Obama’s Jobs Plan Won’t Work, Economists Say

A preliminary review of the plan the President Obama is expected to present in his speech tonight doesn’t look so good:

The economy is in the dumps. Growth is slowing. The housing market remains depressed. Job creation has stopped.

Can a stimulus package of roughly $300 billion in spending and tax cuts get things back on track?

President Obama believes it can and is expected to make that case Thursday night in a high-profile address to Congress and the American public.

But economists say the package won’t be enough to change the struggling economy’s trajectory.

“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.

In the second quarter, the economy grew a measly 1% and economists spent the summer revising their forecasts lower and lower.

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.

The simulative potential of the plan is hindered by another factor: A majority of the plan’s spending is needed just to continue current law — something that will provide no boost.

According to a draft proposal of the plan, $120 billion would be spent to extend the payroll tax cut that has boosted the size of workers’ paychecks this year. And $50 billion would be spent on unemployment insurance.

The expiration of those programs could slow the economy. But at the same time, their extension will not provide any additional stimulus.

So, to quote a long dead Englishman, this speech will be “a tale told by an idiot, full of sound and fury, signifying nothing.”

You might be better advised watching the NFL Pre-Game Show.,

FILED UNDER: Barack Obama, Politicians, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. Moosebreath says:

    “But economists say the package won’t be enough to change the struggling economy’s trajectory.”

    “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”

    So, I take it Doug is in favor of a bigger stimulus package then, right.

  2. Polaris says:

    My take is this: I don’t think Obama wants or expects anything to pass. I think he’s going to create a program so toxic to the GOP that congress will immediately turn their nose up at it, and then Obama will try to blame congress for the economy in 2012.

    -Polaris

  3. ImpeachOBAMA says:

    Shakespeare was waaayyyyyy ahead of his time!

    It’s very sad that the majority voice of Americans get ignored. We do not have a representative government. This administration is not “by and for the people”. It is for the unions, for the illegals, for minorities, for fraud (be it welfare or voter) and it is for getting reelected. The lies told by Obama are astounding. I hope Issa proves beyond a shadow of a doubt that Obama and Holder were complicit in Fast & Furious and they get arrested and prosecuted to the fullest degree. We need a special prosecutor to investigate both these liars. They MUST not get away with their “plan” to diminish our 2nd Amendment rights and freedoms. Sorry I strayed off-topic. But, to me, everything Obama does furthers the destruction of America. He must be stopped.

  4. ImpeachOBAMA says:

    @Polaris: Exactly. What a coward Obama is.

  5. Ben Wolf says:

    Of course Obama’s plan will fail. $300 billion, even if it were perfectly targetted is less than 1% of GDP over three years: meanwhile GDP fell better than 6% in Great Recession Part I. If he were serious he’d be suggesting total suspension of FICA taxes and a middle/poor class tax cut to help the country climb out of the hole it’s in. Others have championed resurrecting th WPA to provide transitional jobs for people who have been unemployed so long employers don’t want them.

    These are things that will have a real impact on economic recovery, so of course we won’t do any of them.

  6. Gerry W. says:

    @ImpeachOBAMA:

    But, to me, everything Obama does furthers the destruction of America.

    But of course, republicans never destroy a country either. You know, borrowing for 1 trillion dollars for tax cuts, borrowing for war, “deficits don’t matter,” “stay the course” as the ship sinks, voodoo economics, guns and butter economics, and neglect of the infrastructure.

    Guns and butter 2005.
    http://www.washingtonpost.com/wp-dyn/content/article/2005/09/21/AR2005092102504.html

    It’s very sad that the majority voice of Americans get ignored.

    Yes, as Bush came to my state in 2004 and said “free trade is good” we watched the factories close. And they are still closed. And there is nothing the right or the left talks about that is going to open up those factories. There are 2 billion people who want jobs just as much as we do and most are willing to work for a dollar an hour.

  7. Gerry W. says:

    The best plan to date, in my opinion, is by Tom Friedman.

    Cut spending-democrats hate it.
    Raise revenue-republicans hate it.

    1. Educate the population
    2. Attract the best immigration and talent
    3. Best infrastructure
    4. Best rules for capital spending
    5. Government funded research

    http://www.charlierose.com/

  8. Sam says:

    Ten records set by President Downgrade ObamAA+.

    http://online.wsj.com/article/SB10001424053111904583204576544712358583844.html

    1: First downgrade of America’s debt.
    2: Fed spending highest since WW2.
    3: budget deficit highest since WW2.
    4: employment lowest since 1983.
    5: Fed debt highest since just after WW2.
    6: long term unemployment highest since the 1930’s.
    7: home ownership rate lowest since 1965.
    8: percentage of workers paying fed income tax is lowest in modern era.
    9: government dependency highest in American history. (people collecting one or more government check).
    10: slowest job growth in 26 months after a recession in history.

    GREAT Job President Downgrade ObamAA+!

  9. Sam says:

    @Gerry W.:

    A certain way to lose an argument is to offer one bad behavior in your attempt to support another.

  10. Alex Knapp says:

    @Sam:

    1. It was also the first time the House put conditions on a debt ceiling increase, and Republican resistance to raising the ceiling is the reason why the downgrade happened.

    2. Fed spending highest since WW2 wasn’t any of Obama’s budgets. It was W’s last budget.

    3. Biggest budget deficit was W’s last budget.

    4. Under Obama we’ve seen the biggest loss of government jobs in American history, which has had a direct impact on the unemployment rate.

    5. Taxes are at their lowest point since WW2.

    6. True, but he inherited the recession.

    7. No, that was under W.

    8. People aren’t paying income taxes because of bipartisan tax cuts and because they don’t have jobs. And again, the recession was inherited.

    9. Again, related to Obama’s inherited recession.

    10. This has in large part to do with the huge cuts in government employment and the Fed’s deflationary policies.

  11. Polaris says:

    Alex,

    When was the last time Obama even submitted (let alone passed) a budget? It’s supposed to happen every year by law.

    -Polaris

  12. Alex Knapp says:

    @Polaris: There’s no law requiring the President to submit a budget. But Obama has submitted a budget every year.

    Congress has failed to pass any budgets. But they’ve adopted continuing resolutions for appropriations. Last time I checked my copy of the Constitution, the President has no power to force Congress to pass a budget.

  13. Polaris says:

    Alex,

    That is true but unhelpful and I believe you know it. In fact Obama has not submitted a budget every year. The last time he tried was in 2010 I believe and it was so unserious that not even Obama defended his own budget which was promptly defeated in the Senate 97-0. In addition that budget was even worse than GWB’s last budget to which other stuff has been tacked on since I don’t believe that congress has passed ANY budget under the Obama administration.

    Need I remind you that the Dems had acongressional super-majority in both houses until 2011 of this year?

    -Polaris

  14. john personna says:

    No Polaris, no law requires the Pres to submit a budget. It is convention that one be submitted and rejected though 😉

  15. Alasdair says:

    How about if President Obama proposes

    1) The Gov’t will stop discouraging increasing production of domestic energy resources and energy
    2) The Gov’t will stop discouraging new businesses from starting up (by suspending/removing current over-regulation)
    3) The Gov’t will stop ‘trying to increase revenue by increasing taxes’ and will start ‘trying to increase revenue by increasing the numbers of taxpayers at existing (or slightly lower) rates’
    4) My Administration will not seek spending increases until revenue has increased

    I realise that this is heresy to many readers here … apparently many do not realise that it is possible to increase tax revenue without increasing tax rates …

  16. john personna says:

    (It is a wonder of neurobiology that a physicist and an ideologue can exist in the same brain!)

  17. Polaris says:

    @john personna:

    Fair enough. To clarify it IS the law that congress is supposed to vote on a budget bill every fiscal year for POTUS to sign.

    Congress (both houses) was in Dem hands from Jan 2007 to Jan 2011 (at which point the house switched over), and since Obama’s election, not one budget has been passed and Obama’s only budget was even worse (in terms of deficit) than the one we have now and was so unserious that even the Dem led senate (had 60 dems in their caucus at the time) voted against it 97-0.

    -Polaris

  18. Polaris says:

    John,

    Maybe I’m not the ideologue you think I am merely because I dare to disagree? Just a thought.

    -Polaris

  19. john personna says:

    FWIW I think Obama has resigned himself to a slow slog of a recovery. $300B is too small to work and too large to pass.

    We all get to live that catch-22.

    And yeah, Obama wil note that Republicans shot it down while offering only austerity. In a year austerity will have a bad rep.

  20. john personna says:

    @Polaris:

    Disagree with who? Your in-group? Or merely “the other,” the out-group?

  21. Alex Knapp says:

    @Polaris:

    In fact Obama has not submitted a budget every year. The last time he tried was in 2010

    Facts are stubborn things.

    I don’t believe that congress has passed ANY budget under the Obama administration.

    You believe incorrectly.

    Need I remind you that the Dems had acongressional super-majority in both houses until 2011 of this year?

    In a parallel universe, perhaps. But not in this one.

  22. john personna says:

    Seriously, you show mental flexibility when you break from the in-group, not when you flock.

  23. Tsar Nicholas says:

    It’s almost becoming sad watching this president flail and stumble his way around his presidency. By analogy it’s like watching a newbie attorney butcher his way through his first opening statement at trial. You can’t help but cringe. When you factor in the affirmative action component of his education, prior “experience” and this presidency, in and of itself, Obama’s stunning incompetence nearly is painful to watch.

    In any event, what’s holding back the job markets in large part is overregulation and litigation. We need comprehensive environmental reform. We need labor and employment regulation reform. We need to roll back the EPA, the NLRB, OSHA, the SEC, the IRS and the FCC. We need comprehensive tort reform, most notably medical malpractice and class action reforms. We need a large-scale buildout of our nuclear power capabilities. We need to drill for more oil and to mine our shale reserves. We need offshore drilling. We need to dam more rivers. We need to retain and to expand our military supremacy, especially in the air and on the seas. We need tax regulation reform, along with tax code reform for small businesses. We need less red tape for government contractors. We absolutely need to repeal Obamacare.

    Most of all we need Obama back in school and Harry Reid as Minority Leader.

  24. Polaris says:

    Alex,

    Yes, facts are stubborn things when it took me all of 10 seconds on a google cross search to determine that I was in fact right. Those 2010, 11, and 12 budgets you have linked to aren’t in fact passed budgets. They are combined SPENDING RESOLUTIONS packaged together as budgets. I know that congress hasn’t passed a budget to be sent to Potus in almost two years now, and the last budget submitted was more than a year ago by Obama and defeated 97-0.

    As for parallel universes, I’d check again. Congress doesn’t change after the November election. Congress (like Potus) changes 20 Jan the next year after that November election. That means the newest House didn’t take it’s seat until 20 Jan 2011 which means, yes the Dems did control the House (and Senate) from Jan 2007 to Jan 2011 (with super-majorities from 2009 to 2011).

    -Polaris

  25. Alex Knapp says:

    @Polaris:

    Yes, facts are stubborn things when it took me all of 10 seconds on a google cross search to determine that I was in fact right. Those 2010, 11, and 12 budgets you have linked to aren’t in fact passed budgets.

    Quite so! They were submitted budgets, which I provided to you as a response to your argument that “Obama hasn’t submitted a budget every year.”

    I know that congress hasn’t passed a budget to be sent to Potus in almost two years now, and the last budget submitted was more than a year ago by Obama and defeated 97-0.

    Also accurate! But please note that Congress did pass a budget for FY 2010, when Obama was President. Thereby belying your claim that Congress didn’t pass a budget while Obama was President.

    Congress doesn’t change after the November election. Congress (like Potus) changes 20 Jan the next year after that November election.

    True!

    That means the newest House didn’t take it’s seat until 20 Jan 2011 which means, yes the Dems did control the House (and Senate) from Jan 2007 to Jan 2011 (with super-majorities from 2009 to 2011).

    If you define supermajority in the Senate as 60 seats (which most do), the Democrats only had a supermajority for about six weeks, due to delays in seating Al Franken, Ted Kennedy’s illness, and Scott Brown’s election.

    In the House it’s a bit trickier to define supermajority, but if we go with the 2/3 needed to override a Presidential veto, I don’t believe the Democrats ever had that.

  26. Ben Wolf says:

    Polaris, is there a particular reason you’re fixated on whether or not the president submits budgets? I’m not sure where you are trying to go with this.

  27. Polaris says:

    Ben,

    My point was that Obama had more than two years with an overwhelming congressional advantage he could have used to impose any “Jobs solutions” he wanted and he didn’t do it.

    Now he’s going to throw up an empty plan that’s certain to be rejected so he can run against it.

    Not cool.

    -Polaris

  28. Ben Wolf says:

    @Polaris: I agree the President’s performance on this issue has been unacceptable, but it’s been virtually identical to what Republicans have been demanding we do: nothing.

  29. Polaris says:

    @Ben Wolf:

    I agree the President’s performance on this issue has been unacceptable, but it’s been virtually identical to what Republicans have been demanding we do: nothing.

    Now that’s not precisely true. It is true that the GOP did nothing, but that was because the voters (with quite a bit of justification given the promises of justification) threw them out of all levers of powers including the inability to even fillibuster in the Senate. Essentially the only role for more than two years for the GOP was to block what they didn’t agree with, and the Dems wasted it. Bottom line.

    Since Jan 2011, the GOP House has attempted to do something. It’s something a lot of you don’t agree with, but it is something. However, coming up with a direction requires leadership, and honestly, I hope you’d agree regardless of political persuasion, that that’s something we expect from POTUS (good or bad) and something Obama doesn’t seem to do very well.

    -Polaris

  30. Ben Wolf says:

    The President likes to build consensus, and clearly doesn’t do confrontational politics well. I don’t think he’s temperamentally suited to it. Whether this is good or bad in a leader I think depends upon the context in which he finds himself/herself, but I don’t disagree his style fails to inspire confidence.

    As far as doing something about the economy, most of his proposals have been technically correct (in terms of stimulating aggregate demand) but far too weak to make a significant difference. Too little, too late has been the name of the game. The Republicans have repeatedly proposed actions that are pro-cyclical, meaning they reinforce the current trend rather than countering it.

    So we have weak and ineffective but not-quite-crashing versus deepening the recession, which is actually what we’re planning to do anyway with an austerity package. It’s like a choice between dumb and dumber.

  31. Polaris says:

    Ben,

    That’s assuming of course that the Keynsian model is the correct one to use. I have my strong doubts. I note that Keynes himself would be appalled at the notion of increasing the Deficit/GDP ration to it’s current levels even to stimulate the economy. Keynes himself said that such debt ratios were grossly unhealthy in fact.

    -Polaris

  32. An Interested Party says:

    @ImpeachOBAMA: Such stuff as dreams are made on

    In any event, what’s holding back the job markets in large part is overregulation and litigation.

    A convenient right wing talking point…one that would be made more credible with some evidence to back it up…

    Since Jan 2011, the GOP House has attempted to do something. It’s something a lot of you don’t agree with, but it is something.

    So sorry to disappoint you, but many more people than just a lot of those here disagree with ending Medicare as we know it…

  33. Ben Wolf says:

    @Polaris: Don’t take my word for it: listen to the markets. The bond market is literally begging the federal government to borrow from it and spend, as evidenced by ever-lower yields.

    Look, (and those of you who’ve read my rantings before, feel free to skip the rest of this post) the private and government sectors each have two “modes”: spend (deficits) or save (surplus). The private sector wants to save because it wants to pay down record levels of private debt and hedge against future economic hardship. On an individual level this is the smart thing to do, but when everyone is doing it at the same time, consumer spending plummets and financial assets (dollars) are pulled out of circulation. Lower spending means a drop in aggregate demand, which means you have fewer dollars chasing the same number of goods and services. This is what economists refer to as deflationary pressure.

    Government can respond by choosing which mode to be in. If it spends more, it literally transfers financial assets from itself to the private sector. This helps stimulate demand and acts to counter the deflationary pressures. This also gives the private sector breathing room to heal itself from the economic crash. It’s sort of like a life-support machine breathing for a patient until the patient is strong enough to do so on her own.

    If, however, the government chooses to reduce spending (to save) it comes directly into conflict with the needs of the private sector. We then have both entities competing with each other for a limited number of dollars, which increases deflationary pressures and inhibits the private sector’s efforts to save. In other words government saving actually interferes with the economic recovery by slowing the private sector’s ability to retire debt.

  34. michael reynolds says:

    Economist’s say.

    Is there a more meaningless phrase in the English language? Why not go with “Astrologer’s say?” At least those people can achieve some kind of consensus and sometimes they accidentally get something right.

  35. jd says:

    The President, according to the Budget and Accounting Act of 1921, must submit a budget to Congress each year (for the following fiscal year), between the first Monday in January and the first Monday in February. Of course it doesn’t get passed. What use Congress, if not to sit on it until the last possible moment?

  36. Tlaloc says:

    Moody’s would apparently beg to differ with your title. They claim it’ll lower unemployment 1%.

    http://www.politico.com/news/stories/0911/63069.html

  37. Paul F says:

    @Alex Knapp: I love how libs parse the truth whenever it suits them.

    The Democrat controlled congress did not pass a budget for 2 years. Once Republicans took back control of the House, a budget was passed – because grown ups forced the children on the left to do their job.

    Obama’s speech was FactCheck’d and he was found to be a big liar. There is no bill. There is no way on earth humanly possible to guarantee any of the NEW $450 BILLION in borrowing will ever be paid for, let alone over 10 years. And let me say again – this clown, after his big “working vacation” HAS NO BILL!!!!

    What kind of chief executive plans the biggest speech of his career, and barks at his detractors that they need to stop fooling around and PASS THIS BILL IMMEDIATELY, and then shows up WITHOUT THE BILL?

    Any decent company would have fired this fool on the spot with this kind of sophomoric behavior.

    Your clown is done. All the parsing you try will not help him escape from his litany of economic failure.

  38. Peter Baxter says:

    My Work Plan by Peter Baxter retired Management
    Consultant

    1 My executive summary. The world has too many people demanding
    too much resources this must be controlled. Only China has achieve
    success in the war against population growth the rest of the world has
    lost. My advice to China is only help those countries that have
    followed your example and controlled their populations. We must have a
    United Nations plan that tackles this problem of overpopulation now

    2 Marketing and Sales strategy -The United Nations Charter of Human
    Rights states everyone is entitled to their property and this is step
    two we will house everybody by building ecologically friendly homes
    for everybody in the world. We will have a United Nations controlled
    mortgages, that everyone can trust and can afford to pay.

    3 My team and personnel We need people trained to complete the above
    tasks and to achieve this we will offer free web based training. No
    one will be unemployed again those who are between jobs will be
    retrained on their computers. Employers will estimative their needs
    and this will be the basis for peoples training.
    We don’t have sufficient workers to complete the task of homing
    everyone, my guess is we will need to build homes in factories and
    assemble them on site.

    Remarks No one will be judged on qualifications alone again but on
    their proven problem solving abilities. We have too many qualified
    idiots and not enough problem solvers.

    Please compare my plan with President Obamas

    This plan will never be accepted because of the Greed of a few
    plutocrats who control everything today including President Obama.

    However we do have a vote and we can vote for leaders who will
    implement this plan or one just like it for it is based on everyone’s
    human rights.

    Peter Baxter