Mr. Obama's jobs plan
How much bang would he get for the borrowed bucks?

Wednesday, December 9, 2009

ONLY ABOUT a month ago, White House Chief of Staff Rahm Emanuel took ashot at policy wonks who were picking apart the Obama administration'shealth-care plans. "The goal isn't to see whether I can pass thisthrough the executive board of the Brookings Institution," Mr. Emanuelsaid. The remark implied that the administration cares more aboutpolitics than policy. So we were pleased to see that President Obamachose the Brookings Institution, the venerable centrist think tank, asthe venue for his speechon the economy yesterday. In that spirit, we'll leave the politicalanalysis of his proposals to others -- in any case, it's obvious thatunchecked joblessness could mean disaster for his party at the pollsnext year -- and focus on their policy merits.

The problem is all too real: The unemployment rate is lower than it was a month ago, but still -- at 10 percent -- far too high. Yet the federal deficit,which hit $1.3 trillion for fiscal 2009 and is projected to be aboutthe same in fiscal 2010, is outside the comfort zone as well. Mr. Obamatried to thread the needle. He offered a series of new tax breaks andspending programs, while asserting that they were affordable becausethe Treasury Department will have to spend only about $500 billion ofthe $700 billion Troubled Assets Relief Program (TARP) after all. Thiswas less than convincing. The TARP was financed by debt; and so, to theextent that they replace the TARP, Mr. Obama's proposals will not bepaid for either, except by borrowing.

Still, the fundamental question is how much job-creation "bang" Mr.Obama can hope to get for the additional borrowed bucks. Unfortunately,it's hard to know, because he offered no dollar amounts and relativelyfew programmatic specifics. For example, the president called for a newtax break for small businessesto increase hiring but did not say whether he favors a tax credit or apayroll tax holiday (which would be a more efficient subsidy). Heproposed incentives for consumers who make their homes moreenergy-efficient. "Cash for caulkers"would have the advantage of putting unused capacity in the constructionindustry to work; however, like "cash for clunkers," the plan wouldmerely move future demand into the present.

The president took some partisan jabs at the Republicans inCongress, whom he accused of leaving him with a $1.3 trillion deficit.There's some truth to that, though it's also true that Mr. Obama haspledged to extend most of the previous administration's tax cuts andsupported the Wall Street bailout -- which he yesterday correctlycredited for averting a second Great Depression. Instead of this blamegame, Mr. Obama could offer some truly fresh thinking about jobcreation -- a new push, for example, in favor of free-trade agreementswith South Korea and Colombia,or a lower minimum wage for unemployed youth. Those ideas might wellhave impressed the policy wonks in his audience at Brookings. But theyalso would be dead on arrival in the Democratic Congress. Maybe Mr.Emanuel had a point after all.