Laissez-faire economics

10 Jan 2012 By Daniel Indiviglio

After the August debt ceiling fight, U.S. President Barack Obama said he would focus on generating jobs. But recent White House initiatives look more vote-grabbing than jobs-creating. Politics, and an opposition party that seems determined to just say no, make meaningful action tough. Still, a hands-off approach could backfire if voters don’t feel more warmth of recovery by November.

Congressional gridlock has Obama understandably frustrated. His ambitious political agenda was halted after Republicans triumphed in the 2009 midterm elections. But rather than compromise and give a little to the GOP to pursue additional stimulus for effective job creation measures, he has focused on programs that sound like music to voters’ ears but which may be ineffective in sparking large-scale growth.

Take the “Summer Jobs+” program announced last week. Through a public-private partnership, the initiative hopes to usher in 180,000 jobs for teenagers. Their employment levels plummeted due not only to the recession but also to recent minimum wage increases. Meanwhile, adult unemployment remains above 8 percent, according to government estimates. That’s clearly a bigger problem.

Similarly, the president’s sidestepping of Congress to appoint a new consumer watchdog chief and three labor board members also suggests greater concern for election politics than economic stimulus. Other, arguably more important, nominees for regulators like the Federal Deposit Insurance Corp and Federal Reserve will likely now be blocked by Republicans. The move also may doom any hopes for an extension of the payroll tax cut and long-term unemployment benefits through 2012.

True, these decisions didn’t come out of the blue. They were clearly part of his executive-order driven stimulus measures from last fall. Others included student loan relief and mortgage refinancing for underwater homeowners. But these will have little economic impact this year, amounting to less than $4 billion in stimulus. These, too, touch on issues that are distinctly populist in flavor and important to some voters.

Taken as a whole, the White House’s prescriptions for the economy, at least until the election, appear heavier on placebos than potency. Of course, if the unemployment rate continues to fall, as it did in December, and business picks up, the plan may work. But if growth slows before November, the weak economy could swamp the popular rhetoric.


Email a friend

Please complete the form below.

Required fields *


(Separate multiple email addresses with commas)