Article image
Robert Reich
NationofChange / Op-Ed
Published: Friday 9 September 2011
Temporary tax cuts haven’t proven to be particularly effective in stimulating new spending in times of economic stress.

Two Cheers And One Jeer for The American Jobs Act

Article image

Two cheers for the President and his America’s Jobs Act. Cheer Number One: In presenting it to a joint session of Congress, he sounded as passionate and determined as he’s ever sounded.

Second cheer: He laid out the problem correctly and effectively. He explained why jobs and growth must be the nation’s first priority now — not the federal deficit. The economy is in crisis. People are hurting. So government must act, and act quickly. It’s irresponsible at a time like this to suggest that government should simply close down.

But a jeer because the jobs plan he presented isn’t nearly large enough or bold enough to make a major dent in unemployment, or to restart the economy.

$450 billion sounds like a lot – and is more than I expected — but some of this merely extends current spending (unemployment benefits) and tax cuts (in Social Security taxes), so it doesn’t add to aggregate demand.

The net new boost to the economy is closer to $300 billion. That doesn’t approach even half the gap between what the economy is now producing and what it could produce at or near full employment.

And much that $300 billion is in the form of temporary tax cuts to individuals and companies. Some of these make sense — enlarging the Social Security tax cut, extending it to employers, and giving small businesses a tax holiday for new hires.

But temporary tax cuts haven’t proven to be particularly effective in stimulating new spending in times of economic stress. People tend to use them to pay off debts or increase savings. Companies use them to reduce costs, but they won’t make additional hires unless they expect additional sales – which won’t occur unless consumers increase their spending.

That leaves some $140 billion for infrastructure – improving outworn school buildings, roads, bridges, ports, and so on. And $35 billion to help cash-starved states avoid more layoffs teachers. Both good and important but still small relative to the overall need.

Why did the President include so many tax cuts, and why didn’t he make his proposal sufficiently large to make a real impact on jobs and growth? Because he crafted it in order to appeal to Republicans. To get it enacted, he needs their votes.

I’m having a dizzying sense of déjà vu. The first $800 billion stimulus (spread over two years) wasn’t nearly large enough given the drop in aggregate demand. And half of it was in the form of tax cuts. The reason it wasn’t bigger and contained so many tax cuts was to get Republican votes. But its apparent ineffectiveness — it saved around 3 million jobs, but that didn’t save it from appearing to fail — made it harder for the White House to do anything more to stimulate the economy, and ward off what’s likely to be a double dip.

That’s been the heart of Obama’s dilemma. Big and bold enough to make a difference, and Republicans are certain to reject it. Small and focused on tax cuts, and maybe Republicans will bite. But even if they sign on, what’s the point of the exercise if it won’t have a measurable effect on jobs and growth?

And why would they sign on this time, anyway?

Republican Senate leader Mitch McConnell scoffs “This isn’t a job plan. It’s a reelection plan.” That’s precisely the problem. McConnell and company have stated publicly that their number-one objective is to unseat Obama and regain the presidency in 2012. They don’t want to give the President anything he could possibly claim as a victory. And they’re not terribly worried if the economy stays awful through Election Day because that’s the best way to fulfill their number-one objective.

The President would have done better with a plan that was big enough to make a real difference. And then, when Republicans rejected it, campaign on it.

So two cheers — for both the President’s style and his words. And one jeer: He failed on substance and strategy. 

This article was originally posted on Robert Reich's blog.

Get Email Alerts from NationofChange
Author pic
ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.

FEATURE A

Connect with your friends

Find new content you might like and see what your friends are sharing!

Top Stories

15 comments on "Two Cheers And One Jeer for The American Jobs Act"

John O'brien

September 10, 2011 8:07pm

Be aware, you have at least one person (me) who agrees with you entirely. We need a drastic change in economic thinking at the top. Sadly, Obama didn't give it to us.

Sharon Sandell

September 10, 2011 1:58pm

Obama's economic advisers and Fed Chairman are identical to those of Bush and are all Friedman-loving economists. Why should anyone be surprised that Obama is failing? I am goinng to keep banging this drum until someone who has power responds. Our country is being sold out by an ideology that will ultimately leave us a different entity than the one our founding fathers had envisioned and we are living through a time when disaster is being used as a tool to undermine the US Constitution on a massive scale while plundering the middle class in the name of patriotism. I had an epiphany when I read Klein's book (The Shock Doctrine: The Rise of Disaster Capitalism). She makes clear what the real issues are and extensively documents the long and utterly inhumane history of the so-called "Chicago School of Economics" devised by Milton Friedman, and she lays out the history this economic theory and shows it to be inextricably linked to torture (with our own CIA complicit--they wrote the instruction manual known as the Kubark Manual and we got to see how it works from the photos that came out of Abu Grahib and Gitmo) and the obliteration of human rights. The middle class in America needs to understand that it is being undermined at every turn by corporitsm and that these huge, multinational corporations are destroying lives with a well-oiled machine and are using the Republican Party to do the same thing in the US they have done in the Southern Cone of South American, in Iraq, in the former Soviet Union, and in many other places in the world since their initial successes in Chile (with the use of Pinochet who was backed by Thatcher and Reagan). Until Democrats start explaining to voters that the economic struggles we are experiencing are just the beginning of the adoption of a Friedman economy, until they stop giving it euphemisms like "trickle-down" or "Reaganomics" and call it what it really is (Milton Friedman's design to replace central governmental regulation of Big Business and to transfer wealth from individuals to Big Corporations/Banks/Businesses while dismantling all worker rights and all human rights, decimating the middle class, and privitizing all public works and institutions that help to support centralized government, no article they write is of any true or lasting value. Unless the Democrats are as bought off by the Friedman fairy tale as the Republicans appear to be, they had better start addressing the true nature of the struggle we have been in for the past quarter century or more. These people are relentless. They have a long-term plan and they are ever more successful with it. They have now demonstrated that they do not need to have a US President--all they need is one-half of one branch of government and they can block any Keynesian economic plan proposed. Their strategy of blocking all legislation that gets in their way by refusing to compromise at any level is working and too many people see them as "principled heros" fighting against Big Government. They have a well-oiled propaganda machine and have more and more control over the media and message. For the first time, because Klein opened my eyes, I am disappointed in what every single Democrat has to say. They utterly miss the central struggly of our era: Friedman vs. Keynesian economics. The former will decimate the middle class and destroy human rights, worker rights, unions, and will obliterate all opposition. The latter will restore these things. So, I beg the few politicians who have not already surrendered to what Klein so aptly labeled Disaster Capitalism (the use of disasters, whether natural or man made, to so unsettle large populations that they are too concerned with day-to-day survival to pay attention to the systematic undermining of their rights and the dismantling of nothing less than the American way of life). The use of torture goes hand in hand with the remodelling of countries to get large populations to go along with this economic model. It is coming home to roost and unless those who have the ability to sound a clear and well-defined warning of what is at risk here start addressing what the true underlying struggle is, we are slowly being manipulated into this economic model. The fear that is being used now is all being manipulated so well by Republicans (fear of depression/recession, fear of losing everything through the many natural disasters that have been ongoing for years now across this country, fear of terrorism [bin Laden did more to help these corporatists than he likely ever understood--he made a huge mistake in believing the US government was the enemy and failed to identify the forces that have been manipulating that government for what they are: The real people raping the Arab states/peoples of wealth and treasure--the same ones who all too willingly make deals with despots when it suits their bottom line]. The use of torture by the US military/government, the active spying on its own citizens without due process, the undermining and dismantling of labor unions, rendition, the constant drum beat of fear, fear, fear are all symptoms of Friedmanism's presence in our midst. If we do not address this diabolical restructuring of our society soon, it will be too late. Klein has written a history of our era that most of us did not understand or analyze while we were living it. We are on the brink of losing everything and no one is addressing the fact that an ideology is being imposed on us is the antithesis of our American ideals and republic. Please, no more articles that fail to address the real reason all of this is going on.

obama has a gun to head

(and it isn't a gun held by voters)

Leon Bloom

September 09, 2011 4:45pm

Robert Reich is absolutely correct. The program is not big enough, particularly where the job creation part is concerned. There won't be enough jobs created, even if the bills pass, to make a difference.
More money in the program is required if it going to create enough jobs. To get more money in, you have to go to where the money is, and that is the trillion dollars that are being held overseas by large corporations that don't want to pay the taxes on their profits when they bring those funds in. I believe we should let them bring that money in, tax free, provided that put it to work creating jobs.
I live in San Diego and yesterday we were hit with the largest power outage this country has ever seen. If that isn't a reason to upgrade our electric grid, I don't know what is. General Electric would be a perfect company to do that job, nationwide. They could use those funds to get it done, create tens of thousands of jobs, if not millions, and collect fees for the finished product when the job was done. After all, the head of GE is the president's job czar, he should be glad to invest his funds that way.
There are lots of other specific jobs that could be handled in the same way by companies like Microsoft, Google, and Cysco, who could work on upgrading our data network and making less vulnerable to cyber attacks as well as building a good software learning system that could upgrade the learning process in all of our schools. Perhaps Caterpiller could organize is upgrade of our roads and bridges, as well as upgrading our airports and public transportation with the money they are probably holding.
As it is, that money is not doing our country or these corporations any good, just sitting there and earning very little interest. It's time they put it to work to make sure they can preserve the properous country I'm sure they would like to see.

Andrea Chisari

September 09, 2011 4:25pm

The title of this article suggests there were two good things and only one bad about the "plan".

Instead, it appears that it is like a critique of a restaurant meal and says that the meal looked great on the plate, was served wonderfully well by the waitstaff, but tasted like dishwater.

(Sorry if this posts more than once - it didn't appear the first time so I re-did it.)

steve13565

September 10, 2011 5:56am

As we used to say going through the line at the mess hall in the Army, "Good bread, Specialist", or "Good water, Specialist". (The person serving the food had the rank of Specialist.)

Bradford Nelson Bray

September 09, 2011 2:39pm

What do so-called 3rd world countries and America have in common?

They produce nothing and import everything.

Get the picture? We are fast becoming a 3rd world country whose major manufacturing entities and institutions have gone overseas to find cheap labor. GE recently announced plans to lay off 20,000 workers here and build in China. Same ol' same ol'. And our government (both parties mind you) sign off on it with their blessings!

Frankly, I see nothing that will change the absence of jobs in America. Nothing.

No stimulus will help I don't care how big. We need to create sustainable long term jobs that produce something that can exported to both customers here and abroad. See anyone in America doing that? The only thing we export are drones and bombs! We have perfected that after fighting in at least one war (sometime more) for every generation going back over 100 years!

We have government "representatives" who are hired and supported by multinational corporations. They are hired to create money and profits for corporations (their real bosses), not create jobs for the citizenry. Point: it will not matter who you vote for or the party they "represent." They ALL are working for the plutocracy.

Obama is a joke............just like those whom he followed. They get richer while the 95% of America circles the drain.

Rich Cheney

September 09, 2011 1:44pm

Senator McConnell is typically wrong, but he is correct with his quip on Obama's latest plan, "its not a job plan, its a reelection plan"

Instead of handing over $1 trillion to the banksters and doubling down in Afghanistan, etc... the President should have invested in US infrastructure/clean energy and the middle/working class - but he chose to serve the ruling class... sure, its filled his campaign coffers, but what has that done for the poor, middle and working class?

Curtis Smay

September 09, 2011 12:14pm

Obama Has blown it again He sounded more like a republican than a democrat pay roll cuts is a dishonest way to say I will cut SS . this guy does more harm than he does good . Lets get a real democrat to run on the ballot for 2012 . Lets get rid of this blue dog Republican.

Patrick Monk Rn
San Francisco, Ca
September 09, 2011 12:08pm

Again, to little, to late, ignoring reality and simple/simplistic economics. If the first 'stimulus' had been doled out to "us", we would in one way or another have ploughed it directly back into the economy, spending, paying bills, saving etc; thereby creating a genuine 'bottom up' stimulus. Instead it primarily went to 'the top', who hoarded it and, as usual, nothing trickled down, no crumbs off the rich man's table. Now we essentially get more of the same. Ridiculous.
In this country of the blind, our king has both eyes shut.

Puff

September 09, 2011 12:06pm

I'm still willing to give the President a go on this one. I too was concerned when he mentioned Medicare.
I saw a passion in him that I haven't seen since he campaigned. I hope he sticks to it and goes out to the people and names names of those obstructionists in Congress.

Ray Seyfarth

September 09, 2011 11:52am

You're right once again. Obama is caving in before negotiating. We could spend $450 billion by employing 10 million people at $45,000. That would make a big difference, spending money on tax cuts will not help (or else we wouldn't have this problem). We've tried tax cuts and they are ineffective, so it's time to try something else. Also the cutting of payroll taxes is a dangerous precedent. We have seen how hard it is now to restore rates to previous more sensible levels. The right will accuse the left of trying to raise taxes while simultaneously proclaiming that Social Security is bankrupt. This deal is too good for the Republicans to refuse. If they put this is place, the economy will sputter and they can claim that "Obama's stimulus plans" both failed. If they reject it they look foolish because these are basically Republican plans. Our only hope it that the right truly believes their own propaganda and refuse to go along with the plan.

My view on America at this juncture is that we are being offered a choice between "Heaven on Earth" and "Hell on Earth" and choosing Hell. I am confident that there is wealth enough for all Americans to live well with health care, but people are so Hell-bent on preventing others from succeeding that they will take us all down with them.

Jack

September 09, 2011 11:46am

I'm a bit concerned about the Medicare sell out and the hidden suggestion that Social Security will also take a hit.

I liked the tax cut for the middle class (a new switch from the past "tax cuts") and the increase of taxes to the rich (the recipients of past "tax cuts"). I especially like the idea of repairing our infrastructure. Maybe we can make it as good as we've made Afghanistan's and Iraq's.

That said, like Angel, I don't think he's got the nards to stick to his plan. The first Republican complaint will bring the house of cards down. As my father used to say, "We'll see." And that usually meant "no".

Vindrag

September 09, 2011 11:42am

I think someone should tell Pres Obama that the definition of insanity is doing the same thing over and over and expecting a different outcome. Of course, our only choice in '12 is him or any one of the even more insane tea/republicans.

Angel J. Perea

September 09, 2011 11:32am

Keeping it honest: Are you listening, Mr. Kevin McCarthy (Bakersfield, Ca)? Although I supported our President and was optimistic about his message, I am not confident about his efforts to make a good deal! He has failed us twice trying to compromise!

Also, three items! What does Social Security have to do with Job creation?

Those threee trade bills which will only outsource more Americans jobs! How is that Job creation? Made in America by American! This legislation is just dumb!

When will you stop the billions of wasteful spending on the two wars and get our troops home?

We will see, but know, that because what he says does not match what he has done! I am not confident and disappointed because he has not shown strong leadership even though 3/4 of Middle Class American have expressed support for his policy positions!

What he should have said, " I will sign veto any legislation that does not create jobs for Americans in American!

Mr. President, its only about Jobs and nothing else, stupid! What part of this, does the Kevin McCarthy (Bakersfield) and his filibuster obstructionists in Washington do not understand? Plain and simple.