According to today’s New York Times, the President’s economic and political advisors are squabbling over the economy. One side favors only advocating economic policies that have a chance to pass in Congress (“[t]hese include free trade agreements and improved patent protections for inventors”). The other side wants the president to tap into public anger over the economy, by putting forward “bigger ideas” (such as “tax incentives for businesses that hire new workers”) even if they have little hope of passing in Congress. In short, the internal debate pits the hopeless against the changeless.
With 25 million unemployed and underemployed workers, one side of the internal debate at the White House is pushing bad policies (corporate free-trade agreements and increased patent protections) that will have no short-term impact on jobs, even if advocates of these policies are correct about their longer-term payoff (and they are not). Not to mention that “free trade” agreements are deeply unpopular with the Democratic party base and with swing voters in states like Ohio and Michigan.
Meanwhile, the other side –the “left flank”?– is offering a tax credit to businesses that hire new workers. Which is not a terrible idea, but is far from a “big idea” and much less effective than a host of other proposals on the table, including: financial support to state governments (which are currently hemorrhaging jobs), or extending and expanding unemployment insurance benefits, or work-sharing, or a direct government job-creation program, like we did in the Great Depression.
I particularly like my colleague Dean Baker’s idea of heavily subsidizing public transportation. Make every ride on every major bus and metro system across the country cost only a dollar, say, and have the federal government make up the revenue shortfall. This gets more people out of their cars and puts money in the pockets of people who will actually spend it. (One of the many problems with the tax credit is that firms are already sitting on large piles of cash, waiting for customers to appear before they decide to make new hires.)
If the NYT piece is an accurate account of White House economic and political thinking, the president’s only hope for 2012 may well hinge on the Republicans nominating a candidate from the crazier fringe of the party.