Jobs crisis: most economists agree states can do a few things, though not a lot, to help create jobs.

• Author: Jacobson, Louis
• Position: ECONOMY

Everyone who's been paying attention to national politics knows how polarized the fight over job creation has become.

Last fall, President Obama and congressional Republicans continued to slug it out over who has the best vision for the economy.

The president proposed the American Jobs Act--a mix of targeted tax cuts, funds to keep state and local workers on the payroll and to build infrastructure projects, and an extension of unemployment insurance--only to see it stall in Congress. The president then took to the hustings to decry inequities in the tax code between the super-rich and the middle class.

Republicans attacked Obama's proposed tax hikes on wealthier Americans, describing them as an all-out assault on the nation's job creators.

Where the economy, taxes and the budget are concerned, the two sides today are on different planets, a split that is echoed in legislatures across the country.

"The president's plan is the best one I've heard so far," says Assemblywoman Maggie Carlton, a Democrat from the economically hard-hit Las Vegas area. Her state is staggering under an unemployment rate that was at 13.4 percent in October, the highest in the nation. "We need to get very serious in Nevada, where unemployment in the construction trades is over 50 percent."

But Republican Senator Paul G. Campbell Jr. of South Carolina argues temporary tax cuts aren't the best way to help businesses. Decisions on "shovel ready" projects risk being made for political reasons, not economic ones, he says. "The president's proposal doesn't make a bit of sense."

With the federal government paralyzed over how best to spur job growth, what can states do? A range of economists who specialize in economic development agree there are things states can do to improve the nation's jobs outlook, but there are plenty of pitfalls, too.

Most experts agree the states' role in job creation is limited because they have less capacity to jolt the economy than the federal government and they're facing severe fiscal constraints.

Promoting job creation "is really a task for the federal government," says Jeffrey A. Frankel, a professor of capital formation and growth at the Harvard University Kennedy School of Government. Only the federal government has the tools to increase consumer demand and the availability of credit on a large scale, says Roger Noll, an emeritus economics professor at Stanford University.

In addition, states historically have devoted a big chunk of their economic development efforts to luring factories and other types of businesses to relocate within their borders, sometimes with lavish tax breaks and other incentives. Always controversial, such efforts not only have become more spendthrift than ever before, but are also damaging to the national economy since they merely shift employment and do nothing to create new jobs for the nation as a whole.

States are still "trying to attract jobs from other states," says Jon Shure, director of state fiscal strategies for the Washington, D.C.-based Center on Budget and Policy Priorities. "Many states still feel that, by offering lower taxes and higher subsidies, they can grow their economies. It is not a long term-strategy, but states still do it. And companies still play states off against each other, asking for the best deal and then leaving when they get a better one someplace else. It's a...