The good parts involved extension of unemployment insurance ($49 billion) and federal investments in school modernization ($30 billion) and infrastructure ($50 billion), the latter of which would involve at least some direct hiring of workers to do the jobs. Another good feature is extending $35 billion in aid to states, which, while it will not create any new jobs, is intended to prevent the loss of some which would otherwise vanish in the midst of state attempts to balance budgets.
The sucky part is most everything else: The bulk of the proposal, some $240 billion, more than half, is made up of tax cuts - or, as they are nowadays rebranded by PR outfits and focus groups, tax "relief." And I expect they will work the same as they have in the past - which is, generally, "not."
Economists estimate the plan, which would cost about $447 billion if fully adopted, could create anywhere from 500,000 to nearly 2 million jobs next year. At least one progressive economist said the plan was bolder than he expected.
Maybe so, maybe it is "bolder" than we've come to expect from President Back-Down-Before-the-Battle-Even-Begins, but how good is it really? How much will it do for average schmucks like us?
Before the speech, lots of folks were wondering what direction PHC* would take: Would he get tough on the GOPpers, slam them for their obstructionism, demand that they shut up and get in line? Or would he, as his political advisors were reportedly pressing him to, go "pragmatic" by proposing stuff that was more likely to pass even if it didn't do much because getting something, anything, passed would look better for him in 2012?
Well, it appears he managed to do both. He talked tough, said some version of "pass this bill right now" more than a dozen times, setting the hearts of his adoring fans all a-flutter - but the things he proposed are small and will do little, even if they all get passed, which they won't.
In fact, related it this, the plan contains one really odd thing: He proposed to pay for it by some tax increases on the rich. Now, that is a definitely good thing and good for him for proposing it, but he knows, just like everyone else knows, such a plan has no chance in the House and maybe not in the Senate. Since I for one do not think this represents a brand new and genuine populism on O.'s part and really doubt he plans to fight for this (I notice he didn't say "Tax the rich!" a dozen times in his speech, or even once for that matter), why did he propose it? Was it for the PR effect? Just red meat to his base? Or so he can later use it to run against GOPpers on it? (Maybe - the GOPpers are certainly concerned about that prospect.)
Leaving that aside to get to the program proposals themselves, I seems to me that they are diddly-squat. Remember, for example, that the claim is that their effect could be to create nearly two million jobs next year. But it will take 2.7 million new jobs just to drop the unemployment rate by a single percentage point. By a very crude calculation, that means that the most optimistic forecast is that next year will see an unemployment rate of about 8.4%.
What's more, I don't have a lot of faith is those optimistic predictions. One reason is that the biggest part of the plan is, again, tax cuts - which always seem to be the first resort in such plans. The problem is, they don't work as serious stimulus except under special circumstances, ones which do not exist now. Tax cuts can provide a big stimulus if you have an economy that is ready to go, operating a new full capacity, ready to take off with just a nudge. What we have now is not like a horse straining at the bit, where you can let up on the reins a bit and let it run; we have an economy more like a horse that is sound asleep and we're trying to wake up. Easing up on the reins is not going to get that horse moving.
In fact, over the past couple of years, there have been several hiring tax credits as well as some 16 small business tax cuts measures, all aimed at getting businesses to hire. And they have failed.
You want a longer-term example? Here's one: The Bush tax cuts, the ones that were supposed to be temporary but were extended last December, went into effect on June 7, 2001. At that time, the national unemployment rate was 4.5%. (The good old days.) Since then, through August 2011, we have had 122 months of unemployment data. In all that time, unemployment never went below 4.4%. In fact, it was at 4.4% or 4.5% in a total of eight of those months, all of those is one nine-month stretch from September 2006 to May 2007. That is, for 114 of those 122 months, over 93% of time, unemployment was above where it was when these "job-producing" tax cuts went into effect.
Just recently, the New York Times had a big article on the possible real-world effect of the Obama plan, and in it, stated the obvious:
The dismal state of the economy is the main reason many companies are reluctant to hire workers, and few executives are saying that President Obama’s jobs plan — while welcome — will change their minds any time soon. ...All the blather about "job creators" and "improving the business climate" is utter crap. These people, these corporations, have as their prime concern maximizing their profit. They are not going to take the lead. They are going to follow.
[M]any employers dismissed the notion that any particular tax break or incentive would be persuasive. Instead, they said they tended to hire more workers or expand when the economy improved.
As that same article points out, there is in the White House plan a $4,000 tax credit for employers that hire people who have been out of work for six months or longer.
To the extent these measures could be used, many employers said they would most likely support people whom companies were planning to hire anyway.That is, all the proposal does is increase profits of companies by handing them $4000 for what they would have done anyway without creating one extra job or doing one thing to reduce unemployment.
But why in all that's rational would anyone think it would be otherwise? Corporations - I've said this before - are already sitting on over $2 trillion in ready cash reserves thanks to record profits. They already have more than enough money to invest, to expand, to hire if they were going to do that. But they're not and they won't and putting more money into the hands of people who already have more than enough is not going to change things.
That because of something else I've said before and will say it as many times as necessary: Corporations do not create jobs. The rich do not create jobs. There is only one thing that creates jobs, and that is demand. Demand, demand for goods and services to be supplied in the economy is only thing that creates jobs. Corporations are all about profit. Rich investors are all about return on investment. Businesses are not going to hire people they don’t need to make more profits.
In an economy like this one, there is only one agency that can effectively spur creation of demand, and that is government. It can do it by, essentially, taking money from people who have it, don't need it, and aren't spending it and giving it to people who don't have it, do need it, and will spend it - spend it on goods and services the private economy can supply, creating greater demand for those goods and services, sparking the hiring of people to meet that demand, people who will then have money to spend, creating more demand.
But still, still, what we keep hearing about is how we should - must - cut costs for corporations even though we have already done that repeatedly to no avail, even though it will accomplish nothing except make the filthy rich filthier and richer, and even though cutting corporate taxes is one of the worst ways to stimulate demand. And the latter is not just a philosophical statement, it's a mathematical one.
For example, just last month, Mark Zandi, who is the chief economist for Moody’s Analytics, released an analysis of how well various government measures work as economic stimulus. Zandi, it should be noted, is by no means some sort of lefty; in fact, he advised John McCain's campaign in 2008. Even so, his study showed that government spending is a much better economic stimulus than tax cuts.
Indeed, the single most effective form of stimulus, he found, is increased outlays for Food Stamps: Those expenditures produce $1.71 in economic activity for each dollar in federal spending. It provides that greatest bang for the buck. Rounding out the top three measures were spending on unemployment benefits and on infrastructure. And this is no outlier; earlier studies, including on by the CBO, have found much the same thing. As economic stimulus, spending beats tax cuts hands down.
But the fact remains that the biggest part of O.'s program is, again, tax cuts. According to the Moody’s study, each dollar lost by the Treasury due to the kinds of tax cuts for workers the White House proposes will create just $1.27 in new economic activity. The cuts for employers fare even worse, creating just $1.05 in economic activity for each dollar lost - essentially a wash.
Another important point here is the kinds of tax cuts envisioned: They are cuts in payroll taxes, the taxes that go to support Social Security and Medicare. The proposal is to cut payroll taxes for employees in half next year and trimming employer payroll taxes as well. That is, Barack Obama is looking to stimulate the economy by draining away money that should have gone to the trust funds backing those programs. In the midst of increasingly-shrill claims that the programs are going bust, Obama is proposing to make their long-term financing worse by over $200 billion.
That actually answers a question some people were asking in the wake of his speech: Why did he bring Medicare into it?
The thing is, why wonder? Barack Obama wants to cut Social Security and Medicare. He's made it clear, he's even said it out loud: At a town hall meeting in Illinois on August 11, Obama said he would personally push for such cuts as part of any deal for deficit reduction or job creation.
He wants to cut them. So he's only doing what he said. So why the surprise? (Unless it's surprise that in this case he actually is doing what he said he would.)
Another part of all this is calls to lower the corporate income tax, which, again, seems always to be part of the first resort. But, getting back to the Moody’s study for one more mathematical moment, it found that such a tax cut would create a mere 32 cents of economic activity for each dollar spent. It's a net loser economically. Which only goes to show one more time that cutting taxes to corporations is one of worst ways to stimulate demand, one of the worst ways to stimulate the economy. Federal spending is, simply, factually, mathematically, a much better option.
And what's even better than federal spending on the top two stimulative programs (Food Stamps and unemployment)? Why, direct public jobs programs: the government directly hiring people and paying them to do needed work.
In a recent study, economist Philip Harvey modeled the effects of spending $100 billion on direct job creation versus the same investment in Food Stamps and unemployment. He found that that amount of federal spending on those two programs would create nearly 570,000 jobs. (Note that is within the range of predictions for the White House's program at less than a quarter the cost.) On the other hand, spending that amount on direct hiring would produce over a million jobs plus another more than 440,000 private sector jobs due to the in-direct stimulus effect: over 1.5 million overall.
This would not even be the first time we've done something like this. As just one example, my father was in the Civilian Conservation Corps - the CCC - during the Depression. Part of the WPA, this was a direct federal hiring program for unemployed, single young men who were set to work on a large variety of conservation projects. During its lifetime, it provided 2.5 million men with work for anywhere from six month to two years. So a direct public jobs program is not even a new thing.
But all the exact numbers of employment totals and relative stimulative effects and all the rest are not important. What’s important is the relations among them. And what they come down to is that the single most effective thing the federal government can do to get people back to work, the single most effective thing it can do to get unemployment down, to spur economic activity, is to hire people and pay them to do needed productive work. Period. And if getting the economy moving is what you are actually concerned about rather than ideological rigidity or election-year posturing, that is what you will advocate.
The second best way is to support Food Stamps and insure getting them to everyone legally entitled to them. However, that's going to be a minority of people, sort of a limited universe, so you can go on to include the next best ways: extending unemployment assistance and supporting infrastructure programs.
What you will not do, because it is one of worst, if not the worst, way to advantage the economy, is to push for tax cuts to the rich and the corporations.
So why are those sorts of tax cuts always high on the agenda? How can it be that they don’t understand, that they don't understand the plain, repeatedly found, facts, facts based on both studies and actual experience, facts staring them right in the face?
Don't let your head explode, rather realize that the question has already been answered: They do understand. They do know. It's just that when the choice comes down to the vast majority of us or the handful of the powerful who pay the campaign bills and hire the armies of lobbyists to make sure it's known among those writing and signing the laws what side that handful is on, it's no contest. So instead of thinking about how can they do this, think instead about what this reveals about who is in charge, who makes decisions, who is really in control, who is really responsible for the mess we are in.
Yet something else I've said before: Make sure that you are angry at the right targets.
But there is a lot of anger around, a great deal of angry frustration, and, as is usual, it reveals itself in amoral callousness. I know you've heard about the moments at the GOPper presidential debate when Ron Paul was asked a hypothetical question about a healthy 30-year-old man without health insurance who goes into a coma and requires intensive care for six months. Paul was cheered for his answer that it's not the government's responsibility - and when he was then asked if "society should just let him die," there were shouts of "Yeah!" followed by laughter from the audience.
I expect you also heard about the crowd that cheered Rick Perry’s record of having executed more people than any other governor, any time, anywhere.
It's easy to condemn people like that, and such moral condemnation would certainly not be undeserved. But as I said something over a year ago, I have a certain sympathy for these people, many of who are - like too many Americans - not very well informed and thus easily manipulated into blaming the wrong people - into being angry at the wrong targets.
What's more, they are under stress, constant stress, and it shows, as stress usually does, in anger and coldness and indifference to others.
What stress? To begin with, I know you heard about the poverty numbers: According to the Census Bureau's annual report, a record 46 million Americans suffered in poverty in 2010, more than in any other year since the Bureau started making the estimate. The poverty rate rose to 15.1%, the third consecutive increase; it is now as high as it was in 1993 - and you would have to go back another 10 years, to 1983, to find one higher.
The poverty rate for children under 18 was 22% in 2010, making them more likely than any other age group to be poor. For children under the age of six, the poverty rate is a shocking 25.3%.
(The fact is, the US has long had one of highest poverty rates in developed world. Among 34 industrialized nations tracked by the Organization for Economic Cooperation and Development, only Chile, Israel, and Mexico have higher rates of poverty. But that this is not a new problem only adds to the economic stresses involved.)
Now go beyond that to remember that the broader economy sucks: For one thing, there was a net gain of zero jobs in August and the official unemployment rate persisted at 9.1%.
Signs of sluggish (at best) growth abound. In August, the average workweek for all employees edged down, as did the average hourly earnings for private employees. At the same time, the number of involuntary part-time workers, those who are working part-time only because they can't find full-time work, swelled by 400,000 to 8.8 million - meaning the total un- and under-employment rate went up.
More than six million of the officially unemployed have been out of work for at least six months - some 42.9% of the total number, tied for the record high. And an additional roughly 30,000 people reached 99 weeks without work, up to 2.04 million.
Meanwhile, the number of Americans with no health insurance is at 49.9 million, up nearly 2% from the year before.
And the real point here, the important point, is that this is not just now, this is not just the economic crunch of the past couple of years. This has been going on for decades. Lost decades - literally - of no gains, only the struggle to keep up.
In 2010, working Americans saw the annual median income decline 2.3% percent to $49,445. That was the third year in a row that the median income dropped. Adjusted for inflation, it is now roughly where it was in 1996: Fifteen years of getting nowhere.
Meanwhile, inflation-adjusted household income is now down 7.1% from its peak in 1999. Twelve years down the road and if you're an average family you are worse off than when you started.
Here's a stunner: Adjusted for inflation, the average male worker, that is, one at the median level, now makes less than he did - is worse off than he was - in 1968! Back then, the median income of male workers was $32,844. In 2010, it was $32,137, or $607 less. That's 43 years of work to wind up with no gain.
For all too many among us, our hopes are shriveling; worse, our hopes for the future of our children are seeming to evaporate. Under that kind of stress, it is natural to look for someone to blame, to look for someone who "did this to you." And the unfortunate, the sad, but the true fact is that it is easier, it is always easier, to blame those weaker than yourself. Prejudices and fears emerge easily.
So a lot of these folks are angry, frightened, frustrated, economically stressed people who have been manipulated by powerful voices around them into being angry at the wrong targets. At the poor, at the unemployed, at undocumented immigrants, at unions, at public employees, even at teachers.
So who should they be angry at? Here are a few ideas:
How about the 25 of the 100 highest paid U.S. CEOs who earned more last year than their companies paid in fed. income tax?
How about the companies that spent more on lobbying than on taxes?
How about the companies that have decided that “labor is just too expensive," and want to move to “a labor-less society," because as their profits increasingly come from overseas they have decided they damn well can do without you altogether?
How about the politicians in DC who, analysts say, just don’t care about poverty-related issues?
How about the business leaders and former government officials who wrote to that super committee, that select committee to find ways to slash budget - aptly dubbed the Joint Select Committee on Human Sacrifice by Lambert Strether - calling on it to "go big" and cut far more than the $1.5 trillion in cuts it’s tasked with finding?
How about Sen. Jon Kyl of Arizona, a member of that committee, who threatened to in effect blow up the whole process if the committee considered a single dime in additional cuts in military spending?
How about those - mostly but not exclusively GOPpers - who are willing to let the economy go to hell and your life into the trash in order to protect their fat head, fat ass, fat cat cronies from having to pay a single extra penny in taxes?
Or how about the economic system itself, one that celebrates selfishness and applauds amorality? Now, there is a target worthy of our concentrated anger - and while it surely is for the vast majority of our fellow citizens not a visible target, it just as surely is the right one.
*PHC = President Hopey-Changey
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