Obama's Economic Policy: Another Bunt

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by: Brad DeLong

With a multiplier of 2, $50 billion in the first year is 0.3% on the unemployment rate--and it's not clear if we can ramp up an extra $50 billion of infrastructure spending in the first year.

Don't get me wrong: boosting federal infrastructure spending is almost certainly a very good idea. Tax cuts for "small business" much less so--unlikely to reduce wedges between social and private returns on a micro level, and likely to have a low bang-for-buck on the macro level.

But the thing that stands out--again--is the radical disjunction between the scale of the economy's problems and the proposed solution. And so the press corps, rightly, says not that Obama proposes plans to fix the economy but that he proposes "a pre-election effort to show he’s trying to stimulate the sputtering economy."

Matthew Yglesias (More Like This, Please):

I don’t think that presidential “messaging” has much power to alter the outcome at the midterms, but that’s all the more reason the White House may as well propose ideas that make sense on the merits and then hope for the best:

President Barack Obama is asking Congress to approve at least $50 billion in long-term investments in the nation’s roads, railways and runways in a pre-election effort to show he’s trying to stimulate the sputtering economy. The infrastructure investments are part of a package of targeted proposals the White House announced on Monday. With November’s elections for control of Congress approaching, Obama planned to discuss the proposal later Monday at a Labor Day event in Milwaukee.

Given that congress almost certainly won’t agree to anything this sensible, monetary policy remains are best hope in practice. But it’s foolish for the White House to constrain itself to only proposing ideas congress is likely to approve. This new approach is the right way to go.

Ryan Avent (Fiscal policy: A new hope):

MAYBE I should have asked about an infrastructure spending package sooner:

President Barack Obama is asking Congress to approve at least $50 billion in long-term investments in the nation's roads, railways and runways in a pre-election effort to show he's trying to stimulate the sputtering economy.... While the proposal calls for investments over six years, the White House said spending would be front-loaded with an initial $50 billion to help create jobs in the near future.

The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a new air navigation system designed to reduce travel times and delays. Obama will also call for the creation of a permanent infrastructure bank that would focus on funding national and regional infrastructure projects.

It will be interesting to see full details, and to see the reaction from Congress. Mr Obama will also call for a substantial package of small business tax cuts, potentially worth up to $100 billion. The message that Americans are unhappy with the state of the economy seems to have sunk in.

Zandar (TAX CUTS UBER ALLES):

A Clintonian move if there ever was one. The bad news: actually helping the American people directly has now gone by the wayside.

The White House has decided to forgo a broad-based payroll-tax holiday at this point, officials have said. That proposal, which had been part of earlier discussions with key congressional officials, would have been an expensive measure, potentially costing hundreds of billions of dollars. It also could have deprived Social Security of needed cash even as Democrats are accusing the GOP of plotting the program's demise on the campaign trail.

It also would have boosted America's paychecks directly, so there's no way the GOP was going to allow that to pass before an election and the Village has already given the GOP cover on this: it may "deprive Social Security of needed cash". That's cockamamie bull, considering that Social Security could have easily taken the hit for a couple of months. But hey, the big Obama plan to save the Dems? Tax cuts for businesses. The GOP is already calling Obama out on this and are declaring that the real message is that tax cuts uber alles should have been the plan all along.... Shoulda swung for the fences, instead he lays down a bunt. Forcing the GOP to vote against a payroill tax holiday that would have directly put money in America's paychecks would have been the wise thing to do. Instead he's doing what the Republicans want now as a default position and they're pillaging him for it.