Why Obama Can’t Pivot to Jobs

obama gop back from the brinkThe Hostage Crisis Continues: Why Obama Can’t Pivot to Jobs and Growth

With the hostage crisis behind him, the President is now ready to talk about the nation’s real problem.

Nine paragraphs into his remarks today announcing the nation has paid most of the ransom the radical right demanded as a condition for maintaining the full faith and credit of the United States (he didn’t use these exact words), the President pivoted to the agenda he should have been talking about all along:

“And in the coming months I’ll continue also to fight for what the American people care most about: new jobs, higher wages, and faster economic growth.”

But what precisely will he fight for now that the debt deal has tied his hands?

He says he wants to extend tax cuts for middle class families and make sure the jobless get unemployment benefits.

Fine, but the new deal won’t let him. He’ll have to go back to Congress after the recess (five weeks from now) and round up enough votes to override the budget caps that now restrict spending. What are the odds? Maybe a little higher than zero.

He says he wants an “infrastructure bank” that would borrow money from private capital markets to pay private contractors to rebuild our nations roads, bridges, airports, and everything else that’s falling apart.

Fine, but the new deal he just signed may not let him do this either – if the infrastructure bank relies on federal funds or even federal loan guarantees to attract private money. The only way he could create an infrastructure bank without sweetening the pot would be by privatizing all the new infrastructure. That means toll roads and toll bridges, user-fee airports, and entry fees everywhere else.

Apart from its potential unfairness to lower-income people, such a privatized infrastructure would have the same effect as a tax increase. After paying more for roads and bridges and all other infrastructure, Americans would have less cash for to spend on goods and services. That means no boost to the economy.

The President also wants to complete trade deals and reform the patent process. These may make the economy slightly more efficient, but they’re not going to have any perceptible positive impact on the lives of the 26 million Americans who are now either looking for work, working in part-time jobs but needing full-time ones, or have given up looking.

More importantly, the deal he just signed makes it impossible for the President and Democrats to launch any major jobs program – no WPA or Civilian Conservation Corps, no major lending program to cash-starved states and locales, no new help for distressed homeowners, and so on. Nada.

“We’ve got to do everything in our power to grow this economy and put America back to work,” the President says, now that the hostage crisis is over.

But the sad truth is he and the nation remain hostage to the ideology of right-wing Republicans who won’t let the government spend more money. Yet if the government can’t spend more – at least this year and next, until the pump is primed and the economy is growing again – we won’t see job growth. And without job growth, the economy will remain anemic.

That’s why even the stock market is reacting badly to the end of the hostage crisis.

If you hadn’t noticed, the number of people unemployed or underemployed keeps growing. (We’ll know Friday how many it added in July, but remember it needs to add 125,000 a month just to keep up with the growth of the labor force. Anything below 125,000 means we continue to slide backward.)

The reason: Consumers, who are 70 percent of the economy, haven’t been able to pick up the slack. That’s because they’re still deep in debt. Their homes have plummeted in value. They can’t borrow. Their jobs are on the line and their wages are dropping.

So where will the demand come from if not government? The radical right points to the alleged “failure” of the stimulus program as evidence that government spending doesn’t work. The fact is it did work – it saved at least 3 million jobs, and would have saved far more if the stimulus was on the scale needed and directed to job creation.

To be sure, pump-priming is more difficult when the well is almost dry, as it is now. And widening inequality – the rich taking home an increasing share of the nation’s total income and wealth – has left the vast middle class with even less purchasing power.

But the pump still needs to be primed.

And the well has to be filled: The nation must also push for real tax reform that reverses the surge toward inequality – raising taxes on the wealthy, cutting them for the middle, and expanding the Earned Income Tax Credit for the poor.

Robert ReichTo do this, though, requires that Americans understand the truth. But where will they learn it?

The radical right has not only captured the federal budget. In convincing so many Americans the problem is the size of government rather than their shrinking paychecks and growing economic insecurity, the radical right has also captured the American mind.

Robert Reich
Robert Reich’s Blog

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Comments

  1. in_awe says

    Yes! SPEND MORE! More Keynesianism is the answer!!! WE just didn’t spend ENOUGH – that is the problem. Double down – more wealth transfer to unions, buy more votes! Heck, spending $300,000 per job “saved” (Ha! What a joke.) just wasn’t thinking BIG enough – let’s do it all over, this time with relish!

    It couldn’t possibly be that layers and layers of more business crushing regulations are playing a role, or more unfunded mandates, and new de facto taxes that result from regulatory fiats. No, the very very best thing to do in a recession (ah, longing for another summer of recovery like 2010) is reduce profits for small businesses while cozying up to big businesses who are run by guys standing by with open checkbooks ready to drop some serious cash into Obama’s re-election campaign war chest.

    Pivot to jobs? Job One for I Won is campaigning and with the need to amass $1BILLION to stroke his ego who has time to worry about Joe the plumber or Sally the seamstress? Rubbery chickens must be plated and served and $35,000 donations collected – then on to the next town. And yes, the US Treasury CAN pay for I Won’s campaign trips cuz he’s really not campaigning. Just think about how many meals for the homeless those $$$ millions spent on flying him around on his campaign trips would buy.

    You blame Republicans for this economy? Right! Ever think that by keeping us in the economic doldrums he thinks he can fire up his base and continue to play the blame game and eek out a win? Our teflon Prez has to manufacture outrage and pretend to be the only “adult in the room” as he likes to call himself.

  2. bigbadjohn says

    obama can talk all he wants about jobs……aint gonna happen. the economy is humming along just the way the tea / repubs want it to. that is its failing. if it continues they think they will grab the house , the senate and the white house. i dont see that happening either but who knows. what i do know is that ever since the black man took the white house the rich have taken their ball and went home. you have to understand the rich are of the hive mind. they want it all and have just about succeeded.

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