The point of President Barack Obama’s American Jobs Act is, well, to create jobs. And the sooner the better, right? Unemployment is above 9 percent, and everyone from Wall Street to the Congressional Budget Office to the White House now thinks that number isn’t going to improve anytime soon. Thus Obama’s new $450 billion stimulus plan. But since this new proposal is structured just like 2009’s $800 billion American Recovery and Reinvestment Act, it should be no surprise that it contains many of the same flaws as Stimulus 1.0.
The WSJ nicely sums up 2008:
To prevent crumbling housing and credit markets from sinking the broad economy, the Bush and Obama administrations and the Federal Reserve spent, lent and invested more than $2 trillion on one initiative after another. If you owned a credit card or a money-market fund, had a savings account, bought a Dodge pickup or even a hunting rifle, or borrowed to buy a home or finance a small business, odds are good that the U.S. stood behind you or the firm that served you.
This looks like a smaller version of the original stimulus law. Its origins are more political and fulfilling a legislative need, than policy-driven. I’m OK with the UI extension and extending the health insurance subsidy, although I wish both were better designed. I generally support tax relief, but I am concerned the targeted capital gains reduction will give some cover to let the broader capital tax rates jump at the end of 2010. That would be very bad. The spending programs will have little near-term GDP effect, and so should be evaluated in how they meet other policy goals. They’re largely ineffective as immediate stimulus, because government spending is slow. The $250 check to seniors was pandering the first time Congress passed it (on a broadly bipartisan vote). It’s still pandering. Why are seniors more deserving of aid than, say, a low-income working family? The “using TARP dollars to help Main Street” is a transparent gimmick. If you’re going to increase the deficit, it’s better just to stand up and say the deficit increase is worth the short-term economic benefit you think will result from the other policies. I suggest they do a targeted bill that contains only the UI and COBRA provisions, because I think the large deficit impact of the other provisions, relative to their small macroeconomic benefit, isn’t worth it.