Going Big, Right Away: President Obama Unleashes Demand Side Economics

Right away. Pass this American Jobs Act right away. That was President Obama's recurring message to Congress tonight. While politicians and the political media are trying to take the political temperature of the President's jobs proposal, the President - the truly American president, reminded us of something tonight: 14 months (the time till election day) is a luxury most Americans don't have. That was the message that rang through his rhetoric. The complementary message that rang through his proposals? Demand side economics.

If you haven't yet, watch the President's speech first (transcript here):



I am not very good at this instant reaction thing. Generally, I tend to absorb things. But tonight's message from the President and his plan was unmistakable, inspiring and has me jumping up and down: he will not, so long as he holds power, leave the American people who are struggling in this economy at the mercy of the political elite in Washington, DC. He will not, to the extend his power allows, leave any stone unturned to jump-start job creation. And he will, with all his power, put America back to work.

The plan the president put forward was simple but ambitious, big but shovel ready, and just what the country was hungry for. But let's keep something mind: the speech and the proposal the president delivered was a tremendous victory for the simple idea that the only way to permanently grow the economy is to create demand.

  • Tax credit for small businesses to hire new workers or to give employees pay raises. More pay/new workers = greater demand for goods and services.

  • Expanding the payroll tax cut on the employee side (first enacted by the president last year) by 50%, giving the average family an additional $1500 to spend, especially affecting the working poor, who have a much higher propensity to spend every dollar put in their pocket. Extension and expansion of the payroll tax cut = greater demand.

  • Creating an equal payroll tax cut for employers so that they can do item 1 and hire new workers or give existing workers a raise.
     
  • Rebuild America. It's shovel ready.
    • Roads, bridges, schools and airports. Double the benefit by hiring contractors who will hire construction workers to build these things. New construction jobs = greater consumer demand. New building and improvements = greater demand for construction material. Better transit = better environment, less time spent in traffic, more productive workers, money saved for consumers = greater demand.
    • Rebuilding schools. America's children deserve no less. Jobs in the community = greater demand for mom-and-pop businesses in the community.
  • Fund the rebuilding of America by leveraging federal investment with private capital.
    • Independent fund based on how badly a construction project is needed and how good it is for the economy. Not crony-Congressional allocations of money. Challenge the private sector to invest in success with the leverage of federal funds. Funding going where it is needed most. Builders taking on more projects. More jobs = greater demand.
  • Put teachers back in our classrooms. Once again, an economic two-fer.
    • Numero uno: teaching jobs saved = teacher salaries saved = more money in pockets of teachers = more demand in the local economy.
    • Numero dos: better education and more care for our children in school, which means less time spent by parents dealing with trouble at home. That means better communities, less worried and more confident parents - that is, parents confident they don't have to save all their money to send their kid to a private school or provide after school care. = Parents able to spend more as consumers = more consumer demand.
  • $4,000 credit for hiring the long-term unemployed. More two-fer.
    • "Fer" One: the long term unemployed need jobs, and when they can get a job, they will be able to spend more money. That's a gimme. = Greater demand.
    • "Fer" Two: The federal government right now pays for unemployment benefits beyond six months. If they can get hired, that's money saved by the federal government that it can use to.... oh, I dunno, either pay for this tax credit or rebuild schools and expand airports, for example. = Greater demand. (see above).
  • Tax credit to hire veterans. No-brainer. Veterans serve our country, and it's time we served them. They are skilled people, and employers gain. With private employment gain for veterans, not only will they be able to spend more (= greater demand), on the V.A., for example, if some of these jobs came with health insurance, the federal government would save money that could be used to give the economy a further boost.

  • Extend unemployment benefits. Do I need to explain this one? Unemployed people are the most likely to spend every dollar they get, because they are living on the absolute edge of being this close to being put out on the street. This is a no-brainer greater demand generator. To the tune of $1.62 for every dollar in unemployment benefits, actually.
The White House has a fact sheet available, which describes the above in greater detail.

The President went big. $450 billion big. And not with useless tax breaks. Where he gave tax breaks to business, he tied them directly to job creation and challenged businesses and their Congressional benefactors to defy him. $240 billion in payroll tax cuts for employees and employers. $140 billion to build roads, bridges, schools, railways, and airports. The rest to help states save jobs of teachers and firefighters, and to create incentives for every job created for business.

How is he going to pay for it? A more detailed proposal on that is coming soon, but suffice it to say the corporate and ultra-wealthy welfare state that the political Right has built over the past three decades is under a sharp axe.

Today, in the Congressional responses from the Republicans, they knew their tactics of holding America hostage and then selling it cheap to their corporate benefactors have lost, and the President's sincere attempt to awaken the American people and convince them that increasing demand is the only ultimate way to a sustainable recovery has succeeded tonight.

Speaker John Boehner's statement was conciliatory, and seeking a way to work with the president. Even Eric Cantor said some ideas of the president's were going to be received well. It's the same Eric Cantor who literally bet on America to fail. It's those same Republicans who bedeviled the President to everyone they could talk to. Those same Republicans are now running for cover and asking for... compromise!

The President has Republicans in Congress cornered (I have written previously about why and how). But even as the GOP members of Congress begin to realize that the American people do not like them - the rock bottom 12% approval ratings come with a majority of Americans wanting their own members out - they will continue to look for ways to undermine the President even (or maybe especially) if it's by undermining the American people. The President knows that. And he needs our help: "I intend to take that message to every corner of this country" said the president, adding "lift your voice:  Tell the people who are gathered here tonight that you want action now." You know how to lift your voice. House.gov. Senate.gov. The president needs you. And you. And you over there.