COOKING LITE

Much has already been written and/or said about President Obama's job creation speech before Congress on Thursday night. So this posting is my random observations on his various proposals.

1. It is certainly a job-creation lite or ultra lite proposal. I don't like lite beer and it is difficult to be enthusiastic about his lite offering. With a total cost of under $500 billion it certainly seems too anemic to deal meaningfully with the severity of the nation's unemployment and underemployment problem. And almost half of what he did propose was in the form of another reduction of the payroll/social security tax for employees and to a lesser extent for employers.

The larger payroll tax cut for another year has the same goal as the smaller current reduction of 2 percentage points, due to expire at the end of this year. The cut for the next year would be 3.1 percentage points, half of the tax. The argument for the reduction is that the added money on the paycheck will increase consumer spending and thus give the economy a boost. Adding to that supposed spending power is Obama's request for another extension of unemployment assistance, estimated to cost $49 billion. To the extent that there would be any boost by these two proposals, it would certainly be a small one given the size of the American economy. Also, much of the added spending will be diverted toward paying off credit cards or helping with the mortgage or car payment, none of which will help boost consumer spending and create jobs.

As to the rest of the package, it is broken up into so many small parts, it is difficult to imagine any significant impact. Gone is the idea of a huge job creation stimulus in the form of a large infrastructure building and repair program. Instead there is a $10 billion request to set up a revolving loan fund for private sector borrowing for infrastructure, plus $50 for surface transportatiion projects, and another $25 billion to modernize schools and vacant properties.


In short, where's the beef?

2. Having said the above and giving a much too-lite slant to the Obama plan, that perspective must be matched by the view that even some of the smaller pieces of the package will run into the standard GOP opposition to any new spending. Most Republicans have set their feet in concrete when it comes to adding any new spending programs. That intransigence may partly explain why Obama didn't have a beefier proposal. Except for any value in political posturing a huge infrastructure proposal may have entailed, the political futility of offering such was obvious. If you anticipate big trouble with getting less than $100 billion in new spending past the GOP, what's the point in going for $500-600 billion? Which brings up another observation.

3. Obama has proposed that his under $500 billion program be incorporated into the work of the Super Committee in Congress which is madated to produce $1.2-1.5 trillion in spending cuts by the end of November to allow an equal amount to be added to the national debt ceiling. If the Super Committee goes with the Obama request, it will mean the cuts and/or possible revenue increases would have to total close to $2 trillion, thus adding to the already considerable political problems of the bipartisan House and Senate group. But the complications don't stop there.

4. Obama has said he would have his own plan ready for the Super Committee on September 19, a plan that is almost certain to include revenue-producing tax reform and perhaps modest concessions on medicare and medicaid funding. Such tax reforms are likely to be interpreted immediately as tax increases by the GOP, and thus be greeted with an absolute no, no. Continuing on.

Before the bipartisan committee has had a chance to confront its instant task, $1.2-1.5 trillion in cuts, it now totals about $2 trillion if Obama's latest program is included in the deliberations. And there is already talk, once again, that perhaps this is a new opportunity for a "grand bargain" in the spending/tax/debt battle. Such a "grand bargain" would involve about $4 trillion that would include large spending cuts, increased revenues through tax reform, and changes to the health care programs which many Democrats are committed to protect but which are the biggest drivers of the deficit/debt problem.

To close, all of this sounds like the basis for a rerun of the same partisan politics and political posturing we have had for the last two and a half years. And with the 2012 elections just over a year away, there is little reason to believe we are on the threshhold of a new political togetherness mood in Washington. Congress will do the easy stuff like cutting the payroll tax, but the tough stuff will go back on the shelf.