Drawing the Line
Last night, President Obama powerfully called on the Congress to end the “political circus” and act on jobs. His agenda featured proposals that have traditionally gained bipartisan support. He indicted the failed conservative notion “that the only thing we can do to restore prosperity is just dismantle government, refund everybody’s money, and let everyone write their own rules, and tell everyone they’re on their own — that’s not who we are. That’s not the story of America.”
Republican presidential front-runner Texas Governor Rick Perry immediately scorned the need for action, calling for “smaller government, less spending and a president with the courage to offer more than yet another speech.” Republicans seem intent on championing more job-killing cuts in government, more tax breaks to companies already sitting on a trillion in profits, more deregulation of banks and corporations even as we struggle to get out of the mess caused by Wall Street excess.
The president has drawn the line. If he fulfills his promise to take this agenda across the country, Americans will begin to understand the choice that only they can make.
A Modest Proposal
The president’s American Jobs Act is bold enough to draw a stark contrast with conservatives. But it is worth noting just how modest it is, how cautious in conception and conservative in substance.
Size Matters: The White House cleverly surprised observers with the size of the program — $450 billion over one year, a faster spending rate than the original Recovery Act. But no one should be confused; this is a modest plan, a first step at best. It is too small to have much effect on unemployment, and too limited to help put the economy on track.
More than half of the money follows the wisdom of the Hippocratic Oath: first do no harm. $175 billion goes to extend – and somewhat deepen – the payroll tax cut that would otherwise expire in December. $49 billion extends unemployment insurance. $35 billion is provided to save the jobs of teachers and cops who are targeted for layoffs in the coming year.
These are good things to do, and will reduce the drag that government cuts and austerity would otherwise have on the economy. But they keep things from getting worse, and do little to make them better.
A significant part of the agenda consists of measures designed to appeal to conservatives but that will have little effect. Over $70 billion goes to a range of tax breaks for employers that hire workers – the employer payroll tax reductions, a tax break for hiring veterans, subsidies for hiring the long-term unemployed, etc. The overwhelming bulk of these tax breaks will reward companies for jobs that they would have created without them. Few companies will decide to add new employees in a lousy market because of a one-year tax break.
The jobs plan includes over $100 billion for investment in infrastructure – in repairing schools, rebuilding roads, seeking an infrastructure bank. This will put people to work.
But we will never have a better opportunity to launch a major multi-year initiative to rebuild America, to equip our country with a modern infrastructure for the next century. We can borrow money for virtually nothing. The construction industry is flat on its back, with workers and machines idled. The needs are staggering, as the president suggested. Our decrepit infrastructure is increasingly not just a burden on our competitiveness; it is a danger to health and lives. The president’s plan is likely to be rejected by the Republican Congress as “big spending.” But in fact, it is too small to be a down payment on the initiative that we should be launching.
The White House suggests that the plan may add 1% to 2% to GDP growth next year – but that’s in contrast with the hit the economy would take if the payroll tax cut and unemployment insurance aren’t extended. In an economy that has stalled, this is but a first step.
Obama does better than any political leader in challenging the know-nothing conservatism of our time, and contrasting it with the public investments and public policies that have been essential to America’s prosperity and to building a broad middle class.
But it is striking how cribbed his agenda is. This is a moderate, corporate Democrat struggling to address the economic meltdown. In the face of a right-wing majority in the House and public concern about deficits, the president embraces a conservative framework.
For example, the President returned to his most powerful theme – that we must build a new foundation for growth; we can’t simply recover to the old economy that was built on debt and bubbles – and didn’t work for working people in any case. This requires a serious focus on reviving America’s manufacturing prowess, a new strategy for the global economy, a concerted effort to capture a lead role in the green industrial revolution that will sweep the world.
The president referred to this challenge last night. But his call for passing traditional bilateral trade deals, too small to be anything but symbolic of the old failed corporate trade strategy, reveals his establishment caution.
Keynes is dead; long live Keynes
At the Republican debate, Texas Governor Rick Perry goofily announced that the crisis – caused by a financial wilding and bipartisan conservative disarming of the cops on the beat – proved that “Keynes was dead.”
The president’s call for action indicts Perry’s belief that you are on your own. But, he too abandons Keynes by announcing that his program will be paid for in fiscal cuts and tax hikes beginning in 2013. As Martin Walker of the Financial Times has written, the financial markets are telling policy makers to borrow and spend – with interest rates near record lows. Yet policymakers, abandoning Keynes, remain fixated on deficits and debt.
Worse, the president went out of his way once more to put Medicare and Medicaid on the table for a grand bargain with Republicans for dramatic deficit reduction over the next decade. He promised to detail this in another presentation next week, threatening to once more deflate the debate we need over jobs with a return to a debate that is utterly divisive over deficit reduction.
Progressives are demanding action on jobs. An inspired president on the stump is vital to making that case. His agenda is a first step, designed to attract bipartisan support. If Republicans oppose this, they will be turning their backs on working people either out of misguided ideological extremism or for partisan political advantage. The president is right. It is time to act.