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American Jobs Act

President Obama says of his “American Jobs Act” that “There should be nothing controversial about this piece of legislation.  Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans.”  That seems like a very fair statement on the face of it.  There’s nothing about this package that is particularly new or bold in any way at all – it represents a minimal effort to create jobs.

The latest proposal is almost certainly what Obama thought he could get passed more than what the economy really needs.  Let’s see if even that is possible before we get too excited.

Yesterday, the latest unemployment initial claims number came out, the barometer that shows us in real time the state of jobs and, by extension, the economy.  It’s back up to a seasonally adjusted 414k people losing their job last week, a number very close to the 430k that seems to represent break-even with the pace of job creation elsewhere.  The early part of the summer saw this dip below 400k in a show of some strength, meaning that we were adding a net of something around 120k jobs every month.  That’s been cut in half today.

There is a deficit of at least 8 million jobs right now, maybe quite a lot more.  We need job creation more on the order of 500k per month to start making a dent in that, or an initial claims figure of 300k per week.  It’s nowhere near that level.  That’s what Obama and Congress need to manage, and even without the details it’s unlikely that the proposal will get us anywhere near that.

The most interesting feature of Obama’s proposal is aid to state and local government to prevent more job loss at those levels.  A full $35 billion is proposed for just this purpose, concentrating on saving jobs for 280k teachers.  It almost appears that the administration is also looking at initial claims, making sure that things don’t get worse more than working to make them better.

The bulk of the American Jobs Act is a series of tax cuts that will not have much immediate effect.

That’s why this represents a relatively minimal effort – one that might well be crafted more to pass the Congress than to do anything to transform the economy in any substantial way.

On the same day Ben Bernanke spoke to the Economic Club of Minnesota in Minneapolis, saying that any future growth would be up to government policies.  The Chairman is facing increasing resistance, even in public, for more action by the Federal Reserve.  There’s little more that the Fed can do on its own without something from the government.  What Obama appears to be trying to deliver is just enough to meet that call for action.

All together, the speeches and data yesterday add up to one very clear message – the economy is stuck in neutral and the best we can hope for is a small nudge in a positive direction.  There is clearly no “recovery” right around the corner.  No one is in a position to change things overnight.  That probably will scare the stock market and individual consumers once the message sinks in, but this may be the turning point in the Managed Depression.  We have an acknowledgment that the conventional methods are, at best, going to get us to hold even.

The American Jobs Act could be important if it represents a beginning.  If our leadership is finally becoming serious about the crisis this could be a turning point.  If that doesn’t happen it’s really just two years late and a few hundred billion dollars short.

What comes next?  I’ve stated my own ideas for radical transformation before.  Tell the world you think.  Could this be a new start in our national dialogue and efforts for serious change?  What else would you like to see?

19 thoughts on “American Jobs Act

  1. One of the numbers showed that if it were not for growth in the health care sector there would have been even more negative atrophy.

  2. Dan: I missed that, thanks. I will go back and look that over. Health care counts as “consumer spending”, so when we look at the graphs that show insane growth in consumer spending to 78% of all GDP by 2004 we all have to remember that health care is horribly distorting that number. What you’re telling me here is that it’s distorting numbers all over. Great. I need to plow through all that stuff and figure out what’s really happening.

  3. I’ll help to clarify (think I heard this on MPR). The recent month that showed 0 (zero) for job growth had something like 24k jobs added in health care and 6000 lost in the mfg. sector sorry I can’t be more specific.

  4. Dan: Thanks, that’s a good enough lead. I need to track a lot of this down when I have more time, maybe this weekend.

    Anna: I didn’t make my own estimate because I don’t want to guess at a fiscal multiplier. The best article I’ve seen on the concept was in the Economist a long time ago (we’re all using inline links now, I guess!) and there is a ton of debate on the right number. I think the right answer is closer to a million, but it’s just a guess. I also see that EPI was saying the job gap is about 11M, which is on the high side – the range is 8M – 12M and I tend to go with the lower number. If nothing else, creating 8M jobs & then seeing where we are would be one Hell of a start!

    Do I need to write a piece on fiscal multiplier? I guess I never thought it would be important in the debate. Let’s see if Dems use that EPI article (which appears to have come from the Obama administration).

  5. On Fiscal Multipliers: I didn’t mean to go this route, but what the heck. According to this pdf paper by the San Francisco Fed (aka “L” :-) ) the net from the 2008 stimulus (ARRA) 8.7 jobs were created with each million bucks. That suggests that with $440B we should expect 3.8M jobs overall – including the estimated 1.6M, or a net gain of 2.2M jobs.

    That’s a lot better than I expected, frankly. I think I was a bit too hard on this plan. However, it’s no more than about a quarter of the jobs gap that we have, so even at that level the proposal will not end the Depression.

  6. As I’ve discussed with you many times off-line, Erik, my brain isn’t wired to grasp economics at the level discussed here.
    What I see is personal, laid-off at the worst possible time in my life with little or no hope of any meaningful job anytime in the foreseeable future; I see the President’s proposal a little differently; he changed the equation just a bit.
    He is finally taking it to the party which has NOT been at the table since his election and publicly called them out, finally.
    I’ve already seen a bit of a different tenor in the statements made by Republican leaders, but though hopeful, I’m not holding my breath.
    The Republicans have done nothing, NOTHING since this president was elected to create jobs, their focus has been elsewhere.
    Even if the President’s proposals are all enacted, it won’t benefit me directly, that hill is too steep, but many will benefit, and more money will flow into the economy from those who will put that money right back into it, and maybe, just maybe, we’ll start making stuff in this country again.
    I know, Don Quixote, tilting windmills ain’t in my job description.

    • Jack: This was a hard post to write because I don’t want to sound either too negative or too positive about this plan.

      Part of me says:
      This is a Depression and yes, we have to do whatever we can. FDR didn’t know what the Hell he was doing, but he knew he had to do something. So does Ben Bernanke. It’s about time we get something though that builds some infrastructure and gets something moving again. If this is all we can get because of the composition of Congress, then let’s get this through.

      The other part says:
      This is far from adequate and another half-measure that will lull everyone into thinking that they should just not pay any attention and everything’s all hunky and/or dory.

      The details of estimating the number of jobs are not important – basically, something around 2.2M jobs give or take. That’s both not bad and not adequate at the same time. The problem is that big.

      I appreciate your opinion here and want you to know that I’m pretty damned underemployed as well, so I get it. I hope that this proposal goes through and it’s the start of some serious cooperation by the Republicans. We’ll just have to see. But I just can’t see this as anything other than a start.

      • My feeling about this in a nutshell: Even slowing this headlong rush we’re in to becoming a two-class country; the very wealthy and the rest of us, could start something. More jobs should create more demand.
        [Sigh]

  7. This could be a big set-up for congress because Obama knows they won’t pass anything he comes up with. This is probably going to be popular and I think just about everyone thinks government should be doing more. But if it doesnt pass then there is something for Obama to run against because he’s trying but it isn’t his fault nothing gets done.
    I don’t think Obama would just play games but I would bet he would say ‘this is what needs to be done and if you can’t do it we will use that against you.’

  8. Jim: I hope it’s not like that, but even if it is this could be what rids the nation of the extreme part of the right wing forever. Perhaps Obama is going to use their inflexibility against them, why not? But that implies that this is the most we can expect for a long time – and that would be a shame.

  9. I half watched Obama’s speech and thought it was pretty good. I haven’t put much thought into analyzing the AJA, because I don’t think it’s going any where except for maybe extending some tax cuts. If it gets voters more focused on the economy and things that could be done that will be a plus.

    Briefly serfing the web it seems most of the blogger/pundits I read view the plan positively. Ideally, I think it should be more weighted towards needed investments in infrastructure and education, which would do the most for reducing unemployment. About fiscal multipliers, ~$100,000 stimulus per job sounds like money well spent to me, as long as it is going for needed projects and tax breaks for the working class.

    BTW, Robert Reich will be speaking tomorrow at the Summit for a Fair Economy Conference for any other geeky people like me who would give up some time on a nice Sat. to talk about economics.

  10. Laurie: Great stuff, as always. Robert Reich is my top choice for the adult supervision of a new generation of Progressives. :-) I would like to hear more about what he has to say because, as a labor guy, he did call this a “Depression” long before most people were willing to go there.

    The more I think about the AJA the more I realize that this simply has to pass and we have to get things moving. I wish there was more here, but we have to start with something that has a chance of passing – and that’s what Obama did. Always a pragmatist. Should I read in the tea leaves that he doesn’t realize we should do a lot more? No, I don’t think so – but it’s up to us to put that pressure on Obama and, especially, Congress.

    That’s where people like Reich come in. If you go, tell us what he said! I’ll have to read the transcript. We’ve been holding what I call #EconChat on twitter Sundays at 7PM CDT (midnight GMT), just when Japan’s stock market opens for the week. Would love to have you and anyone else interested. Maybe if there’s a Reich transcript up we can talk about that.

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