President Obama visiting a local business in Seattle: Seattle Times/Ken Lambert, via AP
The administration's shift in focus is pretty much a necessity, as the woeful economic news has been coming thick and fast lately. Last week, we learned that GDP growth for the first half of the year averaged just 0.8 percent--barely enough to count as an expansion at all. The deal between the White House and Congress to raise the debt ceiling was supposed to restore some confidence among investors and employers, but by cutting at least $2.4 trillion in spending over the next decade, it looks likely to further stymie growth, and jobs creation, in the coming years.
It's a mark of just how bleak things are that this morning's monthly jobs report, showing a gain of 117,000 jobs in July, was hailed by the White House as "encouraging news," even though the numbers are barely enough to keep pace with the growth of the labor force, and more than 14 million Americans are still out of work.
Politically, too, the "pivot" toward jobs makes sense. President Obama faces re-election next year, and polls show the economy tops the list of voters' concerns by a wide margin.
But public relations aside, do any of the ideas that the administration is embracing look capable of helping to turn things around? Are there are other ideas that might have more impact?
Today, Obama unveiled a package of new tax breaks for businesses that hire veterans returning from the wars in Iraq and Afghanistan. The initiative meets an urgent need: the jobless rate for recent vets stood at 13.3 percent in June, much higher than the already high overall rate of 9.2 percent. (It ticked down to 9.1 percent in July.) And it's structured in part to address the *long-term* unemployment problem we've reported on: Employers will get twice as much in tax credits if they hire a vet who's been out of work for more than six months.
But at just $120 million, the program simply isn't big enough to have much impact on the overall unemployment situation. Indeed, it's unlikely even to counteract the roughly $25 billion in spending cuts that Congress enacted as part of the debt ceiling deal.
So what else does the administration have up its sleeve? In an op-ed in the Washington Post Tuesday, Treasury Secretary Tim Geithner proposed extending the payroll tax cut, in order to spur more hiring, and extending unemployment benefits, to get more money--money that's likely to be spent--flowing through the economy.
But there's one small problem: The payroll tax cut and unemployment benefits are already in effect. Both are set to expire at the end of the year. Along with the cuts that came in the debt deal, the expiration of those measures will cost around 1.5 percentage points of growth in 2012, JP Morgan has estimated. So extending them, though almost certainly worthwhile, won't mean offering a boost to growth compared with where things are now. It'll just mean avoiding making things worse.
The administration also has suggested investments in infrastructure and in clean energy--ideas it's been pushing for a while, as part of President Obama's call to "win the future." But again, only if those investments occur on a massive scale are they likely to have much impact. And that's something that Republicans in Congress are all but certain to reject.
The White House is also said to be mulling a program that would let Fannie Mae and Freddie Mac rent out foreclosed properties rather than trying to sell them, given the ongoing weakness in the housing market.
It's encouraging that the administration is considering more structural measures that could help the housing sector recover. After all, until it does bounce back, the economy as a whole will struggle to improve, because with so much wealth lost in the housing bust, consumers aren't spending. But once again, it's not going to be enough to make much of a dent in the larger problem.
What might work better? Some analysts suggest a jobs tax credit, which would simply reward employers for making new hires. Others tout the idea of boosting aid to state and local governments--which lately have had to make painful budget cuts--in order to stimulate growth at the ground level.
But even here, the essential problem the administration faces remains in force: Pretty much the only ways to stimulate growth and jobs that are likely to be effective involve spending large amounts of money. And that's something that Congress has made clear it just won't sign off on.
White House press secretary Jay Carney seemed to acknowledge the administration's predicament this week. "The fact is that there is no magic bullet that lowers our unemployment rate to where it would be ideally," he said.
So President Obama can "pivot" to talking about jobs all he wants. But whether he can do much about them is far less certain.
- Fannie Mae and Freddie Mac
- extending unemployment benefits
- Tim Geithner
- tax credits
- White House press secretary Jay Carney
- payroll tax