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The new Obama? A change we can believe in? Hope so.

September 22, 2011

We hope so

The Obama we elected at last?? For months Ekos-Squared has criticized President Obama for (a) a failure to take forceful positions on job creation and (b) a willingness to compromise with the Republicans who show absolutely no intention to compromise. The President’s plan announced Monday offers what appears to be a distinct and welcome break with the past.

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His plan includes the following:

  •  A $447 billion jobs-creation plan to be offset by higher taxes on the wealthy and on corporations after 2013, when the economy will presumably be healthier.
  •  The tax increases would allow the Bush-era tax cuts to expire for high earners and closing their tax loopholes and limiting their tax deductions.
  •  An additional savings in $1.1 trillion from the ending of the American combat mission in Iraq and the withdrawal of American troop from Afghanistan. Hopefully sooner than later. 
  •  The measure — — does not include changes to Social Security. It would increase Medicare premiums for individuals with higher incomes starting in 2017.

Veto threat! Mr. Obama has promised to veto any legislation that seeks to cut the deficit through spending cuts alone and does not include revenue increases in the form of tax increases on the wealthy. Three cheers. Please don’t back down.

Change and Hope: Obama’s strategy over the past year has been to “play the role of the adult in the room” and to appear to be the reasonable one. But with economic bad news piling up and the GOP not willing to compromise, this posture, just isn’t working.  The millions of folks who spent many hours enthusiastically working for Obama’s election (including this writer) will probably vote for him in 2012.

Yet, if we are going to go all out for Mr. Obama’s reelection in what promises to be a very tough battle, we need a Commander in Chief for the Economy that is to say the real “grownup” who lays down the law when the kids are heading in the wrong direction.

Mr. President stick to your guns.

The GOP&T-Party: Austerity for whom?  Despite their preoccupation with the federal deficit, the Republicans (with a virtual stranglehold on the House of Representatives) refuse to raise taxes on the wealthy and cut corporate tax rates for mega-corporations. But they are more than willing to:

  • Shrink government and gut regulations
  • Slash Social Security+Medicare benefits
  • Decimate vital programs for public safety, security, disaster relief, education, infrastructure investments and support for the poor

GOP House Austerity Hawks: Eric Cantor and Paul Ryan; Austerity for whom?

Will such cuts create jobs and improve the economic security of most Americans? There is no such evidence. Massive numbers of public employees including teachers have been laid-off around the country as budgets are cut – especially in states with GOP governors and legislative majorities. And layoffs hurt the broader economy; sales decline, businesses revenues decline and layoff workers. Laid-off workers get unemployment compensation adding to deficits. Austerity without significant investments in future growth creates interlinked vicious cycles and a downward spiral. Nobel Prize economist Paul Krugman provides an excellent op-ed on this subject.

We have pieced together the following graphs to show what appears to be a striking inverse relationship between government investment and unemployment rates. For Krugman’s interpretation of the government investment chart (top) see footnote below. [1]

The top graph shows how government investments have changed over the past decade. The bottom, the rates of unemployed, unemployed and those who have stopped looking. http://www.roubini.com/email/newsletter/focus/159365.php

The New American Workforce? Let’s say, for the sake of argument, that the GOP’s “theological” doctrine could actually create jobs. Would you want a GOP-inspired job — i.e. low-wage, non-union, little or no benefits and with scant government protection to ensure healthy and safe working conditions? We give you a final chart — one that shows a frightening trend for most Americans — one that can only get worse if the GOP gets its way.

 

Downtrend in wages for most Americans while the rich get richer: Source: RGE North American Weekly: http://www.roubini.com/email/newsletter/focus/159365.php

 Now we need to do our job! Mr. Obama and Congressional Democrats cannot do the job alone. We need a massive outpouring of citizen action directed at members of Congress: Democrats, “don’t grow trunks” (not to mention any names). Republicans, “Come home to America, or start looking for another job.”  Share your thoughts with our growing readership!


[1] Here is how Krugman views it: The fact is that the fading out of the stimulus, and in particular of aid to state and local governments, is already and noticeably leading to substantial withdrawal of government demand. Look, in particular, at actual government purchases of goods and services — governments at all levels buying stuff — which is what standard macroeconomics says should have the highest multiplier, since unlike transfers and tax cuts it is by definition spent rather than saved…. When the recession officially ended, spending was rising at an annual rate of around $60 billion; now it’s declining at an annual rate of $60 billion. That difference is around 1 percent of GDP, and maybe 1.5 percent once you take the multiplier into account. That makes the turn toward austerity a major factor in our growth slowdown.”

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3 Comments leave one →
  1. Steve Cole permalink
    September 23, 2011 1:12 am

    Your on the mark once again Hank. But let’s start debunking some of the Tea Potty myths. Number one that we can’t raise taxes on the rich and the corporations because they’re the job creators. While it might be true that small businesses are creating jobs, the big corporations are Job Destroyers, and the tools at their disposal are not machinery or high technology: 1) Offshoring jobs, destroying not just our manufacturing base but increasingly our computer programming capacity. 2) Mitt Romney style buyouts designed to break up companies like chop-shops do with stolen cars. 3) Lobbying for tax breaks for 1) and 2) and numerous other schemes that allow companies like GE to pay next to nothing in taxes, helping drive up government debt and thus providing an excuse for cutting government services and jobs. 4) Financing the Tea Potty and politicians to do their bidding. The list goes on. Let’s call out the corporations for what they are: Job Destroyers.

  2. Mike Flood permalink
    September 22, 2011 11:38 am

    Excellent summary and analysis! I appreciated the tables.

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