The stimulus proposals Obama announced on Thursday, in contrast, are tightly focused on one thing: job creation. They are, to borrow an Obamaland phrase, more targeted and more timely jolts for economic activity than the Recovery Act was in the depths of the Great Recession.
If you believe that the biggest reason America sits today on the brink of a double-dip recession is a nosedive in aggregate demand -- a vacuum of consumer spending that the federal government can and should fill in order to prop up recovery -- then the best news from Obama's speech was that the president appears to have learned from his past Keynesian mistakes.
For sheer stimulative purposes, the "American Jobs Act" Obama announced before a joint session of Congress appears much better designed than the Recovery Act.
It features creative attempts to encourage hiring through tax cuts, promote job-sharing through unemployment-insurance reform, prevent layoffs of teachers and police officers through aid to states, and provide direct assistance to groups of workers hurt most by the current economic situation -- such as young people and the long-term unemployed.
The largest boost from the proposals -- and probably the one most likely to garner Republican support and pass Congress -- figures to come from halving the employer-side payroll tax for the first $5 million in a company's payroll, and from a related plan to eliminate payroll taxes for added workers or increased wages. The Congressional Budget Office estimates every dollar of such cuts will spur up to $1.30 in economic activity.
But there are three glaring deficiencies in Obama's plan that should concern economists, lawmakers, and unemployed workers from across the political spectrum.
- Obama told America on Thursday that the economic recovery "has stalled." But he didn't specify why it has stalled, or how the $447 billion, to-be-paid-for-later jobs plan he proposed would fix the country's core economic problems. The closest he came was saying that his proposed American Jobs Act would "put more people back to work and more money in the pockets of those who are working ... and give companies confidence that if they invest and hire, there will be customers for their products and services."
- Obama chose a price tag for his proposals that is both large enough to antagonize Republicans and open himself to more "big spender" critiques, but not large enough to fill completely the yawning gap in global demand that Keynesian economists say is depressing the U.S. recovery.
- Perhaps most importantly, the president offered next to nothing to help the still-sliding housing market, arguably the biggest drag on the recovery. The only mention of housing in the speech was a flick at pushing federal housing agencies to refinance more mortgages -- a drop in the bucket, at best.
Still, Republican leaders indicated Obama's plan would not be dead on arrival in Congress. "The proposals the president outlined tonight merit consideration," House Speaker John Boehner, R-Ohio, said in a statement. "We hope he gives serious consideration to our ideas as well."
Which brings up a final question: How flexible is Obama's plan? How willing is he to mash it up with Boehner's ideas, which go heavy on rolling back federal regulations?
Again, the president offered only clues in his speech, not a doctrine. "What we can't do -- what I won't do -- is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades," he said.
Later, he added, "What's guided us from the start of this crisis hasn't been the search for a silver bullet. It's been a commitment to stay at it -- to be persistent -- to keep trying every new idea that works, and listen to every good proposal, no matter which party comes up with it."
"Listening" and "signing," of course, are very different things. The best designed jobs bill means nothing if the president doesn't get to sign it.