If early reports of President Obama's job speech are accurate and the choice for reinvigorating the economy is "go big or go home," it's looking like the President has opted to go home. As Paul Krugman pointed out a few days ago, the problem with the initial stimulus package wasn't that it was ineffective, but that it was too small to repair all of the damage caused by the Bush crash. In short, it may have saved us from a depression, but that's about all it was capable of doing.
So never let it be said that this administration is capable of ignoring past mistakes. If at first you don't succeed, try again -- fail better. When you need a hoist to lift the economy, get a stepladder and hope for the best. Still, it's not all bad.
According to people familiar with the White House deliberations, two of the biggest measures in the president's proposals for 2012 are expected to be a one-year extension of a payroll tax cut for workers and an extension of expiring jobless benefits. Together those two would total about $170 billion.
The people spoke on the condition of anonymity because the plan was still being finalized and some proposals could still be subject to change.
The White House is also considering a tax credit for businesses that hire the unemployed. That could cost about $30 billion. Obama has also called for public works projects, such as school construction. Advocates of that plan have called for spending of $50 billion, but the White House proposal is expected to be smaller.
Obama also is expected to continue for one year a tax break for businesses that allows them to deduct the full value of new equipment. The president and Congress negotiated that provision into law for 2011 last December.
OK, the payroll tax cut and unemployment benefits aren't going to improve employment. These are already in place, so these are status quo measures. Both are necessary to keep the numbers from worsening, but they aren't going to improve anything. Think of them as the cast on the broken leg; you need it to protect the healing bone, but by itself it doesn't fix anything.
More interesting is the tax cut for businesses that hire unemployed workers. Normally, I'd argue that tax cuts don't create jobs and I'd be right. No one is going to create a position just to get a one-time tax break. But a big problem in this job market is that some companies are actually refusing to hire unemployed people. Hiring people who are already employed results in zero job growth. The "jobs creation" that Republicans like to talk about happens when unemployed people get jobs, not when just anyone gets a job. It's simple math; poaching workers from other employers is simply shuffling people from one place to another. Hiring unemployed jobseekers increases the number of employed people total. That's what you want to do. Giving tax cuts to anyone who hires anyone -- or worse, giving them to everyone and hoping they'll hire someone, as Republicans suggest -- won't solve the problem. Targeted tax cuts benefiting employers who are solving the actual problem may.
Schools construction is a no-brainer. Which means the no-brain Republicans will be against it. Like the transportation bill, this would be guaranteed to increase employment in the short-to-medium term and boost consumer spending. And the "one year tax break for businesses that allows them to deduct the full value of new equipment?" Pointless unless you jam the word "American" in that sentence before "equipment." We want to stimulate the American economy, not China's. Unless this tax cut is likewise targeted to a problem, the only people who will really benefit from it will be a handful of importer middlemen who get their beaks wet.
Yet what we need -- big public works projects, massive restructuring of the tax code to give the advantage to the poor and middle class again, protectionist trade policies -- are all missing. You can argue that these are likely impossible given the political environment in Washington, but that's just accepting Homer Simpson's dictum that trying is the first step in failing. It also pretends that the only fights worth having aren't fights at all, but guaranteed wins and gimmes. Politically speaking, if not economically, it may be better to lose good fights than to win easy ones. Or, in the case of this presidency, to fight at all. Two years of compromise and middle-of-the-road politics has gotten this president rock bottom approval ratings. Liberals don't like him because he constantly refuses to fight for better solutions, instead weakening good ideas with compromise after compromise until they've been transformed into ineffective half-meansures. And conservatives don't like him because... Well, because they're Republicans; if he cured cancer, they'd hate him. Wouldn't the wise thing to do be to abandon this approach altogether?
If the president were to roll out an ambitious economic plan and fight for it, then who would be to blame if the economy didn't improve? Certainly not the president. He had an idea and Republicans refused to let him implement it, favoring instead a status quo of a weak economy and low employment.
And next time around it'd be that much more politically feasible to do something that would actually work. We need something that would actually work.