While he tries to coax the economy into producing more jobs with one hand, Obama has set in motion an inexorable process that will lead to more economic contraction.
Pesident Obama’s jobs speech last Thursday evening heartened Democrats and progressives, but yesterday’s meeting of the “super-committee” reminds us how much Obama has already given away and the traps he has set for himself (and the recovery) going forward.
While he tries to coax the economy into producing more jobs with one hand, Obama has set in motion an inexorable process that will lead to more economic contraction. The process will also deprive the Democrats of clarity in defending their most popular crown jewels—Medicare and Social Security—against unpopular Republican assault.
Ironically, while Republican front-runner Rick Perry was getting hammered by other GOP leaders for playing fast and loose with Social Security—creating an opening for Democrats with seniors—President Obama is on the verge of proposing an increase in the Medicare eligibility age from 65 to 67.
This would create huge hardship—it is astronomically expensive for this age group to buy health coverage off the shelf—as well as reinforcing doubts about Obama among seniors, exploited by Republicans during the Affordable Care Act debate. Not would this bad idea solve the larger problem of a grossly inefficient health care system. Obama cutting Medicare also gives Republicans political cover to propose even deeper Medicare cuts.
Meanwhile, in the second ring of the budget circus, the meeting of the super committee underscored the gap between economic reality and the conventional wisdom in the deficit and the jobs recession. It fell to Doug Elmendorf, director of the bipartisan Congressional Budget Office, to give the committee members a lesson in elementary economics:
There is no inherent contradiction between using fiscal policy to support the economy today, while the unemployment rate is high,” he said, “and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.
And he added: “If policymakers wanted to achieve both a short-term economic boost and medium-term and long-term fiscal sustainability, a combination of policies would be required: changes in taxes and spending that would widen the deficit now but reduce it later in the decade.” [emphasis added]
This puts the wonky and technocratic CBO well to the left not just of the super-committee but of the Administration, on what to do and why to do it.
One of the most sensible proposals has been offered by Congressman John Larsen of Connecticut. He wants Congress to create a parallel Congressional panel charged with getting the economy to full employment by 2021.
And in the third ring of the circus, last weeks mood of Republican conciliation evaporated, as Republicans took aim at Obama’s plans to pay for part of his proposed new jobs spending with attacks on his proposed tax hikes on the top two percent.
In the latest GOP Orwell-speak, rich people are now invariably referred to as “job creators” (how many affluent people actually create jobs?)
Someone—maybe even President Obams—should remind the citizenry that in the 1990s, when tax rates on the wealthy were much higher, the economy created 20 million jobs. And in the 1940s, when personal income tax rates peaked at 91 percent, we had a record boom. Businesses create jobs when customers have money in the pockets to buy products, not when taxes are cut.
Out in the real world, the Census Bureau has just reported that the income of the typical American family, adjusted for inflation, is now at its lowest level since 1996—15 years of lost growth, except for the wealthiest of Americans, those good people who brought us the crash.
That reality—not a battle over which party is more fiscally conservative—will color the 2012 election and determine its outcome. For all of its impact on improving the lives of real people, the antics of the super committee and the misplaced debate between Obama and his Republican critics might as well be taking place on Jupiter.
(From American Prospect)