Obama's Jobs Speech: Bolder Than Expected
The main question I had prior to the President's jobs speech was how bold the proposal would be, and how committed the administration was to enacting the legislation. It was bolder than I expected, and the speech promised more commitment to this issue than we have seen in the past.
The American Jobs Act is a $450 billion package containing a mix of spending and tax cut proposals. The proposed legislation contains most of the expected elements: Infrastructure spending featuring school modernization and transportation, tax incentives to hire the long-term unemployed, payroll tax cuts for small businesses, tax credits to hire veterans, temporary work programs, and help to refinance mortgages.
The speech was delivered with a passion and commitment we haven't seen from the president for some time, and it was effective at placing the responsibility for action on Congress. And pointing out that all of the programs in the Jobs Act have been supported by Republicans in the past didn't hurt his arguments.
However, there are some concerns. First, the speech itself lost its focus on job creation toward the end. Instead of jobs, the speech talked about the deficit, red tape regulation, the need to accept painful cuts in social programs, and so on -- all favorite GOP issues. If that's an indication that the commitment toward job creation will be similarly derailed by these issues in the future, then that's worrisome.
Second, and more importantly, I didn't like the way the package would be paid for:
The agreement we passed in July will cut government spending by about $1 trillion over the next ten years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I'm asking you to increase that amount so that it covers the full cost of the American Jobs Act. ...
So we can reduce this deficit, pay down our debt, and pay for this jobs plan in the process.Too many of the proposed budget cuts are front-loaded already, and this would likely make it worse. It would be much better to pay for the package when the economy is on better footing. Paying for a significant portion of the job creation bill immediately, e.g. in 2013 and 2014 (as would likely be a condition of it passing Congress), will offset some of the stimulus and make it less effective. I would prefer legislation that triggers new revenue and spending cuts when, say, the unemployment rate falls below some threshold such as 6.0 percent. But political realities rule this out. I also don't like that this would be paid for by cutting social insurance programs.
Finally, if the bill does pass Congress, it won't be anything near $450 billion dollars. That's just the opening bid, and if anything passes at all it will be far short of what's needed. But there may be a chance that some of it will pass, the tax cut provision in particular, though I see this speech more as the beginning of a long battle then the end of one.
So the positives are that the speech was bolder than expected, showed political savvy (though it will still face stiff resistance), and there appears to be a commitment to keep pushing new legislation until the unemployment problem is eased.
The negatives are the way it will be paid for -- paying later would be better, the uncertainty about the ultimate size of the package (or if anything will be enacted at all), paying for it by cutting social programs, and the sense that other issues might derail future efforts on job creation in the same way they derailed the speech toward the end.
But overall, I'll have to admit that the speech and the proposals were better than I expected.
