Where is the US economy headed?

The 112th Congress includes many new members elected on a promise to close the nation's unsustainable deficits. Spending does not equate to results, even when it comes to military spending. That was the message of Grover Norquist, head of Americans for Tax Reform at a recent Cato Institute Capitol Hill briefing on January 19, 2011. He argues that there is a strong conservative case to be made for cutting military spending sooner rather than later. http://www.youtube.com/watch?v=DEoJcI3VuFw

By National Journal
updated 8/9/2011 4:15:46 PM ET

Analysis

Nearly halfway into his speech from the State Dining Room on Monday, President Obama finally launched into what amounts to his core job-creation message these days. He ticked off a familiar trio of policy initiatives — extend unemployment benefits and the temporary payroll tax cut, spend more on infrastructure — and then blamed congressional Republicans for not enacting them.

“These are all ideas that traditionally Republicans have agreed to, have agreed to countless times in the past,” Obama said. “There’s no reason we shouldn’t act on them now. None.”

Markets were unmoved. Stocks fell before the midday speech, and they kept right on falling afterward.

No one should have been surprised. Obama needs a sharper, weightier economic message — and perhaps, many of his ideological allies suggest, a revamped policy plan as well.

Here’s why the president is struggling to get through: There appear to be two key fears driving investors and businesses right now. First, fear about the erosion of the U.S. and global recoveries, which are rooted in economic fundamentals and seemingly immune to any presidential speechifying.

There’s also widespread concern, voiced by Standard & Poor’s in its downgrade of U.S. debt on Friday, that Washington lawmakers have lost any ability to work together to solve tough economic problems. As the National Federation of Independent Business said Tuesday, in releasing another survey showing a glum outlook from small business owners, “for all the activity in Washington, D.C… they have done nothing but create a sizeable helping of anxiety, exactly what we don’t need.”

That concern would seem to be inflamed by Obama’s message of, 'I’ve got all these great economic ideas, but Congress won’t play along.'

Part of Obama’s struggle is that, despite his much-touted push to “pivot” to jobs after the end of the debt-ceiling fight, he’s still talking first and foremost about deficits. The first 650 words of his 1,500-word speech on Monday centered on the S&P downgrade, the details of the debt-limit deal, his willingness to talk about reducing social safety net spending and his commitment to stay on deficit reduction “until we get the job done.”

Obama’s other problem is the simplicity of his opponents’ message. Everyone knows Republicans’ economic mantra: Cut spending, create jobs, don't raise taxes. There’s little economic evidence to suggest such an “expansionary austerity” plan will work — but the rhetoric is dynamite.

Administration officials hint strongly that Obama’s next messaging move is to take Republicans head on in the court of public opinion. He’ll attempt to engineer a repeat of the grassroots-pressure strategy he executed in the debt fight, when Obama used his bully pulpit to urge voters to phone their members of Congress and demand compromise — a move that jammed Capitol switchboards, but didn’t appear to alter the terms of the bargain he struck with Republicans.

Jared Bernstein, a former Obama economic adviser who is now a senior fellow at the Center on Budget and Policy Priorities, said a grassroots strategy is the president’s best bet — and that it should be themed on a simple policy plan. (Bernstein would go with a plan he calls FAST!, which would pump billions of dollars into maintenance and retrofit projects at local schools across the country.)

Obama needs to “latch onto one big, visible idea that will create a lot of jobs,” Bernstein said. “Argue your heart out for it. And if the opposition gets between you and action on jobs, tell the American public who’s blocking you.”

Other left-leaning economists advise an even bigger policy shift.
“He needs more than a message,” said Robert Shapiro, a former Clinton administration economic adviser who now runs the consulting firm Sonecon. “He needs a fresh program that provides a narrative of how his continued leadership will lead to much stronger job creation, income gains and growth than we’re seeing today. This would entail, for example, cuts in payroll taxes on both sides, and a serious plan to bring down foreclosures and stabilize housing prices.”

Michael Mandel, the chief economic strategist at the Progressive Policy Institute, said Obama must rethink his economic approach entirely — starting by jettisoning the notion that more tax cuts or spending to stimulate demand will actually boost the recovery. (Mandel contends pumping more money into the economy largely helps Americans buy more imported goods, creating jobs overseas but not at home.)

“His message should be: We’ve come to a fork in the road,” Mandel said. “We have deep structural problems. Our production base is eroding, our innovators are being tied up with regulations, and we have an investment shortfall. I will do whatever I can to fix these problems.” He added: “But the first thing he has to do is admit that the economy has problems that can’t be solved by demand stimulus, including a growing competitiveness problem that’s not going to go away.”

Administration officials suggest that Obama probably won’t shift his message or his policy much, if at all, until Congress returns after Labor Day.

Presidents, after all, don’t typically roll out big new plans in August.

Then again, this isn’t a typical August.

In the meantime, I read Obama's August-8 speech after the credit downgrade by Standard and Poors. Reader's digest: All our problems are eminently solvable. And the solution is . . . balancing the budget. (Sigh)

Note: there are assertions of fact here that are not backed up by links. However, my remarks are based on the assumption that the reader is literate and generally aware of current events. Those who don't meet those criteria are free to ignore the post.

(and seriously trashing the state capital along the way)

However, my remarks are based on the assumption that the reader is literate and generally aware of current events.

Thomas wrote:

In the meantime, I read Obama's August-8 speech after the credit downgrade by Standard and Poors. Reader's digest: All our problems are eminently solvable. And the solution is . . . balancing the budget. (Sigh)

It is a significant change from the current year fiscal budget he submitted seven months ago. That one, though failing to meet Krugman't standard for massive new "stimulus" funding, did indicate a significant increase in the current deficit from already high levels.

However, there is little indication that Obama really intends to balance the budget. He has already ignored the recommendations of the special commission he appointed to study the subject. The deadlock between Democrats, who insist on tax increases as the principal means of reducing the deficit and Republicans who insist on entitlement reform instead continues undiluted. The select Congressional Committee that will comvene next month is empowered only to find an additional trillion in cuts over the 10 year budget period - chump change. Even this effort may end in deadlock.

I think he is focused on 2012 and his shrinking prospects of reelection. He may also be clueless.

He has already ignored the recommendations of the special commission he appointed to study the subject.

The deadlock between Democrats, who insist on tax increases as the principal means of reducing the deficit and Republicans who insist on entitlement reform instead continues undiluted.

The select Congressional Committee that will comvene next month is empowered only to find an additional trillion in cuts over the 10 year budget period - chump change.

I think he is focused on 2012 and his shrinking prospects of reelection. He may also be clueless.

It was Cyclo who suggested that I have likely become accustomed to having my word accepted without question - a subject I had not raised at all.

Your unwillingness to back up your opinions has been commented on, and discussed many times. I've been watching you dodge requests for evidence for years now.

You are an interesting poster, but your inability/unwillingness to provide supporting documentation is frustrating (particularly when you're arguing a point I agree with).

Should we providing you the dossiers of who we've met and how very important that is before we comment on posts? I'll be sure to update my list on the 'A2Kers you've met' thread.

why do you insist on setting yourself up like this?

Finally, a very large fraction of the citations offered as "proof" for assertions made on this forum come from obviously biased sources, yet that aspect of things usually goes unchallenged.

ehBeth wrote:

why do you insist on setting yourself up like this?

In part to get Cyclo to waste his efforts on niggling counterpoint like the post directly above.

When it's just your opinion (Such as, 'Obama is no better than Jimmy Carter'), that's one thing;

Quote:

By National Journal
updated 8/9/2011 4:15:46 PM ET

Analysis

Nearly halfway into his speech from the State Dining Room on Monday, President Obama finally launched into what amounts to his core job-creation message these days. He ticked off a familiar trio of policy initiatives — extend unemployment benefits and the temporary payroll tax cut, spend more on infrastructure — and then blamed congressional Republicans for not enacting them.

Nice. I disagree with two points and have reservations about the third.

Unemployment compensation is darn nice when you lose your job. When benefits extend to nearly two years, you are paying people not to work. I think we are getting what we are paying for. Beyond some reasonalbe cushion effect, we are just dumping undirected money into the economy and waiting for some Keynesian multipler to kick in. We're still waiting.

Same for temporary payroll tax cuts. We are spending borrowed money in hopes the economy will be stimulated. Not to suggest that anyone is going to start hiring because there is a slight tax reduction, but wouldn't it seem at least a bit more effective to reduce the employers' portion, rather than the employees'. It would still dump cash into the economy, and out of the Treasury, and might, at least possibly tip the hiring decision.

Infrastructure spending has potential, but only if the spending results in an economic benefit. Paying to install signs notifying that the continuing highway repairs are our stimulus dollars at work has no benefit to anyone except sign makers and politicians looking for advantage in the next election.

When benefits extend to nearly two years, you are paying people not to work. I think we are getting what we are paying for. Beyond some reasonalbe cushion effect, we are just dumping undirected money into the economy and waiting for some Keynesian multipler to kick in. We're still waiting