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Thursday, September 8, 2011

Obama’s Jobs Speech: “And It’s All Paid For”

I had to watch President Obama’s jobs speech. I was scheduled to comment after the speech on a BBC radio program. Quite often, I skip his speeches. I already know what he plans to say. Tonight was no exception, but I had to watch.

The BBC producer warned me politely that a left-of-center commentator would join the discussion. It turned out to be Larry Kotlikoff of Boston University.

Anyway, here is my summary:

The President proposed  a half-price ($450 billion) second stimulus. He did not put a price tag on it, as I recall, but the press did. The proposed stimulus consists of spending increases for all kinds of goods things like roads and teachers and of short-term tax cuts in payroll taxes and hiring incentives. He did not mention that such short term fixes have been proven to have little or no effect – an inconvenient fact that only academic economists talk about, I guess.

The speech was delivered forcefully and with passion. It might raise his polls. But inquiring minds will want to know why a smaller second stimulus will accomplish what a larger first stimulus did not.

The President’s speech contained, pardon my French, a lie. He insisted that the second stimulus “is all paid for.” This statement will go down in history along with his: “If you like your current health insurance, you can keep it.” 

The President explained that we will spend more money now, but future spending cuts will more than compensate. Why think of  $1.5 trillion in spending cuts? Why not $2 trillion? He did not bother to say that this is the oldest “bait and switch” trick in politics.  What he is really asserting is that some future President and future Congress will be sure to make the spending cuts to “pay for” his spending right now.

I made these points during the BBC interview. I did not have any spirited exchanges with Professor Kotlikoff because he agreed that more spending now would likely create more uncertainty and depress the economy even more. So much for the right-of-center left-of-center debate BBC hoped for.

The President put himself in a bad position. He heralded his jobs speech for weeks, but he had nothing new to say. He repackaged old ideas the best he could. It is my guess that the voting public will see things as they are.

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