The Sad Absurdity of Our Economic Debate

by Jonathan Cohn | September 3, 2010

Is the Obama Administration planning another major initiative to boost the economy? That depends on who is talking. And when.

On Thursday afternoon, press secretary Robert Gibbs announced at his daily briefing that "a big, new stimulus plan is not in the offing."

A few hours later, the Washington Post reported that administration officials were talking about a second stimulus after all--that it would might include a payroll tax holiday and some sort of tax break for business, and that it might be in the “hundreds of billions” of dollars.

The White House Press Office quickly issued a quasi-denial: “There have been a lot of reports and rumors on different options being considered--many of which are incorrect. The options under consideration build on measures the President has previously proposed, and we are not considering a second stimulus package. The President and his team are discussing several options, as they have been for months.”

Meanwhile, at around the same time, Politico posted its own story on internal deliberations: “The Obama administration is mulling a raft of emergency fixes to stimulate the economy before the midterms, including an extension of the research and development tax credit and new infrastructure spending, according to several people familiar with the situation.”

Finally, following this morning’s jobs report, President Obama announced that “I will be addressing a broader package of ideas next week. We are confident that we are moving in the right direction, but we want to keep this recovery moving stronger and accelerate the job growth that’s needed so desperately all across the country.”

What’s really going on here?

Reading between the lines, and based on what I’ve gleaned from some (mostly) informed sources, the argument is in some ways semantic. Yes, the White House is looking at initiatives that could both boost the economy. But while it’d prefer a bigger plan, focused more on infrastructure spending and aid to the states, Congress has no appetite for that. So it’s focusing on other, lesser measures that might have a shot. In a series of speeches and events next week, President Obama will propose and argue for these initiatives.

The White House doesn’t want to call the new package a “stimulus,” because the very term has become politically toxic. But the point of the initiative is to stimulate the economy--which means, technically speaking, it would be a stimulus, although probably a very small one. (I’m hearing the Post’s sources were wrong to say “hundreds” of billions of dollars, as in more than one hundred billion, although it’s always possible it’s my sources who are wrong about that.)

Does yesterday’s rhetorical contortions suggest the White House needs to do a better job with its message? Yeah, probably. Does it also suggest that the political world, including those of us in the press, need to stop going crazy over every little tick in the news cycle? Yeah, probably.

But I feel like all of that is a distraction from the real, underlying problem here. The economy is still sick. Democratic initiatives helped us avoid catastrophe--it was only two years ago that the economy was shedding hundreds of thousands of jobs a month and the global financial system teetered on collapse. But while the private sector is creating jobs, it’s not creating them fast enough to keep up with population growth or, at least recently, to offset layoffs as cash-strapped state and local governments downsize.

Liberals tend to argue that Obama should have taken more dramatic steps to fix the economy when he took office. I tend to agree, in part because a lot of those liberals have pretty good track records on this sort of thing.

But whether Obama failed to do that because he made a bad policy decision or was simply constrained by political reality, depressing as it is, he’s now in the camp of wanting to do more--if he could. Yet conservatives continue to win this debate, by arguing that uncertainty is the reasons business aren’t hiring (even though the jobs data doesn't support that theory) and that high deficits are spooking the markets (even though the markets don’t seem spooked by government debt and even though conservative proposals for tax cuts would create a lot more of it).

So now we’re left to argue over morsels. If you’re going to stimulate the economy with tax cuts, a payroll tax holiday seems like a decent way to do it, at least based on what I'm reading and seeing. Giving business a tax break for research and development, not so much. But the business community loves the R&D idea, since it’s money in their members’ pockets. The hope seems to be that support from business, along with the appearance that Democrats are doing something good for business, will somehow win over enough votes to pass the package as a whole.

Personally, I don’t see it. But, then, I’m not sure how much it matters, either as policy or politics. Some of these measures might help a little bit and I’m not one of those people willing to dismiss a good idea because it’s not good enough. But I have serious doubts that anything remotely meaningful can pass Congress at this point--and, politically speaking, I'm dubious it will make a difference come November, although there are longer-term prospects to consider.

The truth is that the conversation about the economy should be in an entirely different place right now--we should be talking about a much bigger package, one focused on infrastructure and measures that have more bang for the buck. But the time to change that conversation has probably passed. In fact, it probably passed a long time ago.

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