Wednesday, December 9, 2009
ONLY ABOUT a month ago, White House Chief of Staff Rahm Emanuel took a shot at policy wonks who were picking apart the Obama administration's health-care plans. "The goal isn't to see whether I can pass this through the executive board of the Brookings Institution," Mr. Emanuel said. The remark implied that the administration cares more about politics than policy. So we were pleased to see that President Obama chose the Brookings Institution, the venerable centrist think tank, as the venue for his speech on the economy yesterday. In that spirit, we'll leave the political analysis of his proposals to others -- in any case, it's obvious that unchecked joblessness could mean disaster for his party at the polls next year -- and focus on their policy merits.
The problem is all too real: The unemployment rate is lower than it was a month ago, but still -- at 10 percent -- far too high. Yet the federal deficit, which hit $1.3 trillion for fiscal 2009 and is projected to be about the same in fiscal 2010, is outside the comfort zone as well. Mr. Obama tried to thread the needle. He offered a series of new tax breaks and spending programs, while asserting that they were affordable because the Treasury Department will have to spend only about $500 billion of the $700 billion Troubled Assets Relief Program (TARP) after all. This was less than convincing. The TARP was financed by debt; and so, to the extent that they replace the TARP, Mr. Obama's proposals will not be paid for either, except by borrowing.
Still, the fundamental question is how much job-creation "bang" Mr. Obama can hope to get for the additional borrowed bucks. Unfortunately, it's hard to know, because he offered no dollar amounts and relatively few programmatic specifics. For example, the president called for a new tax break for small businesses to increase hiring but did not say whether he favors a tax credit or a payroll tax holiday (which would be a more efficient subsidy). He proposed incentives for consumers who make their homes more energy-efficient. "Cash for caulkers" would have the advantage of putting unused capacity in the construction industry to work; however, like "cash for clunkers," the plan would merely move future demand into the present.
The president took some partisan jabs at the Republicans in Congress, whom he accused of leaving him with a $1.3 trillion deficit. There's some truth to that, though it's also true that Mr. Obama has pledged to extend most of the previous administration's tax cuts and supported the Wall Street bailout -- which he yesterday correctly credited for averting a second Great Depression. Instead of this blame game, Mr. Obama could offer some truly fresh thinking about job creation -- a new push, for example, in favor of free-trade agreements with South Korea and Colombia, or a lower minimum wage for unemployed youth. Those ideas might well have impressed the policy wonks in his audience at Brookings. But they also would be dead on arrival in the Democratic Congress. Maybe Mr. Emanuel had a point after all.