Few options left for Obama on economy
Wednesday, June 06, 2012
Few options left for Obama on economy
By: Andrew Taylor, Associated Press
WASHINGTON (AP) -- In the wake of an alarmingly weak jobs report
last week, President Barack Obama and lawmakers in both parties
find themselves possessing few if any realistic options for jolting
the economy out of its doldrums before Election Day.
Big-ticket items like payroll tax cuts, free-trade agreements,
months of extended unemployment benefits and "stimulus" spending on
public works and aid to states and local governments have been
tried but have failed to spur a sustained, robust recovery.
Obama's $830 billion stimulus bill - a third of it tax cuts -
enacted when he took office has pretty much run out, its impact the
subject of heated debate on the campaign trail. At its peak in
2010, the stimulus measure accounted for at least 1 million jobs -
and perhaps as many as 5 million - according to the Congressional
Budget Office.
Many of those jobs, particularly in state and local government,
have since disappeared. Republicans, empowered by mid-term election
returns two years ago, now scoff at Obama's suggestion for another
round of stimulus government spending.
Obama's remaining "to do list" for Congress contains a partial
tax credit for new hires, extending tax breaks about to expire,
renewing highway and mass transit construction programs and
preventing interest rates on student loans from doubling. Even
combined, they hold little promise of lifting a $15 trillion
economy from its torpor.
What's missing are proposals to try to boost consumer demand -
like a new round of tax cuts for individuals - or another set of
big-spending "stimulus" proposals to pump federal dollars into the
economy.
The "president is continuing to work with his team on potential
new ideas" to jumpstart the economy, White House spokesman Jay
Carney said Monday when pressed about the sagging rate of job
growth.
The reality is the ideas coming from Obama are likely be the
ones he has already proposed. There is no money and no political
appetite for bolder ideas. And the White House has no confidence
that Republicans in Congress would help him muscle through even
smaller economic measures for fear it might be seen as helping his
standing with voters.
"It's not okay to simply root for failure and hope it pays off
politically," Carney told reporters.
Obama's jobs initiative last fall featured lots of
campaign-style rallies in swing states but little real engagement
with Republicans controlling the House or serving as gatekeepers in
the gridlocked Senate. The initiative coincided with a lift in
Obama's poll numbers but seemed to further alienate top Republicans
like House Speaker John Boehner of Ohio.
Congress did enact a major chunk of Obama's jobs proposal last
winter, extending unemployment benefits for the long-term jobless
and a two-percentage point cut in the Social Security payroll tax.
Despite costing $150 billion, the package didn't provide any new
stimulus for the economy since it prevented existing policies from
expiring rather than establishing new ones. Lawmakers in both
parties pretty much ignored Obama's call to make the payroll tax
cut more generous and extend it to businesses.
For now, fixing the economy is mainly a messaging battle.
"I hope Republicans care more about their country than they do
about winning the next election," said Sen. Sherrod Brown,
D-Ohio.
Obama's "to do list" consists mainly of marginal initiatives
such as a tax breaks for companies that move their operations back
to the U.S., hire new workers or boost their payrolls. A similar
payroll tax credit was in place in 2010 but didn't seem to do much
to promote hiring. Economists say that companies hire workers based
on how well their business is doing, rather than in response to tax
incentives.
"Whether it's pretending that small-ball, Post-It Note quality
proposals would have a major impact on the economy, or pretending
that Republicans - who are the only ones actually working on
bipartisan solutions - are somehow sitting on our hands, he's doing
a major disservice to the American people," Senate Minority leader
Mitch McConnell, R-Ky., said of the president.
Republicans are offering some business tax breaks of their own.
House Majority Leader Eric Cantor, R-Va., wants to let most
businesses deduct 20 percent of their earnings when determining
their tax bills. It's a nonstarter in the Democratic Senate.
House Republicans point to almost 30 bills they have passed that
are now stalled in the Democratic-controlled Senate. They include
boosting offshore oil exploration, easing environmental regulations
and forcing construction of the proposed Keystone XL oil pipeline
project from Canada to the Gulf of Mexico. All are job creators,
Republicans argue.
GOP leaders in the House also plan a vote before Congress
recesses for the political party conventions on extending all of
former President Bush's tax cuts due to expire Jan. 1. That alone,
they say, would give businesses more certainty about their taxes
and confidence to hire more people and make job-creating
investments. Democrats will try to stop Republicans from forcing a
vote on it in the Senate.
In the absence of action on Capitol Hill, some economy-watchers
are hoping for the Federal Reserve to step in with a new round of
"quantitative easing." That's when the Fed buys Treasury bonds so
as to drive interest rates lower. But the 10-year bond is already
at a record low as investors worried about Europe have sought the
safe haven of U.S. securities.
And this close to the election, the Fed is mindful of the harm
it could incur to itself if it's seen as goosing the economy to
benefit Obama's election prospects.