THE DIFFICULT TRUTH is that on some level there was no way President Obama’s speech on jobs to a joint session of Congress on Thursday night could live up to expectations. There is no magic way to swiftly create jobs or to ease the interconnected problems of unprecedented long-term unemployment, unacceptable levels of overall unemployment and stubbornly stagnant economic growth. The era of the trillion-dollar stimulus is over. Indeed, the wisdom of another massive stimulus package has to be considered in the context of the mounting national debt and accompanying concern about whether leaders will ever summon the political will to address it.
But the shaky state of the economy, the need to at least avoid making it worse by too-quick fiscal contraction and the evident human toll of the crisis all counsel in favor of some significant action along the lines of the president’s proposal.
Mr. Obama’s package totals $447 billion — what used to be big money before the even larger 2009 stimulus bill. The president said that, unlike in 2009, that amount would have to be offset with savings down the road, and he promised to provide details next week when he outlines his debt reduction plan to the new congressional supercommittee. It will be essential to see not only how the president proposes to pay for the package but how he envisions making certain that those savings materialize.
The centerpiece, accounting for about half the spending, is prolonging and increasing this year’s payroll tax cut for individuals and extending it to businesses. This tax break would be unaffordable on any continuing basis, but with consumer demand so weak, it could encourage both spending and hiring. Will workers spend every penny of their tax savings? No, but history suggests enough will to make the cut worth trying. Will employers pocket the savings or use them to create jobs? Would those be jobs that would have been created anyway? Some almost certainly would have been. But the marginal benefit in a low-growth economy might be worth the cost.
A tax cut to individuals and employers ought to be the part of the president’s program that Republicans are most likely to support. The president also seeks another extension in the duration of unemployment insurance, which is appropriate given the increase in the ranks of the long-term unemployed, but he would couple this extension with reforms that would allow unemployed workers to use their benefits to gain work experience or start businesses.
The remainder of the package involves speeding planned infrastructure spending, sending money to state and local governments to avoid layoffs of teachers and first responders, and similar efforts. We are most enthusiastic about the infrastructure proposal, because it would accelerate spending that would have happened anyway and because the nation’s deteriorating roads and other facilities are such an obvious target for investment.
Mr. Obama’s package stands almost no chance of passage in the form he proposes. But if combined, as promised, with a serious debt reduction outline next week, it offers the plan that congressional Republicans have been demanding. It sets the stage for an important debate this fall — and quite probably during the months of campaigning to follow.