View from Australia: Making up for lost time

By Jonathan Bradley

Not that we needed further evidence of how rough things economically are in the United States at the moment, but here we go: the Census Bureau reported that the US poverty rate is at its highest since 1993. 46.2 million Americans were living below the poverty line last year — nearly one sixth of the population. Unemployment is at 9.1 per cent, and if you include people discouraged from looking for work, or who work part time and want to work more, the rate expands to 16.3 per cent.

That's bad news for a lot of Americans. It's also bad news for a president looking for a second term, and congresspeople hoping to be re-elected. Even voters who have a job are unlikely to be feeling happy about figures like those; it means they're less likely to get promoted, will find it harder to move into a new job, and will struggle to convince their bosses to give them a pay raise. (It's tough to argue for a raise when your boss knows plenty of other people with no job at all will do yours without the extra money.)

Fortunately, the White House is making an effort to get the economy going again. Last week, President Barack Obama announced a jobs plan worth $447 billion designed to pull the economic recovery out of a stall. The plan is a combination of measures that would stop things from getting worse — continuing a cut on the payroll tax rate, for instance — and measures designed to boost growth and reduce unemployment, such as spending on infrastructure. The forecasting firm Macroeconomic Advisors predicts it would add 1.3 million jobs to the economy before the end of 2012. You can see why Obama and his supporters are hoping to make "Pass this bill" a refrain as familiar as "Yes we can."

An obstacle stands in the way of that happening, however, and it's big, red, end elephantine. The Republican Party would prefer to be reducing spending at the moment, and even though Obama has promised to offset the bill's new expenditure, the GOP is unlikely to approve of his methodology. Expect it to involve an increase in the taxes paid by the wealthiest Americans, for instance. 

In recent disputes with Congressional Republicans, Democrats have been aghast at the conciliatory — or, according to some, weak — front presented by the President. Many on the left believe that by offfering significant concessions on issues like maintaining government programs or reducing the deficit to a party with no interest in offering concession of their own in turn, Obama allowed his opponents to call the shots. The Democratic base has been happy to find the President has found himself in a new and uncompromising mood for the fight over the jobs bill. He's told Republicans that if they don't pass his bill in full, he'll ask the American people to judge them.

Since they won 63 House seats in the 2010 midterm elections, Republicans have shown little desire to help Obama out with any of his plans. They believe they were sent by the American people to halt the agenda of an unpopular president, and since they never had much fondness for that agenda in the first place, they've eagerly accepted their supposed assignment. Republicans control the House and have the ability to filibuster the Senate to a standstill — an ability they have not been shy about exploiting. Even when polls have shown that the public is against them, as they were on the debt ceiling dispute, Republicans have held strong in their obstruction. Some think that Obama's conciliatory stance is driven by necessity rather than temperament: Since the GOP can stop everything, the only way the President can get anything done is by playing nice.

Democrats fear that the same thing will happen again over the jobs bill. Republicans will pass one or two minor parts of it, but without the full weight of the package, the economy will continue to founder. Obama will fume and threaten this time instead of plead and placate, but the outcome will be the same: a Republican victory and continued economic woe.

However, Politico has a report explaining why things might be different this time. The White House thinks that voters are so upset by high unemployment that Republican leaders like House Speaker John Boehner can't afford to be obstructionist. Congress and the Republican Party are much more unpopular than the President, and Democrats are betting that voters will side with Obama. Republicans will have to roll over and pass the bill, consoling themselves that some of its measures, like the payroll tax cuts, are ideas that they've supported, and even proposed, themselves in the past.

Obama is looking at a tough fight, to say the least. Republican insiders have already told journalists they don't want to give the President "a win," and  if he can defeat that instinct, it will represent a significant shift in the dynamic in Washington. But if Obama gets this victory, the American people will win too. The US economy is suffering from a lack of demand — too few people are spending money — and an injection of $447 billion will lead to more spending, and hence more hiring and more growth.

Republicans are deriding it as a "stimulus package." They're right on the terminology but wrong on the basic economics. It was Obama's stimulus in 2009 that kept things from getting much worse than they did. The package, however, was smaller than necessary, and the economy was worse than realised. This bill is making up for lost time.

15 September 2011