President Obama’s new $447 billion jobs proposal, which has most pointedly not been called a “stimulus,” looks very much like a second round of just that. It’s components are:
1.) $250 billion in mostly payroll tax relief;
2.)$140 billion in infrastructure spending on roads, bridges, high-speed rail, school “modernization,” etc.;
3.) $35 billion to rehire laid off public workers and;
4.) extension of long-term jobless benefits and job-training.
Obama is insistent that his proposals be enacted into law immediately, with the implicit threat that, if not, he will begin campaigning against the do-nothing Republican Congress without any similar delay.
House Speaker John Boehner, a cautious man, pronounced the President’s proposals to be of some merit, and it is probably true that many Republicans will be happy to go along with the payroll tax cuts, which consist mainly of a holiday on the payment of Social Security and Medicare taxes.
Although I am normally loathe to pay any taxes whatsoever, I think this approach solves little short-term, and makes our country’s long-term debt problems much worse. It has been widely noted that Americans who still have jobs are not spending on consumer goods, but instead paying down debt, being naturally more astute than most of the politicians they elect. What businesses need foremost in order to create new jobs is not more cash, but more demand, and drawing down U.S. household debt, while a good thing over time, will not generate any increased consumer demand soon.
On the other hand, extending amnesty on paying into the entitlement programs which are already bankrupting us, will lead surely to a reluctance to reinstate the taxes that pay (although only partially) for them – the longer this tax relief lasts, the more fearful politicians of any stripe will be to end it.
The $140 billion to be spent on schools and infrastructure is more of the same from the last go-round. Why would this type of spending be a better tonic to the economy now than it was then? We know for certain only that it is money that will have to be borrowed and eventually repaid, by a debtor nation whose credit rating has just been downgraded. More freshly printed money to be spent in this fashion will only benefit Obama’s union constituents, and not for long. This part of his proposals is a nonstarter, worthy only of derision.
Now we come to the $35 billion to be spent to rehire laid-off teachers and other government employees. It is easy to argue that most of these positions were superfluous in the first place, since so many of the states couldn’t afford the long term expense in paying for their employees’ benefit packages, pensions, medical insurance, etc., not to mention salaries way in excess of what the private sector typically can afford. This pain has been felt once. Why would we print fiat money (or borrow it from the Red Chinese, if you prefer) to go backwards and have to inflict it all over again? This is the most frivolous of the Obama proposals, and he will get nowhere with any but the dullest of voters in arguing that his opposition has dismissed it out of an excess of partisan zeal.
An interesting article appeared in the New York Times edition of Sept.14, entitled “Austere Italy? Check The Traffic.” Its message is that the Italian government, while nearly broke, cannot shed itself of vast legions of public employees whose jobs were bought with their votes, which elected the politicians who have bankrupted their country. One of these employees was quoted, while sitting in a bar drinking coffee with her on-duty colleagues: “You see, here we are at the bar, we support the economy this way.” This explains the Keynsian economics of the Obama administration perfectly.