Last Thursday, President Obama unveiled his "American Jobs Act" to a joint session of Congress with a new plan for job creation. The plan takes a Keynesian approach, much like his previous stimulus bills, but with little success from them, it seems that Obama's American Jobs Act is not so much an economic plan as a political plan for his reelection. Obama and his advisors recognize that they can trap Republicans as a do-nothing Congress if they don't pass any job plan, but know the Republicans will lose their public support if they do vote for Obama's plan, which includes another $500 billion in increased spending and temporary handouts financed by an additional $500 billion in permanent tax increases. As explained by Peter Ferrara at Forbes:
...Obama and the left wing cabal that now runs the Democrat Party put the entire nation through what seems more and more like an historical reenactment of the 1930s. Obama apparently thinks it is a brilliant political insight to pattern his Presidency after Franklin Roosevelt’s, as if the America of today is not fundamentally different or any more sophisticated than the America of the 1930s. As a result, the experience of the Obama presidency has been to prove one more time what should have been realized by 1940, but what thinking people all knew by 1980: Keynesian economics doesn’t work. That is because what drives economic recovery, growth and prosperity is not government spending and deficits, but incentives to produce. Borrowing one trillion dollars out of the economy for the government to spend back into the economy, as in the first Obama stimulus, does nothing to improve or increase those incentives, or expand the economy on net.
How do you think Republicans should negotiate a jobs deal in Congress that will actually work? Let us know your thoughts in the comments.
Ferrara also points out some striking statistics that have resulted from the lagging economy:
Unemployment for African-Americans in August was 16.7%, stuck at depression levels for over 2 years. Hispanic unemployment at 11.3% has been in double digits for over 2 years as well. Teenage unemployment was a depression level 25.4%. Black teenage unemployment was at a Jim Crow level 46.5%. [...]
Then on Tuesday came the Census Bureau report fleshing out the full meaning of no economic recovery. Median family income has fallen all the way back to 1996 levels. The Wall Street Journal reported on Wednesday, “Earnings of the typical man who works full time year round fell, and are lower—adjusted for inflation—than in 1978.”
The poverty rate climbed to 15.1%, higher than in the late 1960s when the War on Poverty was getting underway, $16 trillion ago. The child poverty rate climbed to 22%, nearly a quarter of all American children. The total number of Americans in poverty is higher than at any time in the over 50 years that the Census Bureau has been tallying poverty. Moreover, the number of Americans ages 25-34 living with their parents has soared by 25% since the recession began.
Obama supporters can no longer blame former President Bush, either. Historically, the worse the recession, the stronger the recovery, and America should be in the second year of a booming recovery by now. In fact, since the Great Depression, recessions in America have lasted ten months on average, with the longest lasting 16 months. The recession America is currently in has stretched over 45 months, with unemployment stuck at 9.1%. As Ferrara points out, "this is the longest period of unemployment that high since the Great Depression, when Keynesian economics first reigned supreme."
As a solution, Ferrara believes Republicans should scrap Obama's jobs plan and work through the Republican-controlled House to pass a plan that will actually work.
...They should not get trapped in “negotiations” with Obama, who has demonstrated he has no meaningful understanding of how the economy works, or how to promote economic growth. They should negotiate instead with Congressional Democrats, who will be far more receptive to compromising with Republicans, and far less likely to stick with Obama, after Tuesday’s special election Republican victory in a district that hasn’t been represented by Republicans since before the New Deal.
Congressional Republicans can hammer out a deal with Congressional Democrats for tax reform somewhere between what House Budget Committee Chairman Paul Ryan proposed in the budget passed by the House, and what the Simpson-Bowles Commission appointed by President Obama proposed. There are enough Senate Democrats who support the Simpson Bowles proposals to pass such a bill through the Democrat controlled Senate.
What are your thoughts?