Obama Jobs Bill: Pass it – then do more!

By Mike Andrew

With more than 14 million Americans unemployed, President Obama had his work cut out for him when he announced the American Jobs Act in a speech on September 8.

Republican leaders rejected the president’s plan even before he gave the speech, but no one really expected a party committed to “making Obama a one-term president” to sign on to anything he proposed, no matter how good it might be.

President Obama’s real task was to convince the people who supported him in 2008, and are now increasingly skeptical of his leadership, that he is willing and able to lead the country out of economic crisis.

Nobel Prize winning economist Paul Krugman, who has criticized the president’s economic policies in the past, pronounced himself “favorably surprised” by the American Jobs Act.

It was “significantly bolder and better than I expected,” Krugman said, and if enacted “it would probably make a significant dent in unemployment.”

Almost every important labor leader, from AFL-CIO president Richard Trumka to SEIU president Mary Kay Henry, called on Congress to pass the bill.

The president called for some $200 billion in new federal spending – most of it on infrastructure projects like repairing roads, bridges, and schools – with some additional money going to help retain currently employed teachers.

Obama’s plan also calls for $240 billion in tax cuts. Some of them might actually help create more jobs – incentives for businesses hiring new employees, for example.

However, the experience of the first stimulus package shows that on the whole temporary tax cuts do not result in new economic activity, and therefore new hiring, instead they result in debt reduction or in savings, which do not increase demand for labor.

Two hundred billion of spending sounds like a lot of money, but it’s not – not when compared to the $1 trillion hole in the US economy created by the collapse of the housing bubble and the resulting overhang of household debt.

The president’s plan will obviously fill only part of that hole.

There is a deeper problem, however, and that problem is structural and can’t be solved by stopgap stimulus bills, even good ones.

Since the end of World War II, domestic consumption accounted for some 62-63% of GDP.

In other words, almost two-thirds of all economic activity in the US came from people buying things – as opposed to investments in infrastructure, or new manufacturing opportunities, for example.

That means ordinary working families going about their day-to-day business are the real “jobs creators” in the US economy, not the corporate CEOs.

Starting in the 1980s, domestic consumption rose to 70% of GDP, and that’s where it was before the 2008 crash.

The problem is that the increase in domestic consumption did not come from an increase in the real incomes of working families. Just the opposite. Real incomes have been declining since the Reagan period.

Rather than being financed by an increase in real wealth, the increase in consumption was financed by easy credit,

Since the collapse of the housing bubble, easy credit is a thing of the past, but nothing has replaced it as the motor of consumption.

The credit scheme at least gave working people the illusion that they were participating in a period of national prosperity, but it also led to our present problem – working people saddled with personal debt, without the ability to repay it, and for 14 million working people, without a job at all.



The way out of our economic crisis is not just to create more jobs, but to find a way to create real wealth for the real jobs creators – America’s working people.