09.09.11

What Obama Missed

The president’s tone was strong—but he left some important things out, Jeff Madrick argues.

I thought it was a very strong speech in terms of tone. I think at last the President acknowledged the extent of the jobs crisis in America and I think that thankfully the speech had a sense of urgency. We badly needed that. All in all, I think it was one of his better speeches. I like that the plan was substantial, the newest estimates are $450 billion. I like that some of the plan is directed toward hiring, credits for hiring. That will help reduce unemployment some.

But I do have some reservations about what the president said. One is the large majority of this plan is about tax cuts and tax credits, not real spending. Fortunately, there is some real spending on infrastructure and grants to the states. But we get much more bang for the buck with spending on infrastructure, with spending on unemployment insurance, and sending more money to state and local government than we do for tax cuts for business. For the most part, we’ve had those and it hasn’t worked. But these tax cuts for business and workers will not have the pop per dollar that direct spending would have had. In other words, for every dollar of direct spending, you get more GDP than you do for every dollar of tax cuts and therefore more jobs. So that was disappointing – that was the same old stuff.

The other thing that was disappointing to me that was he mentioned that if we didn’t reform social security, it wouldn’t be here—that is totally not true. I don’t know a Democratic president that would say that, I don’t know if many Republican presidents would say that.

So that danger is what is behind Curtain Number 3, which he hasn’t pulled back yet. That is, he says he will offset all this $450 billion somehow.

Number three, he didn’t talk about two other big areas. One was mortgage relief, and the other was trade policies.

Finally there was one last issue he didn’t mention. There was something behind curtain three so to speak. He said he has a plan to pay for all these tax cuts and spending increases, and he didn’t talk about this plan or the timing of the plan. And that’s where the Republicans are going to make him make pay. Will that now involve cuts in Social Security and Medicare? You can be the Republicans will demand something like that to sign on.