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Monday, Sep. 26, 2011

Is Obama worried about work yet?


Special to The Japan Times

HONG KONG — Beleaguered President Barack Obama has come out fighting with two recent speeches focused on America's high unemployment rate. First, he gave an address to both houses of Congress, which is now being nicknamed the "jobs-jobs-jobs" speech, because Obama mentioned the word 37 times in 32 minutes. Then, 10 days later, he suggested how to pay for his pro-employment package and how to cut U.S. deficits by $3 trillion.

His message was that everyone must help America to pay its way, including the super-rich. He proposed a special tax on millionaires, who can use tax breaks to pay a lower rate than the middle classes. His plans seem destined to be stuck in in-fighting in Congress. The Republicans claimed that Obama's plans amounted to "class warfare", but Obama responded: "This is not class warfare. It's math."

Official U.S. jobless figures at a horrendously high 14 million (9.1 percent) don't tell the story of the deep economic hole that America is in, uncompetitive and indebted to the world. Some economists say up to 30 million people may be unemployed when account is taken of those who have stopped looking for work or are part-timers. Obama's bigger problem is that the job that is imminently under threat is his own. Worse, the people whose cooperation he needs in the House of Representatives to pass his new jobs measures are determined that he should join the unemployed early in 2013, kicked out of the White House after a single term.

Most commentators and some economists have praised Obama for his $447 billion initiative with some saying that the glass is at least 60 percent full. Even the carping Paul Krugman admitted to being surprised at the size of the boost Obama planned, describing it as "significantly bolder and better than I expected." His deal is a mixture of about $200 billion in new spending, much of it on things that the U.S. badly needs, such as better infrastructure, rebuilding old schools, avoiding layoffs for teachers, and the rest in tax cuts, including payroll incentives for hiring new workers.

In spite of applause from Krugman and others, Obama's plan has potentially fatal flaws. It is very much the stimulus mixture as before, and probably too slow to bear sufficient fruit quickly enough to save Obama's job. The president's own — optimistic — estimate is that his measures would boost gross domestic product by 2 percentage points and add 1.5 million jobs. That would still leave unemployment come next year's election day above 8 percent, and no postwar president has been re-elected with unemployment so high.

Obama's pleading has left the Republicans — who have a huge majority in the House of Representatives — unmoved. John Boehner, the speaker, dismissed Obama's "short-term gimmicks", such as the proposed tax credits for companies that hire new workers. He demanded reduction of regulations restricting business freedom, so that growth could be promoted.

A solid phalanx of Republicans say they will not support any tax increases, and Boehner said that failure to extend the tax cuts of President George W. Bush would count as tax increases. Letting the Bush tax breaks expire would add $3.9 trillion to government revenues over 10 years.

Republicans are prepared to eliminate some of the loopholes and exemptions that cost the government about $1 trillion in revenues each year, but Boehner said the review of loopholes should not add to revenues. He wants the government to balance its budget by cuts to spending and benefits, and has demanded that the top tax rate should be reduced to 25 percent.

Louie Gohmert, a Republican from Texas, has already introduced an "American Jobs Act of 2011", a simple two-page bill that proposes eliminating tax on companies that produce goods in the United States. It is symptomatic of Obama's continuing failure that he was beaten in introducing his bill, which will have the same name, although with 155 pages of details.

Obama had two options, both in his general approach to Washington politics and the jobs crisis. He could have opted to play the grubby political game of hectoring, cajoling and arm-twisting deals out of his opponents, as Lyndon B. Johnson did so well, using his vast experience in Congress and knowledge of members' weak points.

Some commentators who sympathize with Obama say he is cerebral and imagines an America that no longer exists where politicians are decent gentlemen — whereas today's Republicans are prepared to destroy the president, and if necessary the country, to gain power. This lets Obama off the hook too lightly. He had opportunities with regard to fiscal responsibility and to debt reduction to use bipartisan reports as the basis for grand bargains, but failed to seize them.

His other option would have been to commandeer the moral high ground and proclaim that America is facing an unprecedented crisis that demands imaginative measures far above the day-to-day and daily bickering in Congress. There is plenty of evidence that the economic situation that the U.S. faces today is just as grim as that which Franklin D. Roosevelt faced in the 1930s.

Nobel laureate Michael Spence in his recent seminal work has shown that the United States has not created jobs in the tradable sectors of the economy — basically manufacturing — for 20 years and that job creation has come in the less productive sectors. For the past decade, real wages have declined for nearly all workers.

The depth of the problem was illustrated when the census bureau reported that 46.2 million Americans are now living below the official poverty line, the highest number since the bureau started keeping records. Median household incomes fell last year to levels last seen in the mid-1990s, proof that the U.S. has already suffered a lost economic decade.

A welter of other reports underline America's grim plight. The quality of its basic education is poor; millions are still struggling with the consequences of the housing boom and bust; infrastructure is failing. Yet, rich America is doing very well. Tax rates are lower than at any time since the war. Corporate profits are higher than ever. Big corporations, which have shed 1.9 million American jobs in the last decade while creating 2.4 million jobs abroad, are sitting on $1 trillion abroad, loath to bring it back to the U.S. until Boehner and his chums can get them a tax break.

The U.S. is trapped in several vicious cycles. It is uncompetitive abroad and will not become competitive unless and until education and training is improved, the burden of the housing bust removed, infrastructure restored.

Obama belatedly realized some of the problems and spelled out possible remedies. But the consensus in Washington is that his two speeches fall short: He did not discover the presidential voice and that his plan will fall somewhere between the White House and Congress.

Kevin Rafferty is editor in chief of PlainWords Media.


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