I am constantly amazed by the inability of this White House to understand the basic workings of the economy and what “immediate” means in terms of stimulus.
What it doesn’t mean are infrastructure projects spread out over 6 years – especially given the onerous requirements the federal bureaucracy lays on any such project. Heck the environmental studies will most likely not be done in 6 years.
But, reports the New York Times, that’s precisely what President Obama is offering as a plan to create jobs.
President Obama, looking to stimulate a sluggish economy and create jobs, called Monday for Congress to approve major upgrades to the nation’s roads, rail lines and runways — part of a six-year plan that would cost tens of billions of dollars and create a government-run bank to finance
We’ve been through this with the 800+ billion dollar “stimulus” bill which, as it turns out, stimulated nothing. Its focus was infrastructure. It has done very little to stimulate economic growth or job creation. In fact, the best that can be claimed for it is it might have saved or protected some jobs. And that’s believable only if you’re willing to buy into the accuracy of the algorithm the computer models they use to estimate such things.
The problem is two-fold: consumers aren’t consuming and businesses aren’t expanding and hiring. That’s an economy wide problem – not one focused in construction. The “this ain’t rocket science” approach then should be to provide incentives for consumers to consume and for businesses to hire and expand.
That’s not going to be accomplished with 50 billion more in deficit fueled dollars spread out over 6 years (that certainly doesn’t fit my understanding of the word immediate).
Instead of spending money, the administration should be concentrating on policies that focus on the two-fold problem of consumers and businesses.
An immediate way to infuse the economy with money and give consumers an incentive to consume is a payroll tax holiday. Common sense says that would put billions in the pockets of consumers and give them the incentive to spend some of it.
But that’s apparently been rejected by the administration. Too “costly”. While they’re more than willing to put you in debt for over a trillion dollars (the first stimulus and this new one), they’re absolutely unwilling to allow you to keep more of your own money. Instead they cling to the notion that top down spending is both credible and necessary to break out of this recession.
Policies that would address the second area of concern are across the board tax cuts for businesses. The markets are unsettled because they’re facing a barrage of new taxes and regulations. They still don’t know how ObamaCare will impact them, there are many new financial regulations they must wade through and taxes are going up on January 1st. You see, it is much more important to fulfill a campaign promise about ending the Bush tax cuts for the demonized “rich” than it is to use common sense and recognize that raising taxes in a recession is simply stupid and at cross-purposes with what the administration is supposedly trying to do with the economy.
If you’re wondering why Americans have lost faith in government in general and this administration specifically, it is because of “policy” that includes things like this:
Central to the plan is the president’s call for an “infrastructure bank,” which would be run by the government but would pool tax dollars with private investment, the White House says. Mr. Obama embraced the idea as a senator; with unemployment still high despite an array of government efforts, the concept has lately been gaining traction in policy circles and on Capitol Hill.
Most Americans are going to look at this and say, at least to themselves, “the only real jobs that are going to be created by this spending spree are in a government controlled “bank”. And then they’ll think back to the wonderful job the government did in the housing market via Freddie Mac and Fannie Mae.
They’re also going to wonder why something like this is “gaining traction in policy circles” when, to most of them at least, it has little or nothing to do with addressing the root problems the economy faces.
If you’ve been wondering why the Democrats are in for a drubbing in November, this story in the NYT does much to clarify that. They’re not only totally disconnected from the reality of the problem, but still operate under the premise that only more government can solve the problem. If consumers aren’t consuming and therefore businesses aren’t hiring and expanding, more infrastructure work (that may have an impact as early as next year the administration claims) and more government bureaucracy aren’t the answer, are they?