Obama Jobs Plan: Please Tell Us There’s More

http://money.cnn.com/2008/12/06/news/economy/obama_plan/index.htm

The linked article provides more details of Obama’s plans to create 2.5 million jobs by 2011.

Obama wants to make public buildings more energy-efficient; repair roads and bridges; modernize schools; increase broadband access; and ensure health care uses the latest technology.

“We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won’t just save you, the American taxpayer, billions of dollars each year. It will put people back to work.”

In addition, he said, “It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online.”

“In addition to connecting our libraries and schools to the Internet, we must also ensure that our hospitals are connected to each other through the Internet.”

“These are a few parts of the economic recovery plan that I will be rolling out in the coming weeks. When Congress reconvenes in January, I look forward to working with them to pass a plan immediately.

Since he hasn’t even taken office yet, it’s too early to come down too hard on him, but I’m hoping that there will be a whole lot more to his economic plans than this.  First of all, since our labor force grows by 150,000 per month due to population growth, and since we’ve already come up short by 3.6 million jobs so far in 2008, this means that we will be 4.7  million jobs short by January of 2011 if 2.5 million jobs is all we create.  And it’s not as though we weren’t short on jobs when 2008 began.  We need 20 million jobs to restore balance to the labor supply and demand equation. 

Yesterday, during his interview with Tom Brokaw on “Meet the Press,” Obama likened the economy to a patient needing triage.  “You don’t worry about the budget deficit while you’re trying to stabilize the patient,” he said.  I agree.  Some stimulus is definitely needed to kick-start the economy.  But the way a stimulus is supposed to work is that the temporary construction jobs put money into people’s pockets which they then use to stimulate the retail sector, which then stimulates the manufacturing sector.  Once manufacturing and retailing are on a roll again, the government stimulus can be withdrawn, leaving a vibrant economy. 

But think about what will happen in this case.  Replacing light bulbs and HVAC systems will create installation work, but a lot of the money will head straight offshore for the purchase of light bulbs and heating system components.  (Light bulbs aren’t made in the U.S. any more, along with very few heating system components.)  So the effect of the stimulus will be watered down by about half.  Of the half paid out to installers, they’ll stimulate the retail sector some, but there is no manufacturing sector left to stimulate.  Virtually everything bought at retail will stimulate the economies of China, Japan, Korea and Germany. 

So once the stimulus is withdrawn, the economy will quickly succumb to recession once again.  Come on, Mr. Obama, there has to be more.  There has to be something you’re not telling us.  It’s one thing to create temporary jobs with a stimulus, but what are the permanent jobs that the temporary stimulus will leave behind when it’s gone?  Is it just that you don’t want to open up the whole trade deficit can of worms just yet? 

Going back to your “sick patient” analogy, what comes after stabilizing the patient?  Do we just leave him lying in a hospital bed, hooked up to feeding tubes but in a “stabilized” state?  That’s not good enough.  We need to make the patient healthy again.  Better yet, let’s turn him into a world-class athlete and shut down the hospital. 

The stimulus plan is a good start, but what’s needed simultaneously is (a) a system of tariffs on maufactured goods, and (b) a program of low-interest government loans to fund factory construction in the U.S.  Do that and soon jobs won’t be your problem any more.  Your problem will be trying to figure the best use for a budget surplus. 

 

“We won’t do it the old Washington way. We won’t just throw money at the problem.

The “old Washington way” is to ignore the trade deficit and sit idly by as plants are shut down and as jobs go overseas.  You’re right.  Let’s not do that any more!

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4 Responses to Obama Jobs Plan: Please Tell Us There’s More

  1. EXCELLENT ARTICLE! Your quote, “So once the stimulus is withdrawn, the economy will quickly succumb to recession once again,” is spot on.

    I’m going to paste this article up on my site tomorrow. It has become apparent to me that Obama’s New New Deal is nothing more than a rerun of 1933 with broad band thrown in for modernization.

    This is NOT 1933 and the Depression of that year was not countered by FDR’s actions, but instead by WW-II.

    Business in a Capitalist society thrives on the prospects of profit, not from bailouts provided by government taxation.

    • Pete Murphy says:

      Let’s not be too hard on Obama just yet. The point I was trying to make was that I’m hoping he has trade policy reform up his sleeve. If so, I wouldn’t blame him for not showing those cards before he’s even sworn in.

      Without trade policy reform, you’re right: this will be nothing more than a re-hash of the Great Depression approach of FDR. Throughout the Great Depression, America actually maintained a trade surplus. How much harder will it be to escape one while running a trade deficit that wipes 5% of GDP right off the top?

      Your final sentence is right on. Profit potential needs to be restored to stimulate the manufacturing sector.

  2. […] Obama Jobs Plan: Please Tell Us There’s More « “Five Short Blasts … – Tagged: free trade, trade deficit, economic crisis, economics, Barack Obama, politics, economic policy, stimulus plan, job creation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, … […]

  3. […] announced his jobs creation program, I asked, “Is that all there is?”  (See “Obama Jobs Plan: Please Tell Us There’s More.)  Well, it seems that the Obama team has already recognized that it’s inadequate, raising […]

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