After a terrific speech on Labor Day in Detroit, President Obama is likely to offer fairly modest proposals tonight, adding up to a program too weak to cure a rapidly deflating economy, and a politics too weak to draw clear lines between himself and his Republican opposition.
While the rhetoric may be a little hotter than usual, according to White House leaks, the centerpiece of the plan will be a temporary payroll tax cut, offered by Obama in the hopes of enlisting Republican support. This is better than nothing but is far from the kind of stimulus that the economy requires. And it is one more olive branch rather than a Trumanesque line in the sand.
The rest of the plan is likely to include other business tax cuts that are inefficient ways of stimulating new hires, and a very modest amount of new infrastructure spending, plus a call for rapid passage of a transportation bill that is up for renewal anyway.
A proposed infrastructure bank amounts to more federal borrowing and will surely be opposed by Republicans. It is also at odds with Obama's own embrace of debt reduction.
Additional aid to state and local government will also reportedly be included in the speech. This also will be opposed by the GOP.
Obama will call for an extension of unemployment insurance. This is advertised as new stimulus, but it should be par for the course in a deep slump. It, too, will be opposed by Republicans unless offset by other spending cuts--thus totally neutralizing its stimulus effect.
The White House will likely claim that the plan would pump more than $200 billion into the economy in the next year, a figure that is probably exaggerated. But even at $200 billion, the effort is too modest.
The risks in this set of small-bore proposals are both economic and political. Economically, these proposals, even if enacted, would not make much of a dent in the unemployment crisis. If Obama is in deepening political trouble because the economy continues to fail the American middle class, this plan will not change the basic trajectory of the slump.
Politically, Obama splits the difference between attacking the sheer craziness of the Republican view of how to cure a sick economy and looking yet again for a middle ground. Republicans are even blocking $7 billion in post-Irene disaster relief unless this emergency spending is offset by other cuts. He needs to take these people on. But his idea of partisanship seems to be to challenge the Republicans to join him in supporting anti-recession policies--tax cuts--that are quite Republican to begin with.
The risk is that he falls between two stools: not partisan enough to rally the country behind a program clearly different from the Republican one and a program that could actually fix what's broken; and not conciliatory enough to bring Republicans to the table except on policies that will enable them to claim vindication.
I hope he proves me wrong. I've been hoping that for going on three years.
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