Until now, the Administration has seemed oddly content with the weakening economic picture and the lack of jobs. They’ve pushed the small business lending bill, which now seems assured of passage, but that’s a minor bill, and with nothing to follow it up, the economy will probably continue to sputter. The preliminary numbers show a decrease in private employment in August, and at any rate the trend when the Labor Department’s numbers get released on Friday will not be positive. Plus, we’re heading into election season, and nobody can credibly explain what the Democratic agenda is for the next two years. What do they hope to accomplish? What’s their platform?
We saw echoes of this in last night’s speech with the call to “rebuild America,” but more trial balloons float into the air this morning.
The Obama administration is considering a range of new measures to boost economic growth, including tax cuts and a new nationwide infrastructure program, according to people familiar with the discussions.
On the list of possible actions: additional tax cuts for small businesses beyond those included in a $30 billion small-business lending bill before the Senate. It’s not clear what those tax breaks would target or how much they might cost in lost revenue to the government.
Also in the mix: a possible payroll tax cut for businesses and individuals, as well as other business tax breaks, according to people familiar with the discussions. Currently, income taxes are scheduled to rise with the expiration of Bush-era tax cuts at the end of this year.
Tax cuts, tax cuts, tax cuts. I suppose a really big tax cut would create some stimulus, especially if it’s targeted to those who would spend it. But as we know, tax cuts are among the worst kind of stimulus you can design. Plus, it tells a story about the economy that conservatives love to repeat, one that belies existing facts. The argument on the other side is that you can either live with horrific unemployment numbers for the next several years, or live with tax cuts as what can get through Congress. And that’s the dilemma facing the White House right now.
The White House is struggling with whether to propose ideas that would appeal to Republicans, and thus get support on Capitol Hill—such as tax cuts—or whether to promote ideas that officials believe could have more economic impact but might hit political resistance, such as more aid for states and more infrastructure funding.
In other words, do you want to create the bill that can do the job or the bill that can pass? In recent history, this Administration has opted for the latter. But it is election season. And Senate Democrats want to hold a vote this month on the Bush tax cuts, showing a desire to draw some contrasts.
A big infrastructure bill – something that would identify and fund projects that have gone neglected for far too long – sounds appropriate. And either you dare Republicans to block it and they cave (unlikely), seeding the economy with a lot of demand, or you dare them and they do block it, at least providing a political argument to make for the future.
Alternatively, we can try another tax cut.