President Obama's Job Creation Mirage

Monday, August 29, 2011 by The Guardian/UK
We've heard plenty about Obama's post Labor Day job creation speech, but will it contain anything that might actually work?
by Dean Baker

 

President Obama has discovered how serious the recession is. That's what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.
But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama's weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.

At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.

As it stands, the social security program is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the program. Given President Obama's willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn't generate much enthusiasm.

A second item frequently mentioned is an infrastructure bank. This would allow the government to treat long-lived infrastructure investment as capital expenditures depreciated over their expected lifetimes, rather than expenditures to be paid for in full in the years the construction takes place. This is good policy and accounting (it is the same approach used by both private businesses and state governments), but it is not going to create many jobs and certainly not in the next couple of years.

The other items on the list are less clear. On bad days, we hear that President Obama is going to tout the trade agreements with Panama, South Korea and Colombia. These deals are all problematic at best, but even their supporters can't claim with a straight face that they will generate any noticeable number of jobs.

There are also reports that President Obama may propose some sort of tax subsidy for job creation. Such a subsidy can be bad or not so bad. One of the proposals, temporarily eliminating the employer side of the payroll tax, is a great plan – if your intention is to give still more money to business and undermine social security.

There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment. If raising the cost of labor by 15-20% doesn't reduce employment, then we can't think that reducing the cost of labor by 6.2% as a result of temporarily eliminating the payroll tax will increase employment. (Sorry, Mr President, logic can be cruel.) This means that we should expect few jobs will be created by this sort of subsidy; we will just be further supplementing the record profit share of national income.

And if we pursue that policy, we will also be raising further questions about social security. It is important to remember that if the point is simply to hand a specific sum to business or individuals, we can do this without ever mentioning "social security" at all. In other words, if the point is to give businesses a tax subsidy equal to 6.2% of their payroll, then we can just specify that they get a tax credit equal to 6.2% of their payroll. It is understandable why Republicans, who explicitly want to end social security as we know it, would insist on tying the subsidy to the social security tax. It is hard to understand why President Obama would adopt the same approach.

Of course, we should not be defeatist about creating jobs. Anyone who cares knows how to do it.

At the top of the list should be a jobs program for young people that would be modelled on the Civilian Conservation Corps. There are many parts of the country where the unemployment rate for young people is 40-50%. These young people have no realistic prospect of getting jobs. Giving them work at or near the minimum wage, cleaning up streets, parks and abandoned buildings in their neighbourhood, can make a big difference in their lives – and considerably enhance those localities.

A more far-reaching policy would be to promote work-sharing as an alternative to layoffs. The money that is paid out in unemployment insurance could instead subsidise shortened work hours. If just 10% of the people who lose their jobs each month could be retained with this policy, it would be create another 2.4 million jobs a year. This policy has been so successful in Germany that its unemployment rate is now lower than before the downturn even though its growth has been almost the same as ours.

Finally, getting the dollar down is the most important long-term job creation policy. If we managed to get back towards balanced trade, it would lead to almost 6 million  manufacturing jobs.

On past form, however, President Obama seems unlikely to go for real job-creation measures. Look forward to being disappointed – especially if you're one of the unfortunate unemployed.

Corporate Welfare: Obama Unveils Pro-Business “Jobs” Plan

By Tom Eley - Global Research - 09-12-2010

President Barack Obama’s Wednesday speech on the economy in Cleveland, Ohio was an exercise in deceit and demagogy. Presenting himself as a defender of the middle class against the wealthy, Obama outlined a “jobs plan” based on a series of corporate tax give-aways that have long been championed by the Republican Party. The president made no proposals for direct job creation.

The Cleveland speech is part of a campaign to stave off what are widely predicted to be major losses for the Democrats in the upcoming November elections. It comes on the heels of Obama’s Labor Day speech in Milwaukee and in advance of a Friday press conference on the economy.

Obama’s new plan hinges almost exclusively on tax breaks for corporations, justified with the threadbare claim that the windfalls will convince firms to hire more workers. This ignores, for one thing, the fact that US banks and corporations are already sitting on a cash hoard of over $1 trillion.

By way of defending his opposition to public works programs or other forms of government job creation, Obama offered a bald statement of his subordination to big business. “I’ve never believed that government’s role is to create jobs or prosperity,” he said. “I believe it’s the private sector that must be the main engine of our recovery.”

New give-aways for corporations in his plan include allowing them to deduct from their taxes the full value of new equipment purchases. He also proposed to increase and make permanent a tax credit for corporate research and development.

As for Obama’s proposed $50 billion in funding for transportation development—a tiny fraction of the financial outlay required to repair the nation’s crumbling infrastructure—it would merely extend existing funding that is currently set to expire, while establishing an “infrastructure bank” that would attempt to secure profits for private investors in public projects.

All told, the new economic measures would cost about $180 billion. According to economist Mark Zandi, the program might “a year from now… create tens of thousands of jobs.” As the Washington Post noted, “This would be a drop in the bucket compared with the 7.6 million jobs lost during the recession that began in December 2007.”

Meager as it is, the proposal has virtually no chance of passing, a fact underscored by its cool reception among many congressional Democrats. “Republicans noted that top Democratic leaders and embattled candidates were virtually silent on the proposals,” the Wall Street Journal observed. “House Democratic leadership aides said they did not want to move forward without assurance that the Senate could pass the measures. And Senate aides gave no such promises.”

As always, the Democrats, who hold historically large margins in both houses, claim their hands are tied by Republican opposition. “The only way we can get anything done is with cooperation of Republicans, and that’s been in short supply in recent months,” said Jim Manley, spokesman for Senate Majority Leader Harry Reid.

What Obama presented as the main difference between the White House and congressional Republicans—whether or not to extend Bush administration tax cuts for the wealthy set to expire in January—is also more pretense than reality.

Obama claims to favor continuing the tax breaks only for households that earn less than $200,000 a year for an individual or $250,000 for a couple, about 98 percent of all households. But prominent Democrats, including Reid and former Office of Management and Budget head Peter Orszag, have already signaled their support for an extension of the cuts for the 2 percent with incomes above the cut-off levels as well.

In his speech, Obama sought to obscure the Democrats’ share of responsibility for the economic disaster, pinning blame on the “governing philosophy” of the Bush years: “Cut taxes, especially for millionaires and billionaires. Cut regulations for special interests. The idea was that if we had blind faith in the market; if we let corporations play by their own rules; if we left everyone else to fend for themselves, America would grow and prosper.”

“For a time, this idea gave us the illusion of prosperity,” Obama continued. “We saw financial firms and CEOs take in record profits and record bonuses… But while all this was happening, the broader economy was becoming weaker... The wages and incomes of middle-class families kept falling while the cost of everything from tuition to health care kept rising. Folks were forced to put more debt on their credit cards and borrow against homes that many couldn’t afford in the first place. Meanwhile, a failure to pay for two wars and two tax cuts for the wealthy helped turn a record surplus into a record deficit.”

These remarks reveal the Obama administration’s contempt for the intelligence of the public. The White House seems to assume that the American people are suffering from collective amnesia.

The policies of tax cuts for the rich and deregulation have long been bipartisan. They were expanded during the Clinton years.

And they have continued under Obama. One wonders whether Obama and his handlers think the public has forgotten that Obama supported the multi-trillion-dollar bailout of Wall Street under Bush and extended it once he came to power. And that Obama intervened to block legislation that would have imposed modest restrictions on the pay of bank executives, while insisting that government loans to General Motors and Chrysler be made contingent on a 50 percent wage cut for newly hired auto workers.

In its staggering dishonesty, the administration’s public relations campaign on the economy is strikingly similar to its effort during the BP Gulf catastrophe to appear “tough,” even as every step it took had as its overriding concern the protection of oil giant’s profits. Last spring Obama staged a visit to the Gulf, followed by a White House meeting with BP executives and a prime-time press conference to present the $20 billion cleanup fund—set up according to BP’s requirements—as a great boon to workers and small businesses victimized by the company’s negligence and criminality.

Similarly, the White House has stage-managed a series of events this week to package another bonanza for the corporate-financial elite as a lifeline to the “middle class.”

Yet even as Obama attempts to pose as an advocate of jobs and the middle class, the White House has been at pains to refute any notion that the latest proposals constitute a “stimulus,” or that they will significantly add to the deficit.

“I am absolutely committed to fiscal responsibility, which is why I’ve already proposed freezing all discretionary spending unrelated to national security for the next three years,” Obama declared, referring to his long-term budget plan dubbed “A New Era of Responsibility.”

The speech was two-faced throughout. Appealing to elderly voters, he promised to fight “the efforts of some in the other party to privatize Social Security, because as long as I’m president, no one is going to take the retirement savings of a generation of Americans and hand it over to Wall Street.”

But minutes later, Obama signaled to the ruling class that he was preparing, after the elections, to impose harsh cuts in basic entitlement programs such as Medicare and Social Security. “[O]nce the bipartisan fiscal commission finishes its work,” Obama said, “I will spend the next year making the tough choices necessary to further reduce our deficit and lower our debt.”

Obama was referring to his National Commission on Fiscal Responsibility and Reform, which in December—one month after the elections—is expected to propose a series of “reforms” of Social Security, including reductions in benefits, an increase in the retirement age, and the introduction of private “add-on retirement accounts.” (See “US ruling class prepares attack on Social Security”)

Obama is playing his role in a carefully orchestrated political act. The media incessantly claim that the primary concern animating voters is their fear of “deficit spending,” and that businesses have frozen hiring due to excessive government intervention from the Obama administration. This is counterposed to the Republicans’ central policy goal—the extension of tax breaks for the extremely wealthy and the rejection of any form of assistance to the vast majority of the population.

In reality, both the Democrats and Republicans are committed to making the population foot the full bill for the economic crisis, the bailout of Wall Street, and the cost of the wars in Afghanistan and Iraq.

Obama Unveils Huge Jobs and Infrastructure Plan

(Let's see how this pans out.--jef)

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Monday, September 6, 2010 by Agence France-Presse

WASHINGTON – US President Barack Obama unveiled plans Monday to spend at least 50 billion dollars to expand and renew US roads, railways and airports, in a fresh bid to fire up sluggish economic growth.

Obama, under intense pressure over November's mid-term congressional elections, in which his Democrats fear heavy losses, was set to formally make the announcement in a speech in Wisconsin, an official said.

The event, marking Labor Day, the traditional kick-off for US election campaigns, heralds a week in which Obama also travels to another struggling state, Ohio, and holds a press conference in a bid to ease his political woes.

A White House official said that the "bold" infrastructure plan will be front-loaded, target six years of investments and make significant progress in the first year, in a bid to stimulate the sagging economy and create jobs.

It appeared unlikely however that Obama could get the plan passed through Congress before the mid-term elections, which are effectively a referendum on Democratic economic management and a 9.6 percent unemployment rate.

Opposition Republicans who slammed Obama's 800-billion-dollar stimulus plan as a failure are also likely to hammer the proposed new investment as another example of the government doling out taxpayer dollars to little effect.

On Wednesday, in Cleveland, Ohio, Obama is expected to unveil another plank of his revised economic strategy, a series of tax breaks for small businesses worth 100 billion dollars.

The official, speaking on condition of anonymity, said the Obama plan unveiled Monday would front-load 50 billion dollars of investment to jumpstart job creation.

The administration would work with Congress to offset the spending in other areas, to ensure it does not further inflate the budget deficit, the official said.

The plan, to be announced at the Milwaukee Laborfest, a union gathering, also targets improvements to the US air traffic control system, an acceleration of high-speed rail projects, and establishes an "Infrastructure Bank" to coordinate federal funding and planning for projects.

Critics have long complained that the US highway system is crumbling and suffers from underinvestment, so Obama will target modernizations which could quickly employ jobless workers while improving the US transportation backbone.

The White House official, who spoke on condition of anonymity, also said Obama would propose making a major new investment in the rail and transit system, including an overhaul of creaking Amtrak rolling stock.

The plan also envisages an overhaul of technology used in the crowded US air traffic control system, including the use of satellite surveillance, which it said could reduce travel delays and airport noise.

On Saturday, Obama vowed to expand a prosperous middle class and help his compatriots achieve the American Dream.

"This Labor Day, we should recommit ourselves to our time-honored values and to this fundamental truth: to heal our economy, we need more than a healthy stock market; we need bustling main streets and a growing, thriving middle class," he said in his weekly radio address.

The comments came after a new Labor Department report released Friday showed the economy lost 54,000 jobs last month and the unemployment rate edged up to 9.6 percent.

Although the job losses were much less than the 120,000 slump expected by Wall Street economists, hiring was not substantial enough to help millions of crisis-hit Americans to return to work.