The President should advance ideas that work, and go to battle for them.
Today’s Joplin Globe featured a column by Robert Reich in which the former Clinton cabinet member scolds President Obama for not being bold enough in “spurring growth of jobs and wages.”
Saying that Obama is embracing ideas that appeal to Republicans, including “a corporate tax cut, accompanied by the closing of some corporate tax loopholes,” Reich makes the point that all economists this side of Sean Hannity are making:
Can we get real for a moment? Businesses don’t need more financial incentives. They’re already sitting on a vast cash hoard estimated to be upwards of $1.9 trillion… The problem isn’t on the supply side. It’s on the demand side. Businesses are reluctant to spend more and create more jobs because there aren’t enough consumers out there able and willing to buy what businesses have to sell… The reason consumers aren’t buying is consumers’ paychecks are dropping, adjusted for inflation.
Now, that’s a pretty standard analysis of the situation. Yet, mainly because of the fact that Republicans control the House and essentially control the Senate—the filibuster now gives the minority party veto power over everything—Obama can’t successfully act boldly to do what needs to be done.
Reich offers some ideas on how to solve the problem of the “continuing crisis on the demand side,” which includes:
♦ Exempt the first $20,000 of income from payroll taxes for a year.
♦ Create a WPA for the long-term unemployed.
♦ Allow distressed homeowners to declare bankruptcy on their primary residence, thereby giving them more clout with lenders to reorganize their mortgage loans.
♦ Lend federal money to (rather than bail out) states and cities that are now firing platoons of teachers, fire fighters, and other workers because state and local coffers are empty.
Of course, there is about the same chance of Newt Gingrich becoming president as there is of seeing the kinds of things Reich proposes getting passed through Congress. And part of the reason why is demonstrated by today’s editorial from the Joplin Globe, which—back to its usual conservative line—spurted the following falsehood:
Voters have rejected the liberal approach to spend our way back to prosperity. That approach has not worked as the economy teeters on the edge and unemployment seems to be unsolvable, at least in the short term.
The stimulus bill passed in 2009 was a relatively moderate approach to the problem of a severely damaged economy and, thus, it had rather moderate results. But it did have results. Now that the money from the stimulus has mostly made its way through the economy, what we have is an obvious need for more short-term stimulus to keep the recovery going.
As was proved in 1937 here in America and in Japan in 1997 and as is being proved in the United Kingdom and Ireland and Greece and elsewhere in Europe today, cutting back government spending and emphasizing debt reduction in times like these is a recipe for stagnation, or worse.
Unfortunately, as Paul Krugman and others have pointed out, the Obama administration has bought into the idea that worry over deficits is more important than worry over jobs and wages. David Dayen notes that,
Republicans theorize that a deficit deal would increase confidence in the business sector and financial markets, spurring economic growth all by itself.
You hear that all the time from Republicans. Business hates uncertainty. Business needs confidence.
Someone noted that with Goolsbee leaving all of the big names surrounding economic policy are no longer economists but lawyers and people associated with Wall Street. And it is also telling that, with the Larry Summers editorial from the weekend, all of the economists you’d recognize who have left the administration are calling for more stimulus, while it is those there now calling for confidence.
Confidence it is, I suppose. A Democratic administration, in the face of a turtle-like economic recovery, with a game-changing election on the horizon, appears to be going the way of the timid, embracing the tried-and-failed economic theories of the Republican Party.
Perhaps the administration and fanatical Republicans in Congress can come up with a way for challenged consumers to spend that magical business confidence at the grocery store or at the appliance store or at the car dealership.