There's a lot going on in the world but
I want to write something on Obama's speech last week.
I was interested for two reasons.
First, I have been studiously avoiding the clown car demolition derby
that is the GOP primary but I remain interested in the political contest,
such as it is. Given that Obama's approval ratings are going over a
cliff and polls show he would lose against a generic Republican, if
not any of the actual Republican candidates, this was an important
speech for him. Second, I was very interested to see what sorts of
policy initiatives he would put forward. As you will see from my next
series of posts I think that the trouble brewing in Europe is
extremely dangerous to the global economy and anything the US can do
to increase the rate of US growth would be very helpful at this stage
of the game.
In the end, the speech was far more
interesting from the political angle than from the economic angle.
From a policy perspective the “American Jobs Act” contains a few
new tweaks of the mechanics of unemployment insurance but otherwise
is more or less a $550 billion extension of the American Recovery and
Reinvestment Act (ARRA or “the stimulus.”) It contains some
infrastructure spending, extensions of unemployment benefits,
transfers to states to pay public employees, an extension of the
payroll tax cut, and accelerated depreciation. I found this pretty
disappointing. If $1.6 trillion of these initiatives failed to revive
employment then why should another $550 billion do the job? To be sure the ARRA has its defenders though I am not one of them. I was doubtful that the President would bring something new to the table but I wanted to be surprised. In the end, my doubts were confirmed.
I should mention that in the 2008
elections I supported Obama. I donated the legal maximum to his
campaign both in the Democratic primary and in the general election.
I had many reasons for doing this a short list would be that I was
disgusted with the job the Republicans had done running the country,
horror at the prospect of Sarah Palin in any position of
responsibility whatsoever, and I'll admit, I was captured by the
rhetoric. I thought his speech after the Jeremiah Wright controversy was brilliant. Given that it was clear that the country was in for
some serious trouble as the financial crisis gathered strength I felt
the country needed some inspirational leadership and I thought Obama
might provide it. In the back of my mind I was aware that his resume
was remarkably thin but he seemed so much brighter than most other
politicians I felt that perhaps he would grow into the role and I
hoped that perhaps he might be a transformational character. Having
admitted this I'll also have to admit that I have been disappointed
with his policies generally. I'm to the left of Obama on healthcare
and pretty far to the right of him on economic policy. Thus I was not
surprised by the lack of policy initiatives that I thought might be
effective. I was surprised by the political nature of the speech.
First of all was the setting. He did
not address the nation from the Oval Office but instead called a
joint session of Congress and initially tried to schedule it to
upstage the GOP debate. The speech itself was not so much an address
to the American people as a harangue of Congress, specifically the
recently elected Republican freshmen who have been taking the
President apart over the budget. Indeed, the speech was delivered
directly to them, the President said “Pass this bill, pass it now”
or derivatives thereof ten times in the course of the speech. What
references there were to the actual citizens were stage whispered
asides about how the government works for the people and the people
are unhappy with the government. So, why would you get up in front of
Congress, present them a bill whose merits you claim are self
evident, and then demand ten times that they pass it in front of a
television audience of the voters? It seems like an odd set up to me
but there you have it.
The speech itself had some interesting
moments. My favorite was when he mentioned Lincoln's support for the
trans-continental railroad as an example of a Republican going ahead
and putting public funds to good use. The speechwriter was probably
not too familiar with the corporate history of the Union Pacific. It
was at the center of what was probably the largest corruption scandal in the history of the federal government. The authorization bill was
so badly written the Union Pacific was in litigation for nearly a
century, including nearly a dozen Supreme Court cases, over what
precisely the terms of its obligations back to the government were.
Of course, several private transcontinentals were also built in the
years following the Civil War. The UP was however an outstanding
source of campaign contributions to Congressmen, judges and state
legislatures, particularly when it was in the hands of Jay Gould who
tried unsuccessfully to resolve the legal disputes through mass
bribery. So at least from the perspective of the legislators on the
receiving end of this largesse it was a major success. Not the kind
of thing I would put in a speech though.
I also liked how Obama could in one sentence frame his opposition as on the side of “millionaires and billionaires” and himself on the side of “teachers” and “our kids” and then in the next sentence say “this is not class warfare.” It's me and the teachers against the Republicans and the billionaires? If that's not a reference to class strife then I don't know what is. Still, it was artfully done and I think the Republicans have done an atrocious job of explaining their position. I also thought that he might have wanted to do some more research around his rejection of "the idea that we have to strip away collective bargaining rights to compete in a global economy." Surely the Democratic Party, the annual recipient of hundreds of millions of dollars in campaign contributions from unions, must have noticed that the only places where unions continue to thrive are in services and the public sector. Of course service employees and the public sector are not subject to global competition. Union membership in the traded goods segment has been totally obliterated in the last 30 years. Obama himself presided over the most spectacular example of this when US automakers with their UAW workers had to be rescued by the state while the non-union automakers in the South kept right on going.
In any case, the main event of the speech for me was the rhetorical bait and switch around how the AJA will be
paid for. He led strong with “Everything in this bill will be paid
for. And here's how.” At this I was on the edge of my seat. The
hard part of leadership and governing is not giving away tax breaks
and entitlements but figuring out how to pay for them, and now Obama,
the responsible leader, is going to do just that. Thank God, but
then.... “The
agreement we passed in July will cut government spending by about $1
trillion over the next 10 years. It also charges this Congress to
come up with an additional $1.5 trillion in savings by Christmas.
Tonight, I am asking you to increase that amount so that it covers
the full cost of the American Jobs Act. The agreement we passed in
July will cut government spending by about $1 trillion over the next
10 years. It also charges this Congress to come up with an additional
$1.5 trillion in savings by Christmas. Tonight, I am asking you to
increase that amount so that it covers the full cost of the American
Jobs Act.”
What?
Wait a minute.
So his big idea for how to pay for it is to ask the Congress to
figure it out for him? Hold on a second, didn't he do that back in
February when he decided not to implement any of the recommendations
of his own deficit cutting committee and sent Biden to the
Congressional negotiations for the first three months thereby ceding
the initiative to Congressional Republicans? Yes, he sure as hell
did. How did that work out? Hmmm.... let me think..... Oh, now I
remember the freshmen GOP Congressmen crucified him with the debt
ceiling fiasco, nearly put the country into default and in so doing
got the credit of the country downgraded. What's more that fiasco was
only averted by the eleventh hour deal the President refers to but
whose terms he wants to change. So at best he's reneging on the
original agreement for $2.5 trillion and upping it to $3 trillion and
at worst he's totally abdicating responsibility and putting it on the
very people who almost drove us over a cliff in the first place. What
about all that talk about how the GOP in Congress were a bunch of
irresponsible kids and the finances of the country need to be handled
by “grownups.” So, here Obama gets a chance to take some
responsibility and what does he do? He puts the ball right back in
the court of the kiddies. Seriously, what's behind all this? I mean,
the person who knows best what will happen to the AJA in congress is
Obama himself. If the last time he punted fiscal responsibility to
Congress the result was a total legislative fiasco why would he do it
again?
I
hate to say it but I think the answer is that he knows full well that
it will be a fiasco, and that he wins to a Congressional Republican
fiasco. It seems pretty clear that there's little chance that the
economy improves significantly before 2012. Obama knows that as bad
as he looked during the debt ceiling debate the Republicans looked
worse. His plan seems to be to go on TV, and in front of the cameras
demand that Congress pass his jobs bill. Never mind that the AJA is
just a diet version of the ARRA. Never mind that the ARRA was not a
stellar success. Never mind that it still required $1.6 trillion of
debt finance. These things supply the only coherence the Tea Party
possesses, so Obama is trying to use them to his advantage.
Rather
than actually formulate how to pay for the AJA he's decided to lay
that part of it at the feet of the very people who almost put the
government into default rather than borrow more money or raise taxes
which he knows full well will be necessary if we're going to extend
the ARRA for another 3% of GDP. He also knows that the Republican
base will not stand for those tax increases or additional borrowing
and will hold the GOPs feet to the fire to prevent it. So he knows
that the AJA will struggle in congress, in fact I think he hopes it
does. He may even wish for it to go down in flames. Then when indeed
the economy does not recover by 2012 he can say that if only the
Republicans had passed his jobs bill all would be well. And after
Thursday the video editors for his campaign ads have ten shots too
choose from of him telling Congress to do what he knows they have a
minimal chance of actually doing. No one will remember that the
original stimulus was extremely expensive but not very effective.
They won't remember that by adding another $550 billion to the $2.5
trillion he's reneging on the original deal further eroding his
capacity to negotiate with Congress anyway. No, they'll remember
Obama telling Congress to pass the jobs bill and then congress, ie
Republicans, screwed it all up. For Obama, mission accomplished. For
the unemployed, not so much.
It
makes all that gooey nonsense at the end of the speech about the
expectations of the American people sound like a sneer, as if the
people in the audience are too stupid to notice that he is doing
exactly the opposite of what we sent him there to do: taking
responsibility and making hard decisions. Instead, he's handing the
responsibility over to people who have already played chicken with
the economic security of the country just so that he can blame put
them when he's running for office next year. Great.
I recognize that my criticism of the ARRA and the political rather than economic nature of this post obligates me to step up and discuss the economics behind this in more detail, more to come.
I recognize that my criticism of the ARRA and the political rather than economic nature of this post obligates me to step up and discuss the economics behind this in more detail, more to come.
2 comments:
Who was the last president to write his own speeches?
I really don't know the answer to that. I think they all write some of them. I think Obama may have written his speech on race, and maybe had a lot to do with his speech in Cairo.
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