The President’s speech tonight will introduce a specific piece of legislation called “The American Jobs Act,” which would have been a decent name for the stimulus in January 2009. The price tag will be in the $300-$400 billion range, but we know that at least half of it, and perhaps as much as 2/3, will come from extending current law on the payroll tax cut, extended unemployment insurance and perhaps a business expensing tax break. These were all part of the 2010 tax deal, and the fact that they weren’t made for two years in that deal is just another example of the political malpractice of this Administration.
But even if these big current law extensions get included in a final package that actually passes Congress, extending current law is not stimulative. It maintains the status quo, a status quo where the economy is stuck in the mud. So the rest of the package would have to provide the oomph to actually increase demand. And we’re talking about $100-$200 billion for that, which is just not enough to get the job done.
“The kick to growth is going to be pretty small. It will add substantially less than 1% to GDP growth in 2012,” said Nigel Gault, the chief U.S. economist at IHS Global Insight [...]
Obama’s proposal is expected to include new infrastructure spending, targeted tax cuts and payments to local and state governments. While details are still murky, sources confirmed the package’s overall size was around $300 billion.
“If we’re talking about whether the package is big enough to … start making a dent, it’s probably going to fall short of that goal,” said Gary Burtless, a labor economist at the Brookings Institution.
More from the LA Times, which notes how starkly different the soaring rhetoric of the 2008 campaign was from this prose. That’s to be expected, except for the fact that, for all intents and purposes, this IS a campaign speech. Republicans aren’t going to pass the President’s plans. And so there should theoretically be no constraints on the imagination in terms of job creation ideas. I think it’s irrelevant whether this pre-compromised approach works as a negotiation strategy because there isn’t going to be a negotiation. But it definitely doesn’t work as a political strategy to offer a jobs program that every expert says won’t create enough jobs to make much of a difference.
It’s just another “most responsible guy in the room” strategy, a play to indepedents and moderates, something that has succeeded this summer in bringing the President’s approval ratings to the lowest level of his term in office, INCLUDING WITH INDEPENDENTS AND MODERATES.
This, by the way, is what discredits Keynesian economics.