Obama’s New Goal: 3 Million Jobs
By Justin Gardner | Related entries in Barack, Economy, Taxes
First, the reason why…
The more aggressive target, up from 2.5 million jobs set a month ago, comes after a four-hour meeting last week in which Obama’s top economic advisers told him the economy is now expected to lose as many as 3.5 million jobs over the next year. Obama was told that could drive unemployment, currently at 6.7 percent, above 9 percent, a figure not seen since the recession of the early 1980s.
So how to address it?
Well, the solution may hearten conservatives because some of the economic stimulus will come in the form of tax cuts…
With liberal and conservative economists calling on the government to spend $800 billion to $1.3 trillion to stanch the bleeding, the greater danger to the nation, Obama was told, lies in doing too little rather than too much.Given that gloomy forecast, Obama last week presented congressional Democrats with a proposal to dedicate $675 billion to $775 billion over the next two years to middle-class tax cuts, aid to strapped state governments and investments in domestic priorities such as infrastructure, health-care technology and education — a package designed to jolt the economy while deterring further layoffs and putting people back to work.
But let me ask this…if the tax cuts are only for the middle class is this class warfare? And, if so, why do the rich need a tax cut? How can this be justified at this point?
One thing’s for sure…Obama will start to really slashing budgets and I’m curious as to where he’ll trim the fat.
This entry was posted on Sunday, December 21st, 2008 and is filed under Barack, Economy, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
December 21st, 2008 at 2:01 pm
Justin,
Careful with the enthusiasm here, go back and check Obama’s actual rhetoric:
Create or preserve……
Hmm, that basically means that the employment picture could be exactly the same two years from now as it is today and Obama could claim to have successfully achieved his goal of “preserving” three million jobs.
Sounds more like political legerdemain than a bold new plan to me.
December 21st, 2008 at 2:20 pm
Dahmed if you do – dahmed if you don’t. Beats doing and saying nothing – atleast there isn’t a move to obfuscate the facts and make everyone watch the shiney object as junior and the boys always did.
December 21st, 2008 at 2:30 pm
Terence,
Who says Obama is going to do anything but obfuscate either.
So far, all we’re seeing is rhetoric combined with Keynesian pump-priming right out of the 1970s, which the Japanese showed us back in the 1990s isn’t going to do anything to get an economy out of an recession driven by asset devaluation.
December 21st, 2008 at 2:44 pm
To use the Japanese example ignores the global catastrophe we’ve seen unfold in the last 9 months – this is nothing like Japan on so many levels. All we CAN see is rhetoric right now since junior still sits obstructively in the White House for another month. In all fairness, you need to reserve your criticism of policy until there is actual policy implemented – read Gandelman’s article to the right under “What’s going On” it gives a name to people who are critical before there is actual facts to be critical of? Believe me, I will be as critical as anyone if the policy warrants it, but right now is just too early.
December 21st, 2008 at 2:55 pm
Terence,
The scope of the crisis is irrelevant to the question of whether Obama’s “new” ideas — borrowed from the 1970s though they might be — will actually accomplish what he apparently hopes they will.
History and economic science suggest they won’t.
Not to mention the undeniable fact that I keep mentioning when this topic comes up — we don’t have the money that Obama wants to spend.
Putting the country another trillion dollars in debt isn’t the way out of this situation.
December 21st, 2008 at 3:40 pm
Doug
You don’t have to tell me about the lack of money – I’m a fiscal conservative in many respects – you and I don’t disagree regarding this topic. However, please don’t use economics and science in the same sentence. There is nothing scientific about the current crisis, most of us learned these lessons when we were three and we touched the stove for the first time. Lesson = there is always consequences for actions or lack therof.
This arguement isn’t about money inasmuch as it is about capitalism. Unregulated capitalism (and certainly greed) is what brought us to this point – unfortunately the last ~8 years of “darkness” also resulted in the looting of the US Treasury so there’s no cushion for us. Letting those industries and institutions fail that can’t keep up is the right thing to do – but only when the rest of the world plays by the same rules – and they don’t.
The instance of tax breaks, job incentives, favorable import and export taxes all conspire against your beliefs when the global economy is taken into account – we don’t do that in the US. There is no other choice except to “seed” employment opportunities, infrastructure projects, the industrial base, science, schools, and push more National Defense costs onto the Euroipeans – we’ve been underwriting their national defense since 1945. The non existant money has to be spent – it’s just a question of how it will be spent and by whom. I trust Bush to do absolutely nothing correctly – so it’ll have toi be Obama – give it til June and then slam the s*&t out of him – it’s just unfair to do it now.
December 21st, 2008 at 3:55 pm
Terence
Three quick points in response:
1. Blaming “unregulated capitalism” for the economic crisis makes as much sense as blaming unicorns. We haven’t lived in such a world in a long time. In reality, the causes of the current crisis are far more complex and include government policies that encouraged people to incur debts they could not afford to repay, a monetary system where the value of the dollar is based on little more than a promise, and the basic idea that you can’t delay the day or reckoning forever.
2. The fact that the rest of the world is engaging in a series of bad economic policy decisions isn’t a sufficiently good reason for saying that we should jump over the cliff with them.
3. There’s no reason to believe that Obama and his bureaucrats will be better able to decide how to spend nearly a trillion dollars than the American public would be. So, it would be better to cut taxes to stimulate economic growth than to spend a bunch of money we don’t have and can never repay on make-work projects that will end up favoring the Democratic Party’s constituencies — Unions, teachers, and the environmental lobby.
December 21st, 2008 at 4:53 pm
Doug,
One quick point on 3. Giving people tax cuts won’t do any good unless we are certain they are going to go out and spend. We know the government will spend the money, which is essentially the premise behind Keynesian economics…get people spending again – the government is the spender of last resort.
How about allocating all of these funds to individual states? A mix of tax cuts and government spending by the state governments would seem a rational response.
As far as not having the money, it seems to me to be just a choice of trade-offs (not whether or not the money is actually there). What benefit will we derive now from getting the economy moving again compared to the cost future generations paying off all of the government’s spending. Also, there is still the worry that this “stimulus” will become a permanent fixture of the federal government, which is another reason we should let states do the spending.
December 21st, 2008 at 5:12 pm
L,
But that problem can happen even in the case of massive government pump-priming.
In fact, that’s exactly what happened in Japan in the 1990s. They spent trillions of Yen on infrastructure projects and other pump-priming projects and it had almost no impact on economic growth, because people further down the line chose to save rather than spend and private investment didn’t kick back up until the early 2000s when the Japanese finally forced banks to deal with the bad assets that had been on their books for the better part of a decade.
Again, as I asked Terence, what makes you think that Barack Obama and his minions know better how to spend a trillion dollars than the collective wisdom of the American people ?
I’d also add that anyone who doesn’t think that the Obama pump-priming will be filled with pork for favored political allies doesn’t understand how politics in this country works. $ 700 billion is simply too much money to give away without there being a significant amount of waste.
December 21st, 2008 at 5:16 pm
D
You contradict yourself with #1. It is precisely the lack of regulation and oversight that created this consumer driven goat rope (you also contradict yourself since Unicorns never actually lived). In #2, if the rest of the world invests in their own industries and economic policies solely to cripple or destroy American industrial production that is a huge problem – whether or not it is the correct economic decision for us to counteract these threats is beside the point if our industries are destroyed in the process. Competition is the best thing for the economy but only when it’s fair (notice I didn’t say free). In #3 – There’s no reason to believe the resource allocation won’t be done correctly either – all I can say about that is wait and see before you attack. It certainly won’t be any worse then what’s been done during this current crisis, and there is no comparison to what’s been done these past 8 years.
December 21st, 2008 at 5:28 pm
Terence,
1. Do I really need to go into the numerous ways that government regulation and mandates helped create, for example, the subprime mortgage crisis ?
For example, the explicit programs advocated by Presidents Clinton and Bush and Republicans and Democrats in Congress to make it easier for Americans to buy homes, even it meant getting them into something far less easy to understand, or comply with, than the traditional 30 year flat-rate mortgage ? The home loan interest tax deductions, which further distorted the demand for housing ? The lawsuits that people like Barack Obama filed against mortgage companies accusing them of “redlining” because they wouldn’t give mortgages to people who didn’t have sufficient income or credit history to support them ?
Government regulation isn’t solely to blame, of course, individual greed played a part as it always does in these situations. The suggestion though, that “unregulated capitalism” had anything to do with this is absurd —- we have not been living in such a world at all.
2. If the rest of the world wants to spend taxpayer dollars on zombie industries, let them. That’s no reason that we should let a walking corpse like Chrysler survive on the public dole.
3. What reason should I have to believe that government can properly allocate resources ? They’ve never been able to do it before.
December 21st, 2008 at 5:56 pm
OK, I agree that we haven’t lived in a world of unregulated capitalism–but that is exactly what the right has been calling/touting/advocating this ridiculous nonsense that has bee going on for 8 years.
For the purest in you, I will restate it–the unfettered greed and targeted deregulation designed to enrich the rich is what got us into this mess.
December 21st, 2008 at 5:57 pm
I lump government irresponsibility and actual oversite into the same bin – you split it out. Responsible government officials not making good economic policy is a lack of oversite as far as I’m concerned. Otherwise we are left with the impression that everyone who has been in power since 1976 is knuckle-head – that can’t be true so it must be irresponsibile influence over policy. I have been on the record for letting both GM and Chrysler fail because that is exactly what they need to do in order to start fixing the problems – but it won’t happen in such a destructive way there’s just too much at stake. I do favor the proper allocation of resources by government and I think if it is done correctly it will work. There is a very interseting read at the URL below.
http://remortgageamerica.blogspot.com/
The basic premise is for the government to “back” remortagaging efforts up to $500K at 4.5% fixed – there’s alot more detail than I can cover here. I’m not sure I agree with everything stated, but it would guaranty the average American a low fixed interest rate, help stimulate the economy, push lending out to the local level, while forcing the banks to lend. Give it a read if you get some time – I hear that this program may actually have “legs”.
December 21st, 2008 at 6:52 pm
Terence,
Your faith in the ability of bureaucrats to micro-manage a $ 11 trillion economy is something that I can’t share given the history of how government actually works, and the fact that here really isn’t any such thing as a “responsible” government official. Every decision is influence by politics.
As for the housing market, I see no reason to treat that any differently than you suggest treating GM and Chrylser. We let an artificial bubble grow for far too long, and it’s time to let it pop.
December 21st, 2008 at 6:54 pm
gerryf,
If you’re referring to conservatives in the Republican Party, I would note that they have neither advocated nor put into pratice anything resembling free-market capitalism during the time they held power from 1994-2008.
Again, blaming something which never existed for our problems is entirely diengenuous
December 21st, 2008 at 9:35 pm
Doug,
To me, you are misrepresenting the true nature of the crisis in Japan and why Keynesian economics did not work as expected. The problem was not with government spending but the fact that payment uncertainty persisted after a government stimulus. The Japanese government failed to directly address the bad loans and real estate speculation that had been a primary cause of its crisis in the first place.
If the Bush or Obama administrations can find a way to eliminate payment uncertainty (i.e. guaranteed loan modification, the Hubbard/Mayer proposal of forcing mortgage rates down) and couple that with an effective, state-managed fiscal stimulus/tax break, we could see something different.
Let me ask you a question, if you think that government spending won’t induce private spending, what makes you think that a tax cut will? Following your logic, should the federal government neither spend nor cut taxes and sit on its hands? I think what you have been dancing around with “people might not spend anyway” is the uncertainty I discussed – the uncertainty is the true crux not what sort of stimulus we use.
December 22nd, 2008 at 8:14 am
Middle class tax cuts, while I would certainly enjoy them, won’t create or preserve jobs unless you believe in “trickle up” economics. I think we saw from the stimulus package earlier this year that that sort of thinking has very limited, very short-term benefits.
Combine this with the recent API news regarding the 100% opaque “Golden Curtain” that has descended around the financial world’s TARP bailout recipients, and Obama has a huge mess on his hands that isn’t going to get any easier. Worst-case scenario–we prop the economy up for the next four years by rampant deficit spending and let the poor schmuck who takes over in 2013 deal with the fallout.
December 23rd, 2008 at 11:05 am
Because when people say “tax the rich,” what it really boils down to is “tax private enterprise.” Corporate income taxes, S-type or LL-type income taxes, Capital gains taxes, all may seem like you are taking cash out of the pockets of people who don’t need it, but what you are actually doing is taking the capital used for private investment, job creation, entrepreneurism..ect, all of the things we need to be functioning to create wealth.
With high corporate income an capital gains taxes you stifle growth of industry, and the definition of “recession” is to stifle the growth of industry below 0. With all of this talk about reinvestment in public infrastructure, is that it? Is public infrastructure all that an economy is? What about private industry and actual wealth creation? The vast majority of Americans are employed by privately owned industry. Don’t tell me that it works better if the government controls the means of production.