Richard Shelby:' We Grew Government, But Did Not Grow Economy'

Republican Senator debates former Clinton Labor Secretary on how to create jobs.

ByABC News
June 12, 2011, 11:05 AM

WASHINGTON, June 12, 2011— -- Senator Richard Shelby (R-AL), the ranking member of the Senate Banking Committee, rejected the idea that any new federal stimulus would help improve the dire unemployment picture, calling instead for tax reform and investment incentives to spur private sector jobs growth.

"I don't believe any new stimulus is going to pass in Congress. I don't think it has any credibility," Shelby said on "This Week." "What we need to do is create some certainty, some conditions for people to invest, to grow, to have some confidence. There's not a lot of confidence in the economy right now all over America."

Former Clinton Labor Secretary Robert Reich disagreed, saying that when consumers and private sector investors are not spending, "then government has got to fill the gap."

He called for federal initiatives such as exempting the first $20,000 of income from payroll taxes to put more money in individuals' pockets to spur demand, as well as calling for a WPA-style direct employment program, as done by President Franklin Roosevelt during the Great Depression.

"Under these circumstances, consumers are pulling in. They are not spending. And if they are not spending, then jobs are not going to be created," Reich said.

But Shelby dismissed the notion that previous stimulus efforts had succeeded during the Obama administration.

"I believe that stimulus basically doesn't work for the most part. We've tried that," Shelby said. "The market grows the economy. We've grown the government, but we haven't grown the economy."

Shelby said that greater stability and reform on tax policy will create confidence for small and large businesses that currently have "a lot of money on the sidelines."

"We're talking about real income tax reform to give people incentives to create jobs," Shelby said. "The government stimulus will never turn the economy around."

Reich said he has been surprised by the lack of action to spur job growth, saying there has been a "deafening silence" from Washington on the issue.

This is not business as usual.

"The President has got to come up with a jobs plan," Reich said. "Even if it doesn't get through a Republican Congress, he's got to be fighting for it, and fighting for Americans."

Reich also disagreed with the current focus on the deficit debate, saying that while "the deficit is important over the long term," the focus should remain on job creation.

"Right now the issue is not the deficit, the issue is not the debt ceiling,' Reich said. "The issue is jobs."