Tomorrow's much heralded jobs speech by President Obama before a joint session of Congress will contain many proposals -- including new spending on infrastructure and education, tax credits for job-creation, jobs training for workers displaced by the recession, tax breaks for employers to hire workers among particular voter groups, and so on. This late summer re-enactment of annual State of the Union spectacles won't ramble on about a wide range of policy issues. The President will focus on just one topic -- federal policies meant to foster job creation. That means the President's list of proposals will be long and, according to media reports, will cost about $300 billion. But for an economy debilitated by policy uncertainty, this is exactly the wrong thing to do.
This summer's bruising debate on increasing the debt limit has left lawmakers with no appetite for more spending, whether financed out of taxes or borrowing and the proposals will be DOA. Among Democratic lawmakers, only those with a suicidal urge would suggest that we enact new spending programs financed out of new taxes. That would simply reinvigorate political support for the Tea Party with already proven credentials on successfully opposing any and all tax increases.
The new jobs stimulus includes an extension of the two percentage point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the payroll tax paid by employers. The President will call on Congress to offset the cost of the short-term jobs measures by raising tax revenues in later years. But that means his jobs stimulus will be deficit financed -- a policy that is incongruous with the charge of the super-committee convened by the Deficit Control Act of 2011 to reduce federal deficits and debt. And the President, who was calling for eliminating tax loopholes as recently as four weeks ago, is now proposing a large new loophole himself.
There was a time when responsible lawmakers enacted new spending programs together with new revenues to pay for it. Social Security was enacted in 1935 together with payroll taxes to pay for its expenditures. So was Medicare in 1965 -- where Part A was fully funded out of dedicated revenues and Part B was funded partly out of beneficiary premiums and partly out of federal general revenues. But the Medicare Part D prescription drug program was enacted in 2003 with zero new dedicated funding.
The many stimulus programs enacted after the recession began in late 2007 were entirely deficit financed. The combination of reduced revenues from the recession and failed stimulus programs is why we now face a debilitating explosion of federal debt. The economic uncertainty created by rising debt -- about how debt will be reduced and who will bear the financial cost -- is the fundamental reason for a moribund economy. Proposing new deficit financed spending programs that are impossible to pay for is precisely the wrong thing to do.
But elections have their own compelling logic.
In many earlier speeches, President Obama has revealed a proclivity to criticize and admonish others -- mostly lawmakers in a recalcitrant Congress. But such speeches only alienate rather than attract, divide rather than unite. And we're already battered from those experiences: When we hear President Obama exhort lawmakers in Congress to make sacrifices and put country before politics and serve the people's needs rather than their own narrow political priorities, we should remember that he's doing the latter himself.
Jagadeesh Gokhale is a senior fellow at the Cato Institute, a member of the Social Security Advisory Board, and author of Social Security: A Fresh Look at Reform Alternatives, University of Chicago Press.
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Yeah right. Why hasn't obamacare been recinded?
Then we could maybe believe some of what he says, and have some money for infrastructure.
"The combination of reduced revenues from the recession and failed stimulus programs is why we now face a debilitating explosion of federal debt."
Now there is a lie that will rival anything said in tonight's prevaricator fest. Even the Part D unfunded drug benefit acknowledged earlier in the article is conveniently missing from this incredible claim. Then, of course, there are the two wars, the simultaneous trillion dollar tax cut, and a military budget that is completely irrational. Gokhale even gives Obama a pass on the second big tax cut. (I guess transferring money to the rich is always considered bipartisan) None of these items contributed to the debt according to Mr. Golhale, it all resulted from Obama's reckless stimulus spending. Articles such as this is how the Koch brothers influence public opinion.
I hope President Obama comes out in a big way for a real jobs program. It will benefit all working people in this country.
http://viableopposition.blogspot.com/2011/09/creating-jobs-in-america-what-can.html
With the deficit-to-GDP ratio well above the historic norm of 2.4 percent, there is very little that Washington can afford to do without exacerbating the debt problem further, creating a burden for future generations of Americans.
No matter how poor I got, I always made sure to educate my kids. I mortgaged my house to make sure they got their college educations. For that reason, my family's future is secure. The teabaggers would have raised a family of uneducated, unemployable kids who couldn't afford to buy anything or invest in anything. But at least they wouldn't be in debt.
That is the opposite of logical thinking.
Now another democratic president is tasked with cleaning up the mess that libertarian lassez faire, free unregulated markets have created.
Last report I read is that 'austerity' is not working - not here or anywhere. Austerity is creating more problems of unintended consequences.
With the anti spending mentality in DC there is no way we will ever get the chance to see if it would really work and could be done on a fair basis.
Tax cuts for the wealthy have not produced demand. The "job creators" aren't hiring. They have plenty of money, but don't spend enough to drive demand higher, and aren't hiring because demand is low. If we do some short term spending to stimulate economic growth by increasing DEMAND our debt will go down because revenues will increase even without more taxes -- because taxes are a percentage of income, and incomes will rise as the economy improves -- and when income rises the gross tax revenues increase since they are a percentage of those rising incomes. A rising tide floats all boats. The whole pie gets bigger and so does each individual piece.
Solves the problem.