Thursday, September 8, 2011

American Jobs Act

Putting aside the substance of the proposals for the moment, and whether or not people agree or disagree with the specifics, is this the kind of tone people have been looking for from the president? The administration is writing the bill and delivering it to Congress next week; just pass it already, and do it right now. That sounded right to me. The burden is now on Congress to act, and do something big.

And when I say put aside the substance of the proposals, that is because I don't think the substance of the proposals is as important as the demonstration by the government that they can get something done. People want to see some action. Cut spending, raise taxes, raise spending, cut taxes. How much do the details matter, as long as the plan seems to make sense, and restores the confidence of consumers and businesses? I'm not an economist, and that's why I can say without knowing much about what I am talking about that it's the restoration of confidence, not the details of the proposal, that will make the most difference to the economy. That's why Congress should just pass the bill right away.


  1. Here's the gamble: if the economy isn't better by the time the money is spent and the program is over, then those jobs will go right back down the tube.

    Consumers and private investors need to have more wiggle room to start putting money back into the economy. Government funded ventures like this are not sustainable. I'd prefer more long-term solutions.

    But, like you, I'm no economist, so I'm arguing from a position of relative ignorance.

  2. Cut spending, raise taxes, raise taxes cut spending – does it really matter? That it is the wrong question when it comes to creating real, sustainable jobs. To create sustainable jobs this country needs more money coming in than going out. We have the opposite. The government controls the flow of money through trade, taxes and banking. I Hoped for more but predicted less. Grade "C".

  3. Help me understand why Immelt was sitting in Michelle's box when 20% of GE's jobs have left the country since he took over as CEO. He is head of Obama's Job Council!

  4. I can't answer your question about Immelt. But when my kids make a mess, I usually try to get them to clean it up.

    As for your ideas about how to create sustainable jobs, I think we all have our pet theories. I have no idea if yours are any more valid than anyone else's.

    Want to hear my theory about the economy? I think the economy is like Tinkerbelle. If the economy is sick, what we need to do is clap our hands and say we believe in fairies, and then the economy will get better. For example, when Warren Buffet invests billions in Goldman Sachs or Bank of America, suddenly their stock price goes up. Why? The company hasn't changed. But when the biggest hand clapper gets going, we all start to believe. Reagan cut taxes during a recession and got tough with unions. Clinton raised taxes during a recession. Roosevelt, facing the biggest recession of all, tried all kinds of crazy stuff including direct employment programs by the government, industrial regulations, and boosting unions. All these ideas contradict each other, and we are still arguing many years later about what worked and what didn't work. But in all those cases, eventually the economy picked up again. And that's because cycles are slef-reinforcing both up and down, and prophecies tend to fulfill themselves. And so I think if we all started thinking good thoughts and expressing more positive energy, the economy actually would improve.

    I think I have to expand these thoughts into a blog post about why everybody is wrong about the economy except me. But in the meantime, keep thinking good thoughts.

  5. This may be a good time for you to Hope and me to do policy wonking that discusses Change. The kind of issues I have been hoping Obama and congress would do something about! I am calling both parties and the POTUS out. Long term jobs creation is tied to policy through trade, tax and banking.

    Our so called free trade agreements help corporations but not American workers. They make it easier to export jobs, send money overseas and keep the cash offshore rather than invest it here at home (jobs!).

    Caterpillar is a good example. They now make heavy equipment in China. If they made it here it would be taxed 25% by the Chinese to sell it there. But if they make it in China there is no tax (loss of jobs!). At the same time Chinese imports to America are taxed 2.5%. We have to level that playing field to create manufacturing jobs in America.

    The tax code is not simply a way to raise money. It can be used to create results (jobs!). The code should encourage American investment and job creation, not prevent it like it does now (loss of jobs!). If you lower taxes on something, you see more of it. If you raise taxes on something you see less of it. We can reverse this flow of money out of this country by using the tax code to make investing in America more profitable than sending cash and jobs overseas. At the same time we need to close the loopholes and end the favorable tax treatment from congress members who are bought and paid for (both parties).

    Banks can inject capital and spread it through lending (which creates jobs) or it can suck all the money out. Right now banks are taking the money out of play. We need real reform tied to laws that encourage banks to lend, as opposed to speculate and extract. Money must be spread to job creators who actually produce ideas and hire workers.

  6. I think you have to ask yourself, why, if these changes seem so easy and obvious, they don't just get made. It must be because there are some competing considerations, and some pretty big obstacles to changing them. For example, if you go to the Chinese and say you want to adjust our terms of trade, the Chinese might respond that they think it's pretty unfair that they are earning such a crappy rate of interest on the hundreds of billions in Treasury bills they are holding, and they are thinking of moving some of that money elsewhere. And then we might have to face the fact that if our borrowing costs increase, that could cost us a whole lot more than the trade adjustments we are seeking. Remember there are also a lot of benefits to consumers in low tariffs. If we start creating barriers to entry of goods into the US, then the price of everything goes up. And Wal-Mart shoppers are not going to be too happy about that.