So... the cloud of uncertainty around the debt ceiling has blown over and what happens?
Everybody wakes up, looks around, and realizes the economy ain't doin' squat.
The New York Times quotes various investors:
We get no default, but the bad news is there is a growth trade-off...they had to agree on fiscal contraction that would weigh on growth...recent economic data is already weak...and now that the debt ceiling deal has offered up the prospect of lower spending from the government who is going to drive the economy?
I could get snarky and wonder where the investor class was hiding during all of this. But instead, I will welcome them to where many of us have been during this whole hysterical distraction: what can we do on the jobs front?
The president began to pivot in a Rose Garden speech Tuesday, and numerous people asked me "how can he do that? How can he go from advocating and signing onto austerity one moment, to talking all about jobs!?"
Well, the cuts are pretty backloaded, so that helps, but it's still a fair question, given the unlikelihood of House R's in particular cooperating on anything having to do with jobs. But he's still gotta fight for it.
Today, he spoke up for:
- Payroll tax cut and unemployment benefit extensions
- Patent reform and trade deals
- An infrastructure bank to provide loans to build and repaid public goods.
Number 1 is good and necessary but let's be clear: those measures provide no fiscal impulse. That is, they are already in the current economy, so leaving them in doesn't apply any new pressure to the accelerator, though neither does it let up on the gas.
I can't speak to patent reform -- hard to imagine it moves the unemployment needle much. But maybe it could help our startup problem, which could actually be very important. I'm all for more infrastructure, and in the past, such investment has been bipartisan... but that was then and this is now, so who knows?
Look, it may well be the case that the President and the Congress can't move anything between now and the election. It may be that certain cynical Republicans will block good ideas just to be sure the President doesn't catch a break on the economy. Others simply believe they were put here on earth to cut spending, and nothing else.
So, what's a president to do within such binding constraints? Well, if you can't do... teach.
Build the case for government's role at a time like this. Explain that we're stuck in a vicious cycle of weak demand feeding into weak job growth feeding back into weak demand. Households are still deleveraging, and that's holding back hiring too.
Critics will say: we've tried that and it's failed. They are wrong; they are just another distraction. Ignore them.
Maybe take advantage of your street cred as a compromiser, a grownup, a deficit cutter, and explain, as you did Tuesday, that while you understand the need to live within our means, we can't start cutting too soon. To the contrary, right now, the best way to lower the deficit is to get people back working, spending, and generating more revenue-raising growth.
It won't be an easy pivot, but I don't see an alternative.
This post originally appeared at Jared Bernstein's On The Economy blog.