Meet the New Jobs Plan, Same as the Old Jobs Plan
Today in the New York Times, friend of Ricochet and Stanford economist John B. Taylor previews the President's new jobs plan. Problem is, Dr. Taylor argues, it's far too similar to Obama's demonstrably ineffective 2009 jobs plan.
One part of the new plan, the president said, is to “put more money in the pockets” of people. That was tried in the 2009 stimulus, when the federal government borrowed money and gave it to people in the form of one-time payments or temporary refundable tax credits. The temporary transfers created little or no increase in aggregate consumption or, in turn, in jobs.
Another part of the new plan would “put construction crews to work rebuilding our nation’s roads and railways and airports.” That too was tried in the 2009 stimulus. My colleague John F. Cogan and I found that state and local governments put most of the money in their coffers. The federal government also undertook its own construction programs, but, with few shovel-ready projects, it could only increase infrastructure spending by an immaterial 0.05 percent of G.D.P.
In my estimation, those interventions and most others — cash for clunkers, the first-time homebuyers’ tax credit, quantitative easing by the Federal Reserve and the sharp increase in federal spending — have not only been ineffective but have also lowered investment and consumption demand by increasing concern about the federal debt, another financial crisis and threats of inflation or deflation. Most businesses have plenty of cash to invest and create jobs. They’re sitting on it because of those concerns.
We don't need more of the same, Dr. Taylor writes. What "the American economy needs [is] a new comprehensive economic strategy...[one that] will take us toward a more stable and predictable economic policy with less uncertainty about the future." Dr. Taylor believes that the House Republican Cut, Cap, and Balance plan is a good starting point for a new comprehensive economic strategy, but thinks that it will need to be coupled with aggressive pro-growth reforms that enable the U.S. to tackle its massive debt and deficit problem.
The bad news? We're going to have to wait until after the 2012 election before any meaningful reform has a prayer of being implemented.
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Comments :
Dec '10
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
I find it funny (funny sad, not funny haha) that every time the economy goes on the fritz the first thing government thinks of doing is giving back some of the money it confiscated. It doesn't take a rocket surgeon to figure out that if giving the money back is part of the cure then taking it away in the first place is part of the cause.
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
One thing that sticks out at me in John Taylor's column as I read it a third time, is what he says about business having plenty of cash to invest and create jobs but instead choose to sit on it due to uncertainty. I wonder how much of this hoarder mentality translates to individual consumers. I certainly see it in myself -- I've become more frugal since the beginning of the recession, saving wherever I can, because I can't help but wonder if things are going to get worse. My grandparents grew up during the Depression, and never got over the frugal habits they picked up during hard times. Even when they came into money, they could never bring themselves to part with it. As Americans begin to save more and lead more frugal lifestyles (if this is indeed happening, which I have no data on my fingertips to support), I wonder how this will affect our short and long term economic prospects.
Dec '10
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
I've also trimmed expenses where I can, and I have a government job! Even with my income set on a rock solid floor I still have to figure out how to keep up with inflation in food and fuel. It also doesn't help that my homeowner's insurance and property taxes continue to rise (thus raising my mortgage) when my pay is sure not to increase for at least another year.
Jun '11
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
I don't have a link convenient but Americans started to pay down personal debt at a pretty remarkable clip over the last couple of years. It's one of the overlooked developments that indicates the persistence of sanity among our citizens.
Oct '10
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
I think the President is turning into a columnist the way he recycles his material and rephrases it and then presents it as a new piece.
Sep '10
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
Diane: my gut says you're absolutely right about people saving and avoiding expenses due to uncertainty. The national savings rate has gone from near zero in 2008, to about 5% now. That's offset by ongoing consumer borrowing, which will probably not go below some structural floor.
On the corporate side of things, I really like the idea of tax-free repatriation of profits, which could result in a huge cash infusion into the US economy. But it has to be coupled with some kind of regulatory moratorium or rollback to reduce risk and encourage business activity.
Apr '11
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
Diane, I'll second what you say about being more frugal. I don't know how many times lately I've said to myself, "I don't really need that" and walk away.
Dec '10
Re: Meet the New Jobs Plan, Same as the Old Jobs Plan
Even dullards can recognize that "putting money in the pockets of people," that is borrowed from their children, is wrong.
As to frugality, it is easily observed. Look at your grocery stores; you will occasionally find some cuts of beef below $4/pound in national grocery stores, but never in butcher shops and no longer at WalMart. Walmart has reached the limit of what it can price-support, by raising prices elsewhere in the store; their customers will not buy items at elevated prices, elsewhere in the store. Grocery stores are still able to get some beef cuts below $4, by sequestering their elevated prices to specialty items that their better-off customers can afford.
A second example has been a diminishment of the utilization of space in landfills, across the country. This is not a cost savings measure, in and of itself, by residential customers, as they pay monthly and not by the ton. This is a reduction in purchasing by residential customers. This story was national with ABC, today, with a focus on Orange County (Orlando area), Florida.