Does foreign investment really create jobs?

Marketplace Staff Oct 11, 2011
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Does foreign investment really create jobs?

Marketplace Staff Oct 11, 2011
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Steve Chiotakis: President Obama heads to Pittsburgh today to pitch his jobs plan. He’ll talk to the electrical workers’ union in Steel City, and he’ll join his presidential jobs council in calling for a trillion dollars more of overseas investment coming into the U.S. over the next 5 years.

Gus Faucher is director of macroeconomics at Moody’s Analytics, and he’s with us now. Morning, Gus.

Gus Faucher: Good morning.

Chiotakis: When it comes to creating jobs — I mean, is the plan of trying to attract foreign direct investment — is that a good start, do you think?

Faucher: It’s a start. I think foreign direct investment is better for long run job growth. It takes a long time for international firms to make business decisions. And so if we attract more foreign capital into the U.S., that will boost job growth over the longer run, but it isn’t going to do much for the short run jobs picture.

Chiotakis: What about changes to tax policy — is that going to help?

Faucher: There are changes to the tax code that could help. For example, I think the president’s call for extending the Social Security payroll tax cut and actually expanding it for 2012 — I think that would be a smart move. That would put more money into consumers pockets.

He’s talked about changes on the employer’s side as well, and that could help boost hiring. So I think in the short run, those types of changes are more effective in boosting job gains.

Chiotakis: What about things outside of government action?

Faucher: Well I think right now the big hold up is business confidence. Businesses are hiring — we saw that in the September jobs numbers, which were OK, but not great. But businesses are anxious right now, and until they’re convinced that the recovery is going to continue and is going to solidify, I think they’re going to be reluctant to hire.

Chiotakis: Gus Faucher with Moody’s Analytics. Gus, thank you so much.

Faucher: Thank you.

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