President Obama's address to Congress tonight was really two speeches in one. The first laid out his jobs plan -- substantively, an attempt to forestall a double-dip recession. The second laid out a longer-term economic vision that promised, however vaguely, to restore American manufacturing.
Politically, both plans are aimed at shoring up the president's support within the Democratic base: the jobs plan by its relative expansiveness (compared to the low-ball estimates the White House was putting out earlier this week so that Democrats would be pleasantly surprised at the plan's actual scope), the manufacturing plan by its promise to use state power, in some unspecified way, to help restore middle-class jobs.
Both plans are also aimed beyond the Democrats' core constituencies, however. Parts of the jobs plan -- certainly, the payroll tax cuts to both employers and employees -- will be hard for the Republicans to oppose if Obama and the Democrats simply hammer home these proposals day after day. Similarly, the theme of restoring America's manufacturing capacities (and not, as the president asserted, by competing in "a race to the bottom," but rather "a race to the top") should play well in places like the industrial Midwest -- if, and only if, the president changes our trade policies that were key to our deindustrialization in the first place.
What's in the plans? The jobs package includes $447 billion in spending and tax cuts, most of it to be spent in a single year. By way of comparison, the stimulus package that the Congress enacted in 2009 totaled $787 billion to be doled out over two years, and a chunk of that was devoted to altering the alternative minimum tax, which was of no stimulative value whatever. On a year-by-year basis, then, the president's proposal tonight is actually larger than the initial stimulus, which is as it should be, given the state of the economy.
According to White House officials, the plan includes $100 billion for infrastructure spending, including $50 billion on highways and transportation, $30 billion for school repair and construction, and $10 billion to establish an infrastructure bank, which the president alluded to tonight, though he did not actually use the words "infrastructure bank." (Lest he rouse who-know-what furies, he cautiously termed it the bill introduced by the "Republican from Texas and the Democrat from Massachusetts.") It cuts the employer payroll tax in half for a year, and creates a $4,000 tax credit for every job that an employer creates if the worker hired has been unemployed for at least six months. (The California legislature, coincidentally, may be on the verge of enacting its own $4,000 tax credit for companies that create jobs, raising the possibility of an $8,000 combined tax credit for California employers.) But it caps the employers' payroll tax cut so that large corporations won't be able to claim it on all their workers -- it is tilted toward small businesses which, legend has it, are the ones that create jobs.
Obama's proposal not only extends the employees' payroll tax cut but enlarges it so that the tax would be half its regular rate (3.1 percent of paychecks instead of 6.2 percent). This year, the employee rate is 4.2 percent. For a worker making $50,000 annually, then, Obama's proposal would lead to an additional $500 for that worker next year. Failure to extend the cut -- a position that most Republicans have advocated -- would mean that workers would have $1,000 less next year than this year, and $1,500 less than what Obama is proposing. In the second half of his speech, as he turned the topic to Americans' overall tax burdens, Obama contrasted tax loopholes for billionaires with tax cuts such as these, noting that "we can't afford to do both." He'll need to persist in such contrasts if he hopes to turn political opinion his way.
Obama's jobs plan also includes $35 billion to enable states to retain and hire teachers, and billions for extending unemployment benefits as well. It also includes provisions to remake unemployment insurance so that it moves closer to the German system of kurzarbeit -- "short work," a system in which employers can cut workers' hours rather than lay them off altogether, with the government making up some of the difference in the workers' pay.
The second half of Obama's speech was devoted to more long-term concerns -- the deficit, to be sure, but also to building a sounder economy centered on a revitalized manufacturing sector. Polling shows clear support across the political spectrum for regaining our manufacturing prowess -- no easy task in a globalized economy, as the American people also recognize. Some of Obama's biggest applause lines tonight came when he vowed "to make sure the next generation of manufacturing takes root not in China or Europe but right here, in the United States of America." As to how we do that, Obama was vague: He spoke of "provid[ing] the right incentives and support" and "mak[ing] sure our trading partners play by the rules." Here, though, he lags behind Mitt Romney, who has vowed to label China a currency manipulator on his first day in office and to impose tariffs on Chinese imports. If Obama hopes to win the mantle of the-man-who-restored-America's-industrial-might, he's at least going to have to rise to Romney's standard, if not surpass it. His vision for American economic restoration may be more humane and realistic than the Republicans', but absent a realistic plan for manufacturing -- and that entails altering our trade relations with China -- it will come up short both economically and politically.
The other motif that the president sounded long and loud in tonight's speech was that of exasperation with a do-nothing Congress. Since the Republican House is certain not to enact the spending side of Obama's job proposals (the payroll tax cuts just may be plausible), this motif was just a warm-up, surely, for the campaign Obama will wage next year. As tonight's speech makes clear, he's no slouch at contrasting his economic vision with the Republicans', and if next year's election turns on that contrast, Obama is in better shape than today's polls indicate. Problem is, next year's election will also turn on next year's economy. Obama did a good job tonight at trying to set the terms of next year's debate, but the economy will set its own terms, too.