WASHINGTON – In the wake of an alarmingly weak jobs report last week, President Barack Obama and lawmakers in both parties find themselves possessing few if any realistic options for jolting the economy out of its doldrums before Election Day.
Big-ticket items such as payroll-tax cuts, free-trade agreements, months of extended unemployment benefits and “stimulus” spending on public works and aid to states and local governments have been tried but have failed to spur a sustained, robust recovery.
Obama’s $830 billion stimulus bill – two-thirds of it financing “shovel-ready” projects – enacted when he took office has pretty much run out, its impact the subject of heated debate on the campaign trail. At its peak in 2010, the stimulus measure accounted for at least 1 million jobs – and perhaps as many as 5 million – according to the Congressional Budget Office.
Many of those jobs, particularly in state and local government, have since disappeared. Republicans, empowered by mid-term election returns two years ago, now scoff at Obama’s suggestion for another round of stimulus government spending.
Obama’s remaining “to-do list” for Congress contains a partial tax credit for new hires, extending tax breaks about to expire, renewing highway and mass-transit construction programs and preventing interest rates on student loans from doubling. Even combined, they hold little promise of lifting a $15 trillion economy from its torpor.
What’s missing are proposals to try to boost consumer demand – such as a new round of tax cuts for individuals – or another set of big-spending projects financed by government debt to pump federal dollars into the economy.
The “president is continuing to work with his team on potential new ideas” to jump-start the economy, White House spokesman Jay Carney said Monday when pressed about the sagging rate of job growth.
The reality is the ideas coming from Obama are likely be the ones he already has proposed. There is no money and no political appetite for bolder ideas. And the White House has no confidence that Republicans in Congress would help him muscle through even smaller economic measures for fear it might be seen as helping his standing with voters.
“It’s not OK to simply root for failure and hope it pays off politically,” Carney told reporters.
Obama’s jobs initiative last fall featured lots of campaign-style rallies in swing states but little real engagement with Republicans controlling the House or serving as gatekeepers in the gridlocked Senate.
The initiative coincided with a lift in Obama’s poll numbers but seemed to further alienate top Republicans like House Speaker John Boehner of Ohio.
Congress did enact a major chunk of Obama’s jobs proposal last winter, extending unemployment benefits for the long-term jobless and a 2-percentage-point cut in the Social Security payroll tax.
Despite costing $150 billion, the package didn’t provide any new stimulus for the economy because it prevented existing policies from expiring rather than establishing new ones.
Lawmakers in both parties pretty much ignored Obama’s call to make the payroll-tax cut more generous and extend it to businesses.
For now, fixing the economy is mainly a messaging battle.
“I hope Republicans care more about their country than they do about winning the next election,” said Sen. Sherrod Brown, D-Ohio.
Obama’s “to-do list” consists mainly of marginal initiatives such as a tax breaks for companies that move their operations back to the U.S., hire new workers or boost their payrolls. A similar payroll tax credit was in place in 2010 but didn’t seem to do much to promote hiring. Economists say that companies hire workers based on how well their business is doing, rather than in response to tax incentives.
“Whether it’s pretending that small-ball, Post-It note quality proposals would have a major impact on the economy, or pretending that Republicans – who are the only ones actually working on bipartisan solutions – are somehow sitting on our hands, he’s doing a major disservice to the American people,” Senate Minority leader Mitch McConnell, R-Ky., said of the president.
Republicans are offering some business tax breaks of their own. House Majority Leader Eric Cantor, R-Va., wants to let most businesses deduct 20 percent of their earnings when determining their tax bills. It’s a nonstarter in the Democratic Senate.
House Republicans point to almost 30 bills they have passed that are now stalled in the Democratic-controlled Senate. They include boosting offshore oil exploration, easing environmental regulations and forcing construction of the proposed Keystone XL oil-pipeline project from Canada to the Gulf of Mexico. All are job-creators, Republicans argue.
GOP leaders in the House also plan a vote before Congress recesses for the political party conventions on extending all of former President Bush’s tax cuts due to expire Jan. 1. That alone, they say, would give businesses more certainty about their taxes and confidence to hire more people and make job-creating investments. Democrats will try to stop Republicans from forcing a vote on it in the Senate.
In the absence of action on Capitol Hill, some economy-watchers are hoping for the Federal Reserve to step in with a new round of “quantitative easing.” That’s when the Fed buys Treasury bonds so as to drive interest rates lower. But the 10-year bond is already at a record low as investors worried about Europe have sought the safe haven of U.S. securities.
And this close to the election, the Fed is mindful of the harm it could incur to itself if it’s seen as goosing the economy to benefit Obama’s election prospects.