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  • Obama Opts for Politics Over Jobs, The Times Joins In

    Today’s New York Times editorial on President Obama’s Cleveland political diatribe-cum-economic speech got one point right — Obama “took too long to engage this debate.” The rest of the editorial was little more than an epilogue to Obama’s political speech.

    One can see why the Times would avoid talking about the economic substance of the speech, the debate to which the president is so tardy: because there was precious little in the speech to talk about, despite an economy showing “widespread signs of a deceleration,” according to the Federal Reserve’s authoritative Beige Book. As the Washington Post noted in its coverage of the speech, “Even some vulnerable Democrats…quickly condemned the president’s latest proposal, suggesting it bears an uncomfortable resemblance to last year’s unpopular stimulus package.”

    A quick look at the package quickly reveals its yawn factor. One “new” proposal is to spend another $50 billion on infrastructure. Fifty billion spread over six years in a $15 trillion economy. Not that a larger package would do any better, but as economic stimulus it leaves little wonder his proposal was only taken seriously by the construction unions.

    Another proposal is to make the Research and Experimentation tax credit permanent. That’s great for the long-run, but keeping current policy doesn’t do much for stimulus.

    Obama’s one major, new proposal is to allow all businesses to deduct their investment costs immediately (called “expensing”) rather than deduct these costs over time. The proposal would run through 2011. The idea is to reduce the disincentive to new investment and so spur an increase in business investment. This proposal is important because expensing is normally the province of conservatives. Obama’s proposal represents the first time a leading Democrat has acknowledged that current depreciation rules hamper economic growth.

    Unfortunately, the proposal is likely to have a modest effect at best, in part due to circumstances and in part because Obama has again resorted to policy gimmickry. The problem with the basic proposal starts with the obvious excess capacity currently in place and likely to remain in place for a long time. Sure, some companies are relatively capacity constrained, but not many. So the effects are likely to be greatly muted relative to what we would see under normal economic circumstances.

    Second, as Greg Mankiw points out, interest rates are already incredibly low, so the general hurdle rate on investment is pretty low.

    Third, the proposal’s expiration in 2012 morphs a fundamentally good idea into yet another policy gimmick while injecting a double dose of added uncertainty into the economic environment. If the economy picks up in 2011, people will ask how much of the pickup is simply due to temporary stimulus and how much of it is enduring. Then, in 2012, the economy would weaken again as whatever increase in investment occurs in 2011 reverses. Investment today is for production and profit tomorrow. If tomorrow faces a potentially weaker economy, do you invest more today? That’s a lot of uncertainty to wade through to take the gamble if you don’t need to.

    While nothing Obama and Congress can do will improve the economy in the very near term — economies simply do not turn on a dime — they can act quickly to give the economy a needed boost in 2011. It all starts with abandoning the addiction to policy gimmicks and beginning to focus on fundamentals like spending restraint. But the first, most obvious step is to keep taxes from going up in 2011 as scheduled. Even Peter Orszag, Obama’s first OMB director, has called for extending the tax cuts for two years. A permanent extension would be much better, but two years is a good start not only at deflecting the tax hike but restoring some confidence in Obama’s willingness to ignore ideology for the good of the country.

    Cross-Posted from NRO’s The Corner

    Posted in Economics [slideshow_deploy]

    11 Responses to Obama Opts for Politics Over Jobs, The Times Joins In

    1. Billie says:

      We the people are getting no where fast!

    2. JZ, Illinois says:

      Accelerated depreciation for businesses is a good idea…just like it was when Bush did it with the Jobs Creation and Worker Assistance Act of 2002. So, the one economic proposal from our president that actually has some merit, was "borrowed" from his predecessor. Nice.

    3. Slick - Nebraska says:

      Oh Billie, you are sooooooo wrong. We are going DOWN really fast!!! Our President and his Czars have one goal in mind: total government control. No Jobs = Additional Control through financial need.

      This country is being dismantled brick by brick on a daily basis until there will be nothing left of the Constitution and the Bill of Rights!!! Our current administration does not value what our forefathers used as a basis for the founding of this extraordinary nation, and they are definitely moving us towards a one-world government with a one-world monetary system.

      Our Justice system has been "adjusted to the far left" in order to favor minorities like the New Black Panthers who intimidate voters at the polls, the illegals coming through the southern border who routinely disregard the requirements for them to be here legally because they know there are NO consequences, and Islamic groups who INTEND on instituting Sharia law in THIS country and they make no bones about their intentions, just to name a few.

      Hang on, Billie. We are indeed on the ride of our lives, and one has to wonder if we as a country will survive!!!

    4. Dennis Georgia says:

      We the ignorant are being lead by a fool. I say we are ignorant because we do not turn out at the polls, we do not get involved in what the politicans are doing, we have adapted a mentality of "my vote does not count", "they can't do that", "they do not listen to the people". The bad thing is we have let this happen, we let them make our decisions for us,we let the "guvment" rule our lives in all we do,say and thuink. The liberal media has brain washed all of us, and we sit on our butts and drink it like sugar water. Wake up folks, this country can not survive in its current state.

    5. Ben C. Ann Arbor, MI says:

      Enough already of building parking lots we don't need (Plymouth Rd, Ann Arbor) fixing roads that don't need to be fixed (and ignoring those that do), building bridges to nowhere (Geddes Road bike path over US 23 in Ann Arbor) with money we don't have to be paid for by the next generation that hasn't even been born. This insanity muist stop.

    6. Leon Lundquist, Dura says:

      I remember Obama running down the Economy at the critical time during the election. When the Community Redevelopment Act destroyed the entire residential Real Estate Market (Gee! Thanks Barney Franks) Senator Reid voted every inch of the disasterous spending that he blames on Bush. I cannot think of any move the Administration has made to calm Market fears, indeed the current cash glut proves American Business is stymied by a lack of confidence and predictability directly related to Obamahope, and Obamachange. My oilfield worker friend went to Walmart, the infrastructure workers go part time, just enough to disqualify them from unemployment. They call these things "jobs" but really they have set up five guys to bring heavy trucks onto the road that for a hundred years truck drivers have managed safely. Is that a job? I call it makework.

      Meanwhile Obama keeps paying off his Union friends. My grandfather called the Progressives "The Gimmie Gang" when Woodrow Wilson confiscated his operating Capital. What? Is Political Graft not Prosecuted any more? Progressives have got away with so much for so long they don't even bother to hide it anymore. Now Obama is directly targeting the prime job creators ($250,000+ small businesses) and killing Gulf oil jobs with all the sanity of Captain Ahab. "$100,000 dollar tax breaks for millionaires" says the mad king but he fails to mention they are already paying the overwhelming percentage of tax. Does anybody remember what a tax break is? Is it slight relief from virtual slavery? Really?

    7. Drew Page, IL says:

      He has never been able to generate jobs, at least not in the private sector, but has never had any problem generating politics. It's all George's fault, and of the course the Party of No.

    8. Jan,Mercer,Pa. says:

      Vote in Nov. & 2012, we must elect a real American or we are all slaves to this man & his agenda which is socialism if not worse.

    9. Billie says:

      Good one, Slick!

    10. Ace Sez Bishop, Cali says:

      Nver before in the history of the USA have we been so seriously attacked from with-in–Obama and his elected democrats aren't even trying to hide their treasonous attempts at destroyin' our Constitutional Gov't

      Remember November–fight crime vote out all incumbents–both parties arrogance and lack of integrity (goes with the job?) These are dangerous times to just sit around twiddlin' our thumbs!

    11. Paulc says:

      Assume you are running a small business franchise like International Pancakes with 60 employees. Today you provide health insurance to managers but not employees. In obamacare you must insure all employees or pay a $2000 fine for each or over $100 thousand.

      You likely go out of business. Where do you come up with $100K?

      A certain environment will lead to jobs. Uncertainty of tax laws and onerous tax law leads to no hiring and more likely to firing those you already got.

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