Robert Reich: Why the President Must Come Up With Demand-Side Solutions, And Not Go Over to the Supply Side

Accordingly, the White House is mulling a temporary cut in the payroll taxes businesses pay on wages. White House advisors figure this may appeal to Republican lawmakers who have been discussing the same idea. It would, in essence, match the 2 percent reduction in employee contributions to payroll taxes this year, enacted as part of the deal to extend the Bush tax cuts. Other ideas under consideration at the White House include a corporate tax cut, accompanied by the closing of some corporate tax loopholes.

All this translates into a continuing crisis on the demand side. Consumers can't and won't buy more. Between January and March, sales grew just .15 percent around the country -- perilously close to no growth at all. May sales look even worse. Chain stores are reporting weaker sales. Consumer confidence has dropped sharply.

How to get jobs back, then? By reigniting demand. Put more money in consumers' pockets and help them renegotiate their mortgage loans.