I want to support Obama, I really do. But this speech bothered me the way that speeches by Larry Summers do. On the one hand, the basic theory is correct -- we need to avert a depression before worrying about deficits, rebuild our manufacturing, invest in infrastructure, etc. But there is a huge disconnect between the legitimate goals that are outlined and the inadequate or irrelevant or just plain teeny-weeny neo-liberal policy proposals. The result -- great openings followed immediately by let-downs and anticlimaxes.
A few examples of this disconnect. The president defends his and Congress's stimulus package, which was crippled because a third of it was wasted on tax cuts designed to win the votes of Republicans who all voted against it anyway -- and then he brags about the idiotic tax cuts!
As we stabilized the financial system, we also took steps to get our economy growing again, save as many jobs as possible, and help Americans who had become unemployed.
That's why we extended or increased unemployment benefits for more than 18 million Americans; made health insurance 65% cheaper for families who get their coverage through COBRA; and passed 25 different tax cuts.
Let me repeat: we cut taxes. We cut taxes for 95% of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers. And we haven't raised income taxes by a single dime on a single person. Not a single dime.
Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. 200,000 work in construction and clean energy. 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, and first responders. And we are on track to add another one and a half million jobs to this total by the end of the year.
I'm sorry, but this is a complete rhetorical capitulation to the Right. To listen to Obama, the tax cuts were what saved the economy, not the Keynesian spending. This raises the obvious question: maybe instead of a stimulus, there should have been only tax cuts, as the Republicans argued all along! Maybe we should have elected John McCain after all!
Later, he makes sensible remarks about helping American business, only to undercut them with right-wing (or maybe Ben & Jerry left-wing) romanticism about small business and individual entrepreneurs, which is somewhat at odds with the goal of helping world-class manufacturing enterprises that tend to be large and capital-intensive:
Now, the true engine of job creation in this country will always be America's businesses. But government can create the conditions necessary for businesses to expand and hire more workers.
We should start where most new jobs do -- in small businesses, companies that begin when an entrepreneur takes a chance on a dream, or a worker decides its time she became her own boss.
Through sheer grit and determination, these companies have weathered the recession and are ready to grow. But when you talk to small business owners in places like Allentown, Pennsylvania or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they are mostly lending to bigger companies. But financing remains difficult for small business owners across the country.
So tonight, I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I am also proposing a new small business tax credit - one that will go to over one million small businesses who hire new workers or raise wages.
Didn't Allentown, Pennsylvania and Elyria, Ohio, used to have large manufacturing companies, once upon a time in distant memory? Why didn't he mention all the mom-and-pop entrepreneurs in Detroit? This is inadvertently funny. It reminds me of a cruel Swiss joke: "How do you start a Belgian in a small business? Give him a big one and wait six months."
While we're at it, let's also eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.
Thank God for small favors.
Third example of disconnect: infrastructure. Once again, he says all the right things about the need for infrastructure investment. But then, inevitably, we get the high-speed rail fetish so admirably satirized in the Simpsons episode, "Marge and the Monorail" (in which Marge is the only person in town to question whether Springfield really needs a monorail):
Next, we can put Americans to work today building the infrastructure of tomorrow. From the first railroads to the interstate highway system, our nation has always been built to compete. There's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products.
Tomorrow, I'll visit Tampa, Florida, where workers will soon break ground on a new high-speed railroad funded by the Recovery Act. There are projects like that all across this country that will create jobs and help our nation move goods, services, and information.
Marge Simpson is right, even if Homer and all the others in Springfield disagree. High speed rail is a fetish. It's a cool futuristic symbol, like a rotating Space Needle restaurant or a downtown monorail, but it adds little or nothing to productivity growth, and the argument that technological spin-offs would justify the boondoggle is also an argument for a Space Needle in every town. In every country with high-speed rail it's a massive drain on government and constantly bleeds money. Getting people from London to Paris by train instead of plane simply doesn't do much for European GDP growth. Ironically, Europe, the Mecca of the rail fetishists, is far more reliant on trucking for freight transportation than America, which relies much more on freight rail. What the U.S. really needs is more freight rail, more inland waterways, lock and port modernization and airports, and -- don't hate me! -- more highways and congestion-relieving beltways--all boring and unfashionable things which lack the "gee, whiz" factor of high-speed trains, monorails and Space Needles but which contribute far more to economic growth.
I'm willing to cut the president some slack on energy, since in addition to bowing before the two false idols of our time to which all respectable people must kowtow, Wind and Solar, he says sensible things about nuclear energy and offshore drilling and coal sequestration research:
But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. That means building a new generation of safe, clean nuclear power plants in this country. It means making tough decisions about opening new offshore areas for oil and gas development. It means continued investment in advanced biofuels and clean coal technologies.
Unfortunately, after these sensible statements he then goes wrong again, in my opinion, by endorsing the cap-and-trade bill's approach of making non-renewable energy artificially expensive and then, having rigged prices, claiming that subsidized solar and wind are suddenly "economical" and "cheap" in reality instead of make-believe:
And yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America. (emphasis added)
Mr. President, if you need to rig the market to make something profitable, it ain't profitable. As the Breakthrough Institute and Obama's own Energy Secretary Chu have argued, the goal is to make clean energy cheap in reality, not to disguise its cost by tax subsidies for wind and solar and tax penalties for fossil fuels.
Inevitably we get another gimmick beloved by all right-thinking, moral people: weatherization.
We should put more Americans to work building clean energy facilities, and give rebates to Americans who make their homes more energy efficient, which supports clean energy jobs.
Tax credits for insulation. What a rinky-dink Mickey Mouse Robert Rubin Hamilton Project micro-idea. I have nothing against insulation, but, speaking of mice, in the words of the Roman poet Horace, "the mountain went into labor and gave birth to a ridiculous mouse."
Perhaps the biggest disconnect between sound theory and underwhelming and anticlimactic policy is found in his discussion of trade:
Third, we need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America.
To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security.
One cheer. Why are we only helping farmers (who already do quite well in international trade) and small business? What about big industrial firms--you know, automobile companies and aerospace companies? There aren't a whole lot of mom-and-pop car companies and plane and PC manufacturers. With our growing merchandise trade deficit, do we really need Jeffersonian romanticism about farms and small businesses? Isn't that what the Republican party is for? Wasn't that the economic program of my benighted ancestors in the Confederate States of America?
The president continues:
We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules. And that's why we will continue to shape a Doha trade agreement that opens global markets, and why we will strengthen our trade relations in Asia and with key partners like....
Drum roll, please. Is he about to say: With key partners like the chronic surplus nations, China, Japan and Germany that need to export less and buy more American manufactured goods?
...and with key partners like South Korea, Panama, and Colombia.
Yeah, right. We're going to compensate for Chinese and Japanese mercantilism by selling to small countries in Central America that have FTAs with the US. I know, I know, State told him he had to put the three FTA's in the speech, but he could have done so without risking ridicule (mine!) by treating them as major contributions to America's reindustrialization.
And to encourage these and other businesses to stay within our borders, it's time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.
I'm for that. Every president and presidential candidate promises this and it never happens.
Meanwhile, China's not waiting to revamp its economy. Germany's not waiting. India's not waiting. These nations aren't standing still. These nations aren't playing for second place. They're....
At last, he'll mention the real problem! They're rigging their currencies (China, or Japan) or taking advantage of their cheap labor (China, India) or outlawing union labor (China) or benefiting from increasing returns to scale by treating their EU partners as colonial export markets in order to generate chronic surpluses (Germany). Will a president of the United States actually identify the mercantilist practices that are the biggest threats to American manufacturing?
Not this president:
...They're putting more emphasis on math and science. They're rebuilding their infrastructure. They are making serious investments in clean energy because they want those jobs.
Once again, we're told that China is an industrial power solely because of its people's allegedly superior education and infrastructure investments, not because of its state-sponsored industrial policy and deals with Asian, European and American multinationals. No doubt the president believes this neo-liberal nonsense. Why wouldn't he? Most educated Americans believe it and they never encounter the facts, because of the censorship of opinion by the prestige press when it comes to challenges to the idea that the global market is already free and rule-governed and the only reason some countries have chronic trade surpluses is their superior educational systems (oh, and their high-speed passenger trains).
In my native Austin, Texas, high school students who would make perfectly good auto mechanics or nurses are dropping out in great numbers because the school board says that they have to pass algebra and calculus if we're to beat China and India. The school board, and boards like it across the country, are too naive and trusting to realize that U.S. multinationals are lying when they say that superior education or infrastructure, rather than rigged exchange rates or cheap or non-union labor, are the reasons for outsourcing. So the lives of many young Americans are ruined because our establishment believes corporate America's cynical alibi about our alleged failure in STEM (Science, Technology, Engineering, Math) studies compared to China and India.
I don't want to be completely negative. The president says the right things about financial reform, and has been moving slowly in the right direction:
One place to start is serious financial reform. Look, I am not interested in punishing banks, I'm interested in protecting our economy. A strong, healthy financial market makes it possible for businesses to access credit and create new jobs. It channels the savings of families into investments that raise incomes. But that can only happen if we guard against the same recklessness that nearly brought down our entire economy.
We need to make sure consumers and middle-class families have the information they need to make financial decisions. We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy.
The House has already passed financial reform with many of these changes. And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.
Maybe this, too, will be followed by a let-down but at least the let-down is not in the speech.
Even better, Obama breaks with the old 1990s conventional wisdom and echoes the new thinking that it makes more sense to focus on community colleges rather than trying to send everybody to 4-year liberal arts colleges:
I urge the Senate to follow the House and pass a bill that will revitalize our community colleges, which are a career pathway to the children of so many working families.
And I have nothing but praise for his proposal (originally made in the Clinton years) to replace subsidized private student loans with direct grants and government loans (if only he'd take this direct grant/government loan approach instead of the tax credit/subsidy approach in other areas, like energy):
To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans. Instead, let's take that money and give families a $10,000 tax credit for four years of college and increase Pell Grants. And let's tell another one million students that when they graduate, they will be required to pay only ten percent of their income on student loans, and all of their debt will be forgiven after twenty years - and forgiven after ten years if they choose a career in public service. Because in the United States of America, no one should go broke because they chose to go to college. And it's time for colleges and universities to get serious about cutting their own costs -- because they too have a responsibility to help solve this problem.
This shows you what Obama can do, on the rare occasions when he is in New Deal mode instead of New Democrat mode. Unfortunately, he seems to believe that we are still in the Nixon-Reagan era, and the Massachusetts election seems to have reinforced that belief. Like Carter and Clinton, he feels obliged not only to offer defensive conservative rhetoric, but also, in many cases, to push conservative policies -- tax cuts instead of direct public investment, small-business tax breaks, and -- most gag-worthy -- the claim, in the spirit of Bush, that FTA's will actually make a difference for our manufacturing sector and that we can compensate for Asian mercantilism by having access to the deep consumer markets of .....Panama and Columbia.
I wish I could be more positive. But the takeaway from this speech is that Obama and the Democrats saved the country from depression by passing "25 different tax cuts" and that we will rebuild our manufacturing by helping mom-and-pop stores use high-speed rail to export the hand-crafted batteries, windmill blades, and solar panels they make in their garage workshops to the numerous and wealthy consumers in Panama and Columbia, who, it must be presumed, will not be buying even cheaper batteries, windmill blades, and solar panels from certain Asian countries that suppress wages, outlaw labor unions and pollute with abandon, or from certain European countries that happen to be massively subsidizing exactly the same kind of solar panels, windmill blades, and batteries. Oh, and our policy of cornering the windmill-battery-solar panel market in Central America will succeed only if all American kids know trigonometry by the age of six, as all Indian kids already do, and are adept at calculus by the age of nine, like every child in China....
Future generations of American progressives, if there are any, will shake their heads at this mixture of right-wing market fundamentalism and hippie-ish green romanticism and try to figure out where the Democrats went wrong. Let's hope that those future generations are not investigating the origins of a second era of Republican conservative hegemony.