Obama’s jobs speech will renew push for spending to boost economy
We’ve seen this image before: Barack Obama putting the final touches on an important economic speech calling for stimulus spending, job creation, infrastructure investment, assistance to those hit by the housing crisis and an extension of unemployment benefits.
As the president prepares to deliver a pivotal address to a joint session of Congress on Thursday, it seems like a replay of the economic agenda he outlined when seeking the Democratic nomination.
“To put Americans to work, we’ll create millions of new green jobs and invest in rebuilding our nation’s infrastructure,” Obama proclaimed in March 2008. “It’s an agenda that starts with providing a stimulus that will reach the most vulnerable Americans, including immediate relief to areas hardest hit by the housing crisis and a significant extension of unemployment insurance for those who are out of work.”
While Obama pursued those measures early in his administration, his emphasis later shifted. But the president is once again preparing to use a dramatic platform to call for immediate spending to drive economic growth.
Top White House officials have long thought that significant action to bolster the economic recovery was necessary, but concluded that there was no political appetite for new spending. The significant deterioration in the economy — which is in far worse shape than the president anticipated — has made them revisit that calculation.
“The President has never stopped pushing for stronger investments in areas like infrastructure and housing,” said Gene Sperling, director of the National Economic Council. “What has changed in recent months, is that as economic projections have worsened, more and more policymakers and experts are seeing the importance of these policies for jumpstarting growth and job creation.”
In his speech Thursday, Obama’s prescriptions will be in the same mold as they were in 2008 — infrastructure spending; housing aid, including an expanded refinance program and new measures to assist the unemployed, administration officials say. They will also include tax cuts to give extra cash to workers and spur hiring, as well as aid for states and localities. The cost of the programs is likely to be at least $200 billion, and a reluctant Congress would have to approve many of the ideas.
The clearest indication yet that the nation’s economic recovery has basically stalled came last week when the government reported that the economy added no jobs in August. And in an ominous sign for his political prospects, Obama’s economists also projected that the unemployment rate would remain around 9 percent through the end of 2012, far higher than they had said when he took office.
In his defense, Obama’s advisers like to point out — as the White House did last week — that 2.4 million private sector jobs have been created in the past 18 months.
But that ignores the portion of the economy where Obama has the most influence: government jobs, which have seen significant losses. When those are taken into account, the economy has added far fewer jobs — 1.7 million — over the past 18 months.
The White House also ignores the first year of Obama’s presidency. The economy is down 2.4 million jobs from when he took office.
Virtually no economists blame Obama for the job losses incurred in his first year. The economy, reeling from the financial crisis, was in free fall, and only recently have economists come to grips with how deep the plunge was.
But Obama has been skewered — largely by economists from his own party — for failing to propose a big enough stimulus in early 2009, and then failing to follow through on that stimulus with additional significant measures to drive economic growth.
Some supporters say that Obama mistakenly thought he could leverage his campaign-era image as someone who transcended conventional politics to compromise with Republicans once in power.
“The president said that the politics of the ’90s had grown so bitter because of partisanship on both sides. He was going to fix that by reaching out to sensible, flexible people in the Republican party to come up with common sense economic policies. That approach was doomed from the start,” said Sean Wilentz, a historian at Princeton University.
Republicans, meanwhile, argue that Obama pushed new regulations — governing health care, the financial industry and the environment — that have made companies resistant to hiring.
Since his big push for the $787 billion stimulus package in the first month of his presidency, Obama’s attention has veered from a singular focus on using government spending to drive economic growth.
At first, the economy appeared to be improving, and Obama directed his attention elsewhere, focusing on his health care proposal and Wall Street reform.
Against the counsel of some of his advisers, Obama opted against proposing a second large stimulus bill, and pared back other jobs proposals so they could more easily pass Congress.
After the 2010 midterm elections, he actually did get another significant stimulus measure — a reduction in the payroll tax and an extension of unemployment benefits. But the impact of those measures was blunted by the sudden rise in oil and food prices.
At the beginning of this year, Obama once again shifted to a new theme — “Win the Future” — which relied on laying the groundwork for bolstering American corporate competitiveness.
Obama courted business leaders and embraced many of the pro-corporate themes advocated by Republicans, such as free trade, corporate tax reform and deregulation.
Then the economic recovery starting sputtering out and unemployment began to rise again. But Obama spent the better part of the year in budget negotiations with Republicans, discussing not ways the government could stimulate economic growth but ways it could cut spending.
Now he’s back to his original ideas — spending and tax cuts to spur hiring and drive economic growth.
“These were the correct measures then and they remain so,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and former White House economic adviser. “The problem ... is not that they haven’t worked. It’s that they ended too soon or weren’t enough.”