Duke economist: Cut taxes; UNC analyst: Firm up safety nets

By Monica Chen

mchen@heraldsun.com; 419-6636

DURHAM -- Local economic experts are hoping for disparate solutions to the nation's ongoing widespread downturn to emerge from President Barack Obama's jobs summit today.

The summit, officially called the "Forum on Jobs and Economic Growth," will draw leaders from public and private sectors to discuss how to create jobs for the nation's 15.7 million unemployed.

John Coleman, an economics professor at Duke University's Fuqua School of Business, said in a statement from the university that the government should recognize that it's the private sector that creates jobs and thus stimulate the economy by reducing taxes.

"The lack of response to recent government programs, such as the $787 billion stimulus package, suggests that the government can do little directly to 'create jobs,'" Coleman said. "Indeed, it can make things a whole lot worse by ballooning the already sky-high deficit."

Coleman said the government's role should be to provide long-term incentives to stimulate jobs creation in the private sector.

"There is no better way to do this than to reduce tax rates -- permanently," Coleman said.

John Quinterno, a policy analyst in Chapel Hill, said he believes the federal government should reinforce economic safety nets by extending unemployment benefits passed in the $787 billion stimulus package and provide additional relief to states struggling with their own dwindling funds.

"The economy is a lot weaker than people envisioned and that's one of the reasons unemployment remains at a high level. And the sources of demand in the economy, from what we've seen in the past in the third quarter, has been demand that's come from government spending," Quinterno said.

"When that starts to fade out, the question is -- Do we have any other sources of demand to take its place?" he added.

National experts recently announced that by most economic indicators, the recession widely considered the worst economic downturn since the Great Depression, likely ended during the summer.

In late October, the U.S. Bureau of Economic Analysis announced that gross domestic product increased by an estimated 3.5 percent in the third quarter, largely a result of productivity in the automobile industry, which added 1.66 percentage points.

Since then, however, that assessment has been revised as new figures showed the U.S. economy apparently grew at a slower pace in the third quarter than previously thought -- 2.8 percent instead of 3.5 percent, according to the Commerce Department.

Furthermore, the already double-digit, record-breaking unemployment figures are projected to continue to rise through the next year.

The national unemployment rate for October was 10.2 percent, the highest on record since April 1983. More than half a million people lost their jobs in October, according to the Bureau of Labor Statistics.

North Carolina's unemployment for October was 11 percent. Durham County posted an 8 percent unemployment rate, more than double the 3.8 percent rate of the pre-recession days of October 2007.

"During these difficult economic times, we have a responsibility to consider all good ideas to encourage and accelerate job creation in this country," Obama had said in the announcement of the forum.

The president plans to follow the forum with a Friday visit to Allentown, Pa., to kick off a "White House to Main Street Tour," where he plans to speak with workers on the recession and share ideas for recovery.