Posted by Michael A. Kamperman on February 1, 2010
President Obama’s 2010 budget is not only a jobs killer, it is heartless. The military has a motto that no man should be left behind. If a comrade in arms falls, then you do everything possible to save them. Apparently this motto does not extend to the unemployed. If they fall they are on their own, just as if they were in the streets of Pamplona running with the bulls. The President’s new budget cuts unemployment benefits by $75 billion, which is almost a 50% reduction. Yet the Whitehouse estimates the unemployment rate will only fall to 9.8% by the end of 2010. The only explanation is the President is willing to let unemployment benefits run out for those who are unable to find work. This despite the fact that there is still only one job opening in America for every six applicants. Furthermore, the budget cuts over $10 billion from federal construction projects ranging from the military to schools. Construction spending in the U.S. was reported to fall by 1.2% for the second month in a row. Construction projects equals jobs. Cutting construction projects is equivalent to cutting construction jobs. Furthermore, unbelievably the budget cuts Medicaid expenditures by more than 10%, or $33 billion. Surely the President is not in favor of cutting health care to the poor. The only explanation is the President is willing to let the states pick up more of the tab for Medicaid. Never mind of course that the states are broke and they cannot print money like the federal government.
The federal budget deficit faces a paradox. There is no way to cut the deficit unless spending is cut. Alternatively, there is no way to significantly raise tax revenues unless unemployment rates are significantly lowered and people are put back to work. So there are two paths to lowering the deficit; by cutting spending or by putting people back to work. Growing the econ0my will benefit both the employed and the unemployed. Cutting federal spending will not benefit the unemployed and it will not benefit anyone else. It will ultimately raise the taxes of those still working while austerity measures are put into place.
Unemployment is the number one issue in America, not deficit reduction. People want and need jobs. The President will not succeed by rhetorically expressing a concern for the unemployed while deploying policies that do not create jobs. Yes, the President’s budget includes $100 billion worth of job creation measures. But consider that we have lost several million jobs since the $787 billion stimulus bill was enacted. If we lost several million jobs spending several hundred billion dollars, then is it plausible we will create millions of jobs if we simply spend $100 billion more? What we need is a one trillion dollar jobs bill that includes construction spending and aid to the states. Instead, we get not only a cut back in unemployment benefits but a cutback in federal construction spending and a cutback in Medicaid spending, which means a cutback to the states. Both FDR and Reagan focused on economic growth. They arguably had the most successful Presidencies of the 20th Century. Herbert Hoover focused on the limitations of the federal government during an economic crisis and he arguably had the least successful Presidency of the 20th century. It’s not that Hoover didn’t try. He didn’t try hard enough. History will only judge President Obama by the outcomes of his Presidency, not his intentions. Like Hoover he will be remembered by whether or not he created jobs, not by whether or not he cut the deficit.
T
Posted by Michael A. Kamperman on November 14, 2009
The President has already decided that he is only interested in small and minimalist ideas to create jobs. He does not want to consider programs that will cost a lot of political capital or a lot more of the Treasuries dollars. He and his band of Hoover Liquidationist political and economic advisers are more interested in bringing down the deficit than in putting America back to work. The word is his budget directors are asking his Cabinet Secretaries to prepare two budgets, one for zero growth and one for a 5% across the board reduction in spending for the next fiscal year. They are more interested in making things and selling than to foreigners than to other Americans. He and his liquidationists are crazy if they think the Chinese and the Japanese are going to accept selling a lot less to us and buying a lot more from us. In effect, President Obama is in favor of the American standard of living going down. Therefore, his jobs summit is dead on arrival and will prove to be nothing more than a big show so he can say he tried.
Paul Krugman just said “But these aren’t normal times….so it’s time to try something different.” Yes it is time to try something different. But it is not time to buy into the idea that Washington has already stretched itself to the max and can’t do much more because of the debt and the deficit. President Obama and his economic team are looking for creative ideas to create 10 million jobs on the cheap. There are no magic tricks to turn around the economy. There is only the reality that we will not solve the economic crisis without significant leadership from Washington. President Obama needs to be willing to not only try something different, but something big.
We need to create 10 million new jobs. Assuming each job costs employers an average of $50,000, then it will cost the nation $500 billion a year to add these jobs. The private sector cannot do it right now because the credit markets remain broken and it remains very difficult for many consumers and small businesses to borrow money. Yet one of the ideas to reduce the deficit is to use $200 billion in TARP funds to repay debt and lower the current deficit. Wouldn’t this money be better spent bolstering the community banks that are vital to the small business job creation engine? Yes the New Deal helped during the Great Depression, but the unemployment rate was still over 15% at the end of the 1930’s. It was only the massive fiscal spending to fight World War II that truly ended the Great Depression. A comparable stimulus program today would amount to 8 trillion dollars a year for 4 consecutive years. While that may be over-kill, it emphasizes there is no way to end the economic crisis on the cheap just by tinkering at the edges. Two years ago almost everyone would have agreed that if we entered a deflationary depression there are three things we should avoid doing at all cost. First, the federal government should not cut spending. Next, the federal government should not raise taxes. And finally the federal government should not sanction Zombie banks that only pretend to lend. Amazingly, the Obama administration is hell bent on doing the three things it shouldn’t. What’s worse they want the average American to accept the pain of change.
Posted by Michael A. Kamperman on October 20, 2009
The Whitehouse needs to stop defending the stimulus plan and come forward immediately with a big and bold job creation plan. The one part of the stimulus plan that most people agreed would create new jobs was fast forwarding funding for shovel ready infrastructure jobs. Well don’t hold your breath. Proof has just emerged that the stimulus plan is not only failing to create infrastructure jobs as promised; it is now failing to save even previously budgeted infrastructure jobs. A few days ago federal and state transportation officials told local planners in Texas they would need to significantly restrict their previously budgeted spending on roads and bridges for the next two years. In fact, the only money available for state and federal highways is whatever funds local transportation authorities have received directly from the stimulus plan, and nothing else. The Waco Tribune Herald quoted Waco MPO director Chris Evilia as saying “If it’s not economic stimulus, it’s pretty much a no go for the next two years.” She described the turn of events as a “complete meltdown.” The Waco area is slated to receive $7.2 million from the stimulus plan for roads and planned to use the money for a needed overpass on highway 6. Still, the stimulus money will not be diverted to higher prioritized projects but to routine road maintenance. Without stimulus money the area already planned to widen parts of I-35 and to build an overpass on highway 84. Those two top priority projects will now have to wait for future funding, since the expected annual road money is no longer coming.
We are in a federal and state funding crisis due to a lack of tax receipts because of the economic crisis. Jobs widening I-35 that would have existed anyway without the stimulus plan will now not exist even with the stimulus plan. It is simply stunning things are unraveling so fast at the federal and state level. It is imperative the Whitehouse put together an emergency spending bill to restore fully all budgeted transportation funds without using funds from the stimulus plan to cover the normal budget. The word stimulus means an extra spark. It does not mean replacement money.
There is no doubt we need much higher levels of federal spending to stabilize the economy. There is no doubt the Federal Reserve needs to print a lot more money. What is doubtful and what is an open question is whether or not President Obama has the wisdom and the courage to stand in front of the American people and tell them the economic crisis is proving to be more severe than he and his advisers realized. He must come forward with a one trillion dollar job creation program as a minimum down payment if he wants to see unemployment go down. It is also doubtful whether or not Fed Chairman Bernanke will push through another round of quantitative easing at the Fed’s next meeting. The economic crisis will not end until the President is willing to use all of his political capital on creating jobs.
I need to offer a mea culpa and a retraction. Earlier I attempted to coin the phrase the “Great Unraveling” as a term to describe how the economic dominoes are continuing to fall into each other causing more and more economic losses. The recent cut in highway funds is a perfect example of why we are in a depression and why it is not close to being over. However, it has been brought to my attention that Paul Krugman published a book in 2003 titled The Great Unraveling: Losing our Way in a New Century, which is a collection of his New York Times columns railing against President Bush’s economic policies. At least I have seen Professor Krugman forced to issue retractions of his own.
