President Obama unveiled his more than $450 billion 'jobs' bill yesterday and asked Congress to pass it immediately. While it would no doubt spur some temporary economic growth and add to the nation's GDP it is likely to have very little lasting impact, particularly if paid for by increased spending cuts elsewhere. The big winners if the package were to pass would be construction workers, states and local governments that are currently laying off workers, and taxpayers making less than $106,000 a year as they would not see the payroll tax return to 6.2% next year. Businesses would also realize a 33% savings in their payroll tax bill for a year. While the president thinks that would spur hiring, I think he's wrong. Businesses have been insanely profitable since the crash in 2008 but they aren't hiring new workers very quickly. Republicans argue that the health care reform passed in 2010 is responsible. They may have a point for some very small businesses hovering right around the 50 employee mark. But these businesses are far from the majority of businesses in America.
No, the real problem for economic growth has been weak demand, both at home and abroad for more than three years. Demand at home has been weak since 2008 due to the bursting of the housing bubble and the reluctance/inability of many Americans to buy on credit. Add to that the decline in real wages for the median worker and you have a double edged sword driven deep into the heart of the American economy. Consider the lack of demand for American products overseas and you have a dagger stuck in America's back. Democrats have no answer to solving this problem other than turning to Keynesian style stimulus, which is exactly what the president has proposed. Keynesian stimulus has been vindicated time and time again during normal economic downturns, Republican lies not withstanding. But this downturn is different because it resulted from a huge decline in demand when the housing bubble burst, overextended households, stagnant wages, and irresponsible greed on the part of the banking and mortgage industry. Until we deal with all four of those issues any stimulus package is likely to have a very limited and temporary effect. For what we ought to do I urge you to read Freefall by Noble Prize winning economist Joseph Stiglitz.
Which brings me to the CNN/Tea-Party debate.
Let me start by saying I hate these dog and pony shows. CNN introduced the Republican candidates as though they were entering a boxing ring. My favorite by far had to be when Herman Cain was announced as 'The Businessman.' After all the candidates were on stage and had waved to the audience, the national anthem was performed. Only Rick Santorum and Mitt Romney sang along so I wonder whether the others even knew the words. LOL.
Once the theatrics ended and the debate began in earnest, Governor Perry was attacked furiously from all sides. He defended himself well during the first half hour but lost it after that. Not that it will matter because he was in the midst of a friendly crowd. Bachmann and Santorum scored some points by attacking Perry on his executive order forcing 12 year old girls to receive the HPV vaccine, while Ron Paul attacked Perry for raising taxes, and Romney went after Perry's categorization of Social Security as a 'ponzi scheme.' When the smoke cleared Perry was still standing, though he lost some points when he spoke truthfully about the futility of trying to build a 2000 mile long fence or wall along the U.S. border with Mexico.
All told, I think Perry had a better night than in his first debate. Romney and Huntsman still looked and sounded like the only true presidential candidates out there while the others pandered for support. In the end, however, it won't really matter, because nobody was watching this dog and pony show except the political junkies like me, and the GOP party activists. None of the candidates offered real, workable solutions to the economic crisis at hand, preferring instead to fall back on supply side arguments about tax cuts and job creators that have been thoroughly refuted by empirical research time and time again. By all accounts it seems the race is a two man contest. Romney and Perry, Perry and Romney. The lead will likely change hands a few times before these horses reach the finish line in Tampa, FL next summer.
Next event: The Fox News GOP debate Thursday Sept. 22. Softball question time.