving states flexibility, they differ on funding for job-training programs. Obama calls for more government spending to improve job-training programs. By contrast, Romney’s priority is to streamline the system for greater efficiency.

Meanwhile, the Obama Administration is providing grants to community colleges nationwide to train students for in-demand jobs. The program includes partnerships with local employers.

Obama also supports programs, such as “Georgia Works,” that allow the jobless to keep receiving unemployment benefits during on-the-job training at companies. As part of his American Jobs Act, Obama proposed job-training programs modeled on “Georgia Works.”

Romney’s approach: Romney has indicated that the current system of unemployment insurance needs to be reformed.

In a 2011 debate, Romney said that he wouldn’t support extending jobless benefits. Instead, he backs a system of private accounts, known as “personal re-employment accounts.” The unemployed could use the money from these accounts to help them during the search for a new job. For instance, they could decide whether to spend the money on career training or living expenses. The jobless would decide how to use the funds, so it would offer more flexibility than the current system. However, there are challenges, as well as opportunities, associated with Romney’s ideas.

On the issue of job training, Romney says the system must be streamlined, citing a 2011 study by the nonpartisan Government Accountability Office. The study found duplication and overlap among dozens of federal employment and training programs. By reducing the overlap and increasing efficiency, the government could improve the system and spend less money on these programs, according to Romney.

Romney’s goal is to cap federal spending at 20 percent of gross domestic product, Kessler notes. That would mean major cuts to non-defense discretionary spending in many areas, including job training.

Under Romney’s plan, the federal government would give block grants to states so they could develop their own job-training programs. The goal is to provide local control, with oversight by the federal government.

In addition, Romney’s job-training plan encourages participation from the private sector. Personal re-employment accounts would facilitate programs that place people directly into companies that provide on-the-job training, he says. Retraining funds would be given to companies as incentives to hire and train new workers. Companies would earn the funds only upon “retraining and retaining an individual for a sufficient period of time,” according to the Romney plan.

Like Obama, Romney has praised “Georgia Works,” the program that allows the jobless to collect unemployment benefits during on-the-job training at businesses.

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