September 17th, 2011
08:12 PM ET

Zakaria: We can't cut our way to more jobs

This Sunday at 8pET, there'll be a GPS primetime special on CNN – Restoring the American Dream: Getting Back to Work. I dig into the unemployment crisis and look at how to create more American jobs.  The other day I talked to John King about some of the key points I'll raise in the special. Here's the transcript:

John King: Let's get some perspective now from a man who has spent a lot of hours of late exploring the jobs question. His special, "Restoring The American Dream, Getting Back To Work" airs Sunday night at 8:00 p.m. here on CNN. I'm glad our colleague Fareed Zakaria can share some insights with us tonight. First I want to break this down into two parts, the debate here in Washington and the debate out there in what I'll call the real world.

Here in Washington you have the president's job package and the debate about that, then you have the super committee which is dealing with deficit reduction but a lot of the jobs package could end up being rolled into that. Listen to how the House speaker, John Boehner describes this:

John Boehner, Speaker of the House: Now, tax increases I think are off the table. And I don't think they're a viable option for the joint committee. It's a very simple equation. Tax increases destroy jobs. And the joint committee is a jobs committee....And when it comes to producing savings to reach the $1.5 trillion target, the joint select committee has really only one option - spending cuts and entitlement reform.

John King: Spending cuts and entitlement reform will get you deficit reduction, but do they get you jobs?

Fareed Zakaria: This has become the mantra in Washington that the only thing we need to do is to cut government spending. In the short run, just to be clear, this is just mathematical, the more you cut government spending the more you weaken the economy in the short term. What does it mean to cut government spending? It means you fire teachers. You fire policemen. You fire firefighters. The government stops spending money on various programs and bureaucracies.

Those people who are now not being employed by the government in some way or the other aren't going to go to their local diners. They aren't going to buy clothes. They aren't going to do all the kind of economic activity that used to stimulate demand.

In the long run, perhaps, a leaner, meaner government means that we become more competitive as a society, etc., although the argument that you know the only way to go here is cutting spending is also somewhat suspect because you're taxing at 15 percent of GDP. You're spending at 23 percent of GDP. That's a big gap.

I worry when I hear what John Boehner is saying that the Republicans have decided they're not going to make any compromises, in which case you're not going to get a deal out of the super committee. If the committee's Republicans stick with what John Boehner is saying, what is most likely to happen is that the axe will fall and you will have a sequestration. You will not have a compromise.

John King: And so that would be an example of this world, my world, Washington, not working or not working as well as it should. Out in the real world you mentioned Jeff Immelt. He's the CEO of General Electric. The president asked him to head up a jobs commission of his own to try to find ways to make America more competitive, to make America create more jobs. He looks at Washington from the CEO's perch and he has some complaints like everybody, but he sounded a tad optimistic.

Jeffrey Immelt, Chairman and CEO of GE: Education in this country is not going to be magically solved by cutting the budget deficit. In fact, it gets tougher. So I believe ultimately in our system. I just think we're in a particularly, you know, tough time right now because we're coming out of the crisis where people are still angry and that's understandable. I kind of get that. But ultimately, there's a sense of teamwork that's very much a part of the American culture. There's a sense of partnership that's very much a part of the American culture that I think will ultimately play out.

John King: Will ultimately play out. Where is this sense of teamwork and partnership in our politics? Where does he see it? Because I work here every day and I don't.

Fareed Zakaria: I think it's a hope, it's not a prediction. Look, the thing that he said, though, at the start of that clip, which I think is so important, is he talked about how you can't just cut the education budget and hope that that will create jobs - that it might have the opposite effect. The point is that we have to be practical about this. One of the things I tried to do in that special is say what are practical solutions to creating jobs, let's try to figure out the sensible, smart things the private sector can do and government can do.

You know, for example, when foreigners come here they spend a lot of money. It creates a lot of jobs. Why not have more foreigners come here? We make it so hard for people to come and visit this country as tourists. Every other country's rolling out the red carpet for tourists. So if we approach things that way and say, "It's partly government's responsibility, partly the private sector, some taxes need to be reduced, others could be raised," rather than get into this kind of theological debate about the meaning of government and you know all tax increases always destroy jobs.

Well, you know, Germany has pretty high taxes and a pretty strong regulatory system. Germany is experiencing the lowest unemployment rate it's had in 20 years. Why? Well, because they invest. You've got to invest in growth. You can't just cut your way to a new generation of economic growth.

John King: Did your reporting solve or answer what I'll call the chicken and egg question here in Washington. What came first, the chicken or the egg, and that is that you have the president and others saying corporate America could sure help. They're sitting on billions of dollars in cash, if they would spend it investing in new factories, investing in new jobs, they sure could help. You talk to some CEOs and they say, "Well, we want Washington to help first." There's uncertainty in the tax climate, uncertainty in the regulatory environment, Republicans specifically blame the health care bill and the Dodd-Frank financial bill. Where did the CEOs you talked to come down on that question?

Fareed Zakaria: Well, Jeff Immelt among others came out very clearly on this issue. The reason corporate America is not investing is a lack of demand. In other words, if you had lots of people demanding your products, the fact that Barack Obama wasn't making nice speeches about you wouldn't stop you from building a new factory. Now I think that hits the president too.

The president's jobs plan has a lot of payroll tax cuts and little gimmicks that will supposedly make corporations invest and hire. I don't think they will because ultimately there isn't right now much demand. Consumers are paying down debt. They're not spending money. The one area where it is absolutely clear you could generate lots of jobs is infrastructure, because that is something not dependent on consumer demand.

The government could just go out there. Cheapest interest rates in American history, borrow the money at two percent, build bridges, modernize highways, put in smart grids, do all the things that will pave the way for another generation or two of economic growth. That's the biggest low-hanging fruit we have to create jobs in the economy.

John King: It is the most immediate challenge for the country right now. Fareed Zakaria's special "Restoring The American Dream, Getting Back To Work" Sunday night at 8:00 p.m. right here on CNN - important reporting.

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Topics: From Fareed • Jobs

soundoff (26 Responses)

    Lucky goD< got 25% criminal charge. The Police department is not like telemarketing or Pizza-Pizza order.

    September 17, 2011 at 9:52 pm | Reply
    • GE should pay taxes

      GE had never paid taxes close to the rate of any individual American?

      September 18, 2011 at 6:48 pm | Reply
  2. Grant

    Fareed – Since many many members of the Republican Party and Tea Party seem to assert that they are true Christians I wonder how many truly understand and subscribe to the teachings of Jesus Christ the Bible and their church leaders as it relates to our economy and distribution of income and wealth among all people. A question for the Republicans...would Jesus approve of the US form of capitalism since the late 1960's which has eroded the middle class and led to increase poverty. I think it would be interesting to have religious leaders debate political leaders about the state of our economy and the exponential growth in income and wealth disparity in America.

    September 17, 2011 at 10:12 pm | Reply
    • fazsha

      Better yet, maybe we can get Jesus Christ on an economic panel so that Obama can ignore him like he ignored Volcker. If JC was an economist, he'd be an Austrian School economist. Why?

      Matthew 20:15: "Is it not lawful for me to do what I will with mine own?"

      September 18, 2011 at 3:08 am | Reply
      • ote

        What make you think Jesus Christ is not on the panel?

        September 18, 2011 at 12:29 pm |
      • Grant

        Great, another person who is selective and narrow minded. You need to follow all of Jesus's teachings and not just those that suit your needs. Jesus certainly did not promote a "Me" society and certainly encourage those who have the most to give to those who have the least.

        September 18, 2011 at 9:23 pm |
      • thatdude

        Come on man Jesus will tell you to help yourself.

        January 12, 2012 at 12:31 am |
    • j. von hettlingen

      Come on Grant, it has nothing to do with good Christian values! It's all about brinkmanship! They want to get rid of the Obama-Administration with their anti-tax-increase mantra. They would have the common sense to increase tax themselves, once they gained power. Otherwise where would money come from to finance their "lean budget"?

      September 18, 2011 at 6:14 am | Reply
      • Grant

        Of course it is brinkmanship. I simply want to point out the hypocrisy of the conservative faith-based Republicans. I also think it is not so much Obama's views that the Republicans hold against him but rather it is his name that inferred he was a Muslim and the color of his skin.

        September 18, 2011 at 9:31 pm |
    • USA

      America is now "Too Many Cooks Spoil the Broth", when broth get bad, the blame game start.
      Well....two more years to go, "professional" will take their turn in the musical chair while America going down the drain.

      Maybe the only way to safe America is for all president candidates swear to perform “Harakiri” or death by electric chair if they do not delivered what they promise.

      September 18, 2011 at 12:49 pm | Reply
  3. Ron

    I don't ever remember seeing firemen and teachers on the Federal payroll. When the Feds give money to the States, they move other money around to pay for other things....the status quo continues. Yes, the Feds need to cut and it will be painful but the individual states need to pick up the bill. At some point you can't pay for everything. We're at near 100% debt to GDP with no promise of economic growth. At least post WWII when we had massive debt, we also commanded almost 50% of the world's GDP and expected rapid growth.

    September 17, 2011 at 11:52 pm | Reply
  4. Josh King

    Clearly Fareed, you should have told them the truth!

    They all should come to India for jobs, just like the young Steve Jobs did for his self-discovery of his inner being before he had produced the slew of gadgets in Apple.

    September 18, 2011 at 12:12 am | Reply
  5. fornetta

    i love fareed and his programs.

    he only discussed REAL issues and what affects us .

    hats off to you man.

    keep up the great job.


    September 18, 2011 at 3:12 am | Reply
  6. Kip

    Loved the interview with Jeff Immelt, but glossed over the problem between us and China. China gathers the funds, plans the risk for growth, and then backs it up. In the U.S., we don't want the Government in the plan for growth but leave that to our corporations (which I totally believe is the right way). Here, corporations will only take the risks for new opportunities if they have backing from the Government (read: taxpayers). So, as an investor, why would I invest when I'm spending my money and risk twice? I would invest more if I saw our corporations taking these risks and finding new growth (even slow but economically viable and responsible). Otherwise, I'll continue to pay my taxes and "hope" for job growth to support corporations who won't take the risks on their own. We lost our business muscle when we became too risk averse because of too many stockholders who only will invest as long as they make money. Those aren't the terms of the game.

    September 18, 2011 at 10:30 am | Reply
  7. Briansz

    Fareed, I cannot believe you would interview a shameless dead eyed hypocrite like the General Electric chairman. This character, has no human morals other than serving the bottom line and greedy shareholders like himself. He has no intention of creating well paying jobs in Amerika other than look after GE's and his own greedy interests. After all, he is part of the greedy CEOs that lined their pockets with bonuses and large pensions and salaries after restructuring American workers out of a job and then exporting these well paying American jobs into the third world cheap labor jobs. Are we to pretend that these people are honorable men? Why is this hypocrite on Obama's job comitee? It's like putting the fox in charge of a henhouse. Everyone knows the nature of foxes and the fact that they will be having great chicken dinners until the supply lasts. No wonder America is in trouble and bordering on going broke as a nation while these traitors sell Amerika by the pound. Robert Reich is right, these big business corporatists and their crony friends do not intend to create jobs nor bring back the jobs they exported. First, they have to start paying their taxes which will create these job with or without them. Enough with the one track mind (La pensée unique coined by Ignacio Ramonet) economic system and it's religious myths of an invisible hand that guides the market in an insane belief of exponential profits on a finite planet. The whole scam is a total paternalistic BS. They will continue doing business as usual in the third world, making excuses just like they did to get their hands on bail out money that also disappeared in the black hole of their tax havens. Sorry, Fareed but I will not be part of the comfortable apologists that waste our precious time with these all talk no walk hypocrites and their insane business as usual diatribe. No wonder Amerika, still waiting for democracy to arrive, is probably going to end up bankrupt while these fortunate sons will still be making excuses and heehawing economic BS to who ever wants to listen to their economic myths of monetary scarcity affecting only the middle class while they and their apologists laugh all the way to their tax havens. When we see these characters go bankrupt or start jumping from their office windows, then we will be able to reset our economy that respects everybodies needs for a decent living. Fareed, until then don't waste our precious time with these interviews.

    September 18, 2011 at 2:00 pm | Reply
  8. Anup Desai (Vallejo, CA)

    Currency devaluation proved effective in ending the Great Depression. Why not now? Do we need to keep propping up the dollar?

    September 18, 2011 at 4:08 pm | Reply
  9. Ravi

    Reducing the work hours by 10% for people above a certain pay and employing 10% additional workforce should address the job growth to an extent. The tax incentives for hiring additional workforce should address some of the increase in costs for corporations. Rather than tax dollars going to the jobless, we will now have 10% more people paying taxes. As the economy turns around, the work hours can be restored....

    September 18, 2011 at 8:15 pm | Reply
  10. Byron

    The GE CEO was very quick to change the subject on out sourcing jobs. Why what to create those 15000 jobs in the US next year? And listen closely to what he said. Create jobs where in makes sense in the US

    September 18, 2011 at 8:21 pm | Reply
  11. Grant

    Fareed – Great show you presented tonight! Now how about a show on how to get our government to begin working for America and its citizens rahter than party self-interest, lobbyist interests and special interests? If you can present a program that presents a pathway for both Democrats and Republicans to work together in a collaborative manner to address and solve America's short-term and long-term socio-economic issues then you would be an American hero!!!

    September 18, 2011 at 9:40 pm | Reply
  12. rashid

    as the basics of the current economic situation is overlooked and politics takes prime stage . You make/suggest very good options of creating jobs but Washington will not listen . Maybe the Republicans should be given a chance . I will predict America will further decline

    September 18, 2011 at 10:16 pm | Reply
  13. Salam Mahaba

    The $ 4000 will make the Hotel man happy, but the immigration will end spending more than $ 4000 chasing and deporting the person with the tourist Visa. Making cars will get you $4000 free income

    September 19, 2011 at 12:10 am | Reply
  14. afrommi

    And if you can see, what that creates is more low wages jobs here in the US. Americans have always been good consumers of their own products. The quality of our products started going bad when foreigners started working for less money and companies wanted to save of materials. I remember when 80% of the steel industry left the US with the help of the government. There was such unemployment in industries that used steel. In the 70s there was such recession that it was the first time in my lifetime I saw homeless people. We have to start getting tough with corporations that want to invest tax payer's money over seas and not give anything back. The do not even pay taxes and yet get a refund because they pay tariffs over seas. And the jobs in hotels are not good paying jobs. Most of those who work as housekeepers still get food stamps. They are under the poverty line.

    September 19, 2011 at 2:29 am | Reply
  15. Ray

    We as a country claim that there is this shortage of jobs. All the while our government approves the building of U.S. Naval Warship to be built by foreign company"s ie: Astal. This is only one of thousands of examples how our government has sold the American People down the river.

    September 19, 2011 at 12:02 pm | Reply

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