Obama's Economic Fatalism

Yglesias challenges (with graphs!) Obama's recent assertion on the Today Show that while the American Recovery and Reinvestment Act was a success, it's possible nothing more can be done about unemployment.

The President:

There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate

Yglesias:

Maybe Barack Obama has some reason to believe that the pace of technological change accelerated in some unaccountable way during his time in office. But above I’ve illustrated my alternative theory of the recession. It shows that the housing crisis and the problems in the banking sector led to a historically unprecedented drop in personal consumption. It also shows that while consumption has ticked back up, it hasn’t returned to its pre-recession trend level. All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services. One strategy would be to ensure that all else is not equal and that government spending fills the gap opened up by the collapse in private spending. But that hasn’t happened. Federal spending has continued roughly at trend levels, and state/local spending has also fallen below trend. The result is mass unemployment.

Prolonged unemployment, the White House seems to be arguing, is simply a result of a sudden structural shift in the economy due to rapid technological advances -- advances that haven't accellerated during Obama's first term or since the recession began.  The ARRA did all we could, and now we just wait and see what happens?  The government spent some.  Gave it an honest go.  End of story?

Outside of the poor economic (anti)-policy behind this position, I don't see how "Not Much Else We Can Do" plays well as a 2012 campaign slogan.

Obama's Economic Fatalism

Yglesias challenges (with graphs!) Obama's recent assertion on the Today Show that while the American Recovery and Reinvestment Act was a success, it's possible nothing more can be done about unemployment.

The President:

There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate

Yglesias:

Maybe Barack Obama has some reason to believe that the pace of technological change accelerated in some unaccountable way during his time in office. But above I’ve illustrated my alternative theory of the recession. It shows that the housing crisis and the problems in the banking sector led to a historically unprecedented drop in personal consumption. It also shows that while consumption has ticked back up, it hasn’t returned to its pre-recession trend level. All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services. One strategy would be to ensure that all else is not equal and that government spending fills the gap opened up by the collapse in private spending. But that hasn’t happened. Federal spending has continued roughly at trend levels, and state/local spending has also fallen below trend. The result is mass unemployment.

Prolonged unemployment, the White House seems to be arguing, is simply a result of a sudden structural shift in the economy due to rapid technological advances -- advances that haven't accellerated during Obama's first term or since the recession began.  The ARRA did all we could, and now we just wait and see what happens?  The government spent some.  Gave it an honest go.  End of story?

Outside of the poor economic (anti)-policy behind this position, I don't see how "Not Much Else We Can Do" plays well as a 2012 campaign slogan.

Obama's Economic Fatalism

Yglesias challenges (with graphs!) Obama's recent assertion on the Today Show that while the American Recovery and Reinvestment Act was a success, it's possible nothing more can be done about unemployment.

The President:

There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate

Yglesias:

Maybe Barack Obama has some reason to believe that the pace of technological change accelerated in some unaccountable way during his time in office. But above I’ve illustrated my alternative theory of the recession. It shows that the housing crisis and the problems in the banking sector led to a historically unprecedented drop in personal consumption. It also shows that while consumption has ticked back up, it hasn’t returned to its pre-recession trend level. All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services. One strategy would be to ensure that all else is not equal and that government spending fills the gap opened up by the collapse in private spending. But that hasn’t happened. Federal spending has continued roughly at trend levels, and state/local spending has also fallen below trend. The result is mass unemployment.

Prolonged unemployment, the White House seems to be arguing, is simply a result of a sudden structural shift in the economy due to rapid technological advances -- advances that haven't accellerated during Obama's first term or since the recession began.  The ARRA did all we could, and now we just wait and see what happens?  The government spent some.  Gave it an honest go.  End of story?

Outside of the poor economic (anti)-policy behind this position, I don't see how "Not Much Else We Can Do" plays well as a 2012 campaign slogan.

Two Polls

Biggest Worry:

Americans aged 30 to 49 -- who are the most worried about funding their retirement -- are also the most likely to say Social Security and Medicare are in a crisis. Additionally, Gallup has found non-retirees increasingly likely to believe they will have to fund their own retirement, relying more on 401(k)s and other self-directed retirement plans and less on Social Security and pensions than today's retirees. Thus, it is not surprising non-retirees' future financial security is a significant worry for them.

Economic Confidence:

The sharp drop in economic confidence in early June is consistent with the deterioration in the jobs situation, six consecutive weeks of decline on Wall Street, and fears of a global economic slowdown. Even a recent decline in gas prices to $3.78 a gallon has not been enough to offset the decline in consumer optimism -- possibly in part because overall pump prices remain more than $1 per gallon higher than they were a year ago.

There are a lot of takeaways from both Gallup polls here but most obvious for Democrats and the President (or obvious to everyone but the Democrats and the President?) is that Republicans are a) winning the messaging war on the social safety net gloom and doom even if they're losing the messaging war on what to do about it, and b) have backed Obama into a corner, gleefully reporting job numbers and negative projections as if they had no part in it.  The economy is going to need more than extending the tax holiday, Republicans know it, and they aren't going to let it happen. 

Bad place for an incumbent to be.

But it's early.  Democrats need to toss the finger pointing -- albeit justified -- own the poor state of things and offer an aggressive plan.  If recovery remains slow a politically impossible plan that dies on the House's tea party altar is still going to be a bigger boost than telling voters you did everything you thought you had the votes for knowing it wouldn't be enough.

UPDATE: Looks like the TeaGOP isn't even going to give him the tax cuts.  Welcome to the perpetual Republican campaign.

Independent Action on Jobs

Conservatives in Congress and their echo chamber have backed President Obama, and the American people, into a dangerous corner.  Private sector job creation is desperately needed for our national recovery and to begin rebuilding the economic security of our people.  

Yet for a mix of political and ideological reasons, conservatives are blocking two of the critical steps necessary to achieve that goal: federal investment in private sector job creation and increased tax contributions from the wealthiest and most privileged Americans.  Both are needed in order to get Americans back to work and grow the economy while beginning to reduce the deficit.

The President, however, still has some cards to play.  His constitutional power includes the ability to expend existing federal resources in ways that best meet our national challenges, while calling on Congress to do the same.  Specifically, the President should issue an executive order directing federal agencies to prioritize job creation in transportation, housing, and other programs already funded by Congress.  He should focus those efforts on states and communities with the highest unemployment rates, and through the lens of equal opportunity.  And he should separately urge Congress to prioritize employment in pending legislation like the Surface Transportation Reauthorization Act that both parties agree must be passed soon.  As I’ve recommended before, federal agencies should begin using an Opportunity Impact Statement and requiring Opportunity Action Plans to ensure that federal funds are used most effectively to create greater and more equal opportunity.

These tools should be used to amplify the kind of strategies proposed by the President's jobs council, led by CEOs like American Express's Kenneth Chenault, who have called for measures to cut red tape, provide more loans, invest in energy efficiency and attract more tourists to the United States, among other things.

These efforts, most of which the President can take on his own, should be part of a broader narrative on what government can and cannot do to spur private job growth, and why doing all it can right now is crucial to getting our country on the right track.

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