Tonight is the night of the big speech. The bets are the proposal will be somewhere between three hundred to four hundred billion dollars. A good deal of money will be for extending unemployment insurance and for payroll tax cuts. To keep giving people money who are unemployed is good, but does not add money to the economy to create demand, it only maintains the status quo. The payroll tax cuts do add money to the economy, but at the cost of hurting social security.
Another relatively large amount of money will go so that teachers and other public workers can keep their jobs. I say relatively because even four hundred billion dollars is small change compared to what I think is needed, two trillion dollars this year followed by another thirteen trillion over the next fourteen years. The money for teachers and public workers is well spent and needed, but does not create new jobs. It is a maintain the status quo strategy.
Another relatively large chunk of money will go encourage businesses to hire. When there is demand businesses don't need encouragement to hire and when there is no demand no amount of encouragement will cause a business to hire. So this is pure waste.
Finally there is a tiny amount of money to repair infrastructure. Yes this will create new jobs and this spending is absolutely necessary, but this is like putting a band aid on a wound that needs stitches. Worse, we need new infrastructure, not just old infrastructure repaired. Again this is money well spent but hardly enough.
The big issue that needs immediate attention, global warming, will not even be addressed. Much less issues like inexpensive energy, research, development, trade agreements, or a WPA to get people productive once more.
So the proposal from the president will most likely be inadequate to reducing unemployment and putting the country on track to pay down the deficit. But that is not the worst that can happen. I will address that below.
The worst that can happen is that the republicans pass all of the president's proposal. What, you ask isn't that a good outcome, because passing the president's proposal will keep the economy from getting much worse. Yes that is good. Just like passing the original stimulus package was good. The stimulus package stopped the rapid decline in employment. But the stimulus was not adequate to greatly reduce unemployment to the three percent level or less. I truly wonder at those who wish unemployment would just get down to five percent. I say that is too much unemployment and there is too much work to get done for that to be acceptable. Right now I believe the president would be happy if unemployment reached eight percent. But who knows.
At any rate the president's likely proposal will do little than maintain unemployment somewhere between eight and ten percent. The republicans will then say, look the president's plan does not work, put us in charge and we will implement a plan that does work. If Perry is the nominee he will say look at Texas. If Romney is the nominee he will say look at Bain Capital. I can go through the list, but the president will be blamed.
You think that will not happen. Well republicans are blaming the economy on the stimulus package. I don't hear many pundits saying the stimulus package stopped unemployment from rapidly increasing. The noise on Fox news is all the economy is Obama's fault. The noise from the media is Obama pivoted too soon. Very few people are willing to admit that health care costs are the biggest problem for the economy and that Obama care reduced those costs. Worse no one really says the best way to slow the rapid rise in health care costs is to move to single payer.
Well the worst thing that can happen is the republicans pass the president's plan and then win the election in 2012 by arguing that the president's plan did not work and austerity is the solution. The best thing that can happen is that republicans say "Hell No" and the president can argue that republicans refuse to come to the table.
I am hearing rumblings from Eric Cantor that republicans might just be willing to pass the president's proposal or some part of the president' proposal. That could result in disaster in 2013 when republicans take over both houses of congress and the presidency.