Obama’s Tiny Jobs Ideas for Main Street, A Big Spending Freeze for Wall Street

President Obama today offered a set of proposals for helping America’s troubled middle class. All are sensible and worthwhile. But none will bring jobs back. And Americans could be forgiven for wondering how the President plans to enact any of these ideas anyway, when he can no longer muster 60 votes in the Senate.

The bigger news is Obama is planning a three-year budget freeze on a big chunk of discretionary spending. Wall Street is delighted. But it means Main Street is in worse trouble than ever.

A pending freeze will make it even harder to get jobs back because government is the last spender around. Consumers have pulled back, investors won’t do much until they know consumers are out there, and exports are miniscule.

In December 1994, Bill Clinton proposed a so-called “middle class bill of rights” including more tax credits for families with children, expanded retirement accounts, and tax-deductible college tuition. Clinton had lost his battle for health care reform. Even worse, by that time the Dems had lost the House and Senate. Washington was riding a huge anti-incumbent wave. Right-wing populists were the ascendancy, with Newt Gingrich and Fox News leading the charge. Bill Clinton thought it desperately important to assure Americans he was on their side.

Two months later, Clinton summoned Dick Morris to the White House to figure out how Clinton could move to the right and better position himself for reelection. The answer: Balance the budget.

But in 1994, Clinton’s inconsistencies didn’t much matter. The U.S. economy was coming out of a recession. It was of no consequence that Clinton’s jobs proposals were small or that he moved to the right and whacked the budget, because within a year the great American jobs machine was blasting away and the middle class felt a lot better. Dick Morris was not responsible for Clinton’s reelection. Nor was Clinton’s move to the right. What reelected Bill Clinton in 1996 was a vigorous jobs recovery that was on the way to happening anyway.

Today, though, there’s no sign on the horizon of a vigorous recovery. Jobs may be coming back a bit in the next months but the country has lost so many (not to mention all those who have entered the workforce over the last two years and still can’t land a job) that it will be many years before the middle class can relax. Furthermore, this recession isn’t like other recessions in recent memory. It has more to do with problems deep in the structure of the American economy than with the ups and downs of the business cycle.

Like Clinton’s, Obama’s package of middle class benefits is small potatoes. They’re worthwhile but they pale relative to the size and scale of the challenge America’s middle class is now facing. Obama can no longer afford to come up with lists of nice things to do. At the least, he’s got to do two very big and important things:

  • Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly.
  • Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy — which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)

robert_reich.jpgYet instead of moving in this direction, Obama is moving in the opposite one. His three-year freeze on a large portion of discretionary spending will make it impossible for him to do much of anything for the middle class that’s important. Chalk up another win for Wall Street, another loss for Main.

by Robert Reich

This article first appeared on Robert Reich’s Blog. Republished with permission

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Comments

  1. SandiB says

    Robert Reich: Why are you comparing Barack Obama to what things Clinton did? America wasn’t in this shape when Clinton was in office. Jobs weren’t falling off the plate, money wasn’t horded by banks, Wall Street still had Main Street’s money and seemed to be “careful” how they spent it, and what they invested it in.

    Your memory must really be short, or you aren’t doing all the homework necessary to see the big picture that is now starring Barack Obama. It is his “Movie” and he is doing what “he” thinks needs to be done to stimulate jobs in order to have a “happy ending” for this Movie.

    You report as if you “know” a better way or a know of a “Republican” or past President who could do it better, when we all know that this Recession wasn’t like any we have had before.

    Do ya think maybe different things might need to be done to right this situation?

    I know I heard him say he was going to loosen the strings for
    SBA loans, lower taxes for Small Businesses, and until the BIG CORPORATIONS quit partying with Wall Street and open the doors to their businesses, then I guess you are right…..little Barack Obama won’t be able to play with as “big of toys” as Wall Street can. They are the ones who have the biggest “pockets” so people like you will just hop in.

  2. Michael Honey says

    Robert Reich is probably someone who could explain this to me:

    I thought the bank bailout was to make credit available to borrowers. How does that square with the gigantic profits put in the pockets of bankers? Is there no requirement that they invest their profits to get the economic system moving?

    If not, then why don’t the taxpayers get a share of these huge profits? At least it would have been a good investment for us.

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