Obama Jobs Speech

[MarshalPurnell]

This is too little, too late. It is clear the economy needs a large stimulus and that such would best be applied toward rebuilding the national infrastructure. That would take advantage of the large pool of construction workers put out of work by the housing bubble and would address a real need. A modernized and expanded infrastructure would also lead to other productive and efficiency gains in other sectors of the economy, boosting GDP growth in more ways than one and making it easier to pay off the debt. But $300 billion is a drop in the bucket; I would think at least a $1 trillion in outlays is needed to make a serious impression, maybe more, perhaps 10% of GDP or yet more. At least unlike Japan we have not reached a point of seriously diminishing gains with these kinds of stimulus and we have a proportionally smaller public debt, and a productive stimulus would be easier as a sell for the markets.

The problem is that the last stimulus got eaten in fundamentally less productive ways, shoring up general state spending rather than in stimulating infrastructure projects, and the projects that got approved were the ones that were "shovel ready" rather than most useful. Thus the public will be skeptical of this one, never mind a much larger one that could actually accomplish something, and the Tea Party base will reward its freshmen for digging in against it as well as everything else Obama does. The offsetting funds part is probably going to collapse in bitter partisan fighting, especially since the GOP has made it clear they will not allow for any revenue gains as part of handling the deficit. This will probably just devolve into political theater, with both sides making the points that will appeal to their base in preparation for 2012. Even if by some miracle it does actually pass I doubt it will hold off what seems to be an increasingly more likely downturn in the next few months anyway.

[Surlethe]

Marshall, by the time any useful infrastructure projects clear the planning and procurement stage and jump regulatory hurdles, the second dip of this recession will be over and the economy will be limping along growing again.

Second, just like the first one, extra stimulus now would end up partially, or mostly, crowding out private sector employment instead of actually putting unemployed workers back to work (it's not so clear that someone whose specialty is drywall is able to easily transition to laying cement); and big deficit spending will crowd out private sector investment.

Third, the recession is exacerbating structural changes away from manufacturing and labor-intensive production to capital- and technology-intensive production. What makes you think at all that a stimulus is going to fix, or even hurry along, those underlying transitions?

Finally, be practical: what makes you think the US congress is able to pass a gigantic stimulus like that before the recession is over? The last stimulus was signed into law after the worst of the 2007 recession had passed; historically, countercyclical government spending has been unable to make the business cycle less severe (this was groundbreaking empirical work by Christina Romer in the late 1980s).

(Edit: Before Japan saturated itself with highways nobody drives on, back in the mid '90s, tell me: just how stimulative was its Keynesian spending?)

[MarshalPurnell]

Marshall, by the time any useful infrastructure projects clear the planning and procurement stage and jump regulatory hurdles, the second dip of this recession will be over and the economy will be limping along growing again.

Second, just like the first one, extra stimulus now would end up partially, or mostly, crowding out private sector employment instead of actually putting unemployed workers back to work (it's not so clear that someone whose specialty is drywall is able to easily transition to laying cement); and big deficit spending will crowd out private sector investment.

Third, the recession is exacerbating structural changes away from manufacturing and labor-intensive production to capital- and technology-intensive production. What makes you think at all that a stimulus is going to fix, or even hurry along, those underlying transitions?

Finally, be practical: what makes you think the US congress is able to pass a gigantic stimulus like that before the recession is over? The last stimulus was signed into law after the worst of the 2007 recession had passed; historically, countercyclical government spending has been unable to make the business cycle less severe (this was groundbreaking empirical work by Christina Romer in the late 1980s).

(Edit: Before Japan saturated itself with highways nobody drives on, back in the mid '90s, tell me: just how stimulative was its Keynesian spending?)

I said it was too late as well as too little. This is the kind of thing, on a larger scale, that should have been passed back in 2008 or 2009. We would be seeing benefits now in both improved infrastructure and lower unemployment, and all of the knock-on effects that would result in. At the very least the situation would look a lot more positive, and the course of economic developments are driven as much by perception as anything else. The perception that government efforts have been ineffective, or not even forthcoming, will probably tip the scales next year. There will be more rounds of layoffs and the general misery level will increase through to the election. Boldness now, where it possible, might head that off- doing nothing, or piling on more half-measures will obviously not accomplish anything. And if it is impossible to do anything... that way leads the end of America.

As for the second objection I'm not sure if you are in fact serious or not. The private sector isn't hiring. That is the core of the problem today. Unemployment is the problem, not the debt and not GDP growth. There is no indication that housing or retail sector job hiring will pick up, and indeed it is probably more likely than not they will begin shedding jobs early next year after a disappointing holiday season. A dry wall installer may not be ready right away to pour concrete, but he has some broader experience and temperament that is more suited to that job than being, say, a Silicon Valley software coder. And it seems patently ridiculous to assert that the private sector has any interest in investing in rebuilding public infrastructure like bridges or roads. at least on anything like the scale required to modernize America's transportation networks. There are plenty of other sectors too like energy generation and the power grid where the massive upfront outlays of capital discourage most private investment and where large government investment would, by taking much of the cost away, encourage private investment partnerships.

As for structural changes, that is definitely my concern. We may have reached a point where structural unemployment reaches 10% or higher when counting long-term unemployed out of the usual statistic. The retail sector gutted employment, has seen that productivity was not impacted, and so has no interest in restoring staffing levels. The industrial sector is being gutted by cheaper competition from Asia, by ridiculously tense labor union relations, by poor corporate decisions dating back to the post-World War II era. The software and "knowledge economy" can be offshored to China and India for the same cost savings as manufacturing. Competitive advantage may very well have become absolute advantage thanks to the mobility of capital, and those who control private capital in the United States have benefited enormously by investing outside the United States. If the government does not act with some long-term vision there is no reason "the market" will save America's economic position anymore than it saved the economic position of Britain during the Second Industrial Revolution. If it is more efficient to employ more people in China than in America, the market will do just that; and among other things, a decaying and run-down infrastructure certainly makes operations in the US much less competitive compared to a country with an up-to-date network of modern rail, airports, dock facilities, roads, public transportation, power grids and so on.

It is possible there is nothing to be done to stop structural unemployment reaching double-digits. The competitive industries we do have can be saved, new ones can be nurtured, but productivity gains mean that only so many people can be employed there, much as with agriculture. And corporations have no incentive or mandate whatsoever to employ any more people than they need. That is charity and corporations exist to maximize shareholder value, not uphold a particular socioeconomic structure. At least a major program leading to a temporary (but multi-year) uptick in employment could buy time and the new infrastructure would still be exceedingly useful to those industries which can flourish. What to do with a vastly increased structural unemployment rate will have to be addressed but it may be easier to do that later, in a time of relative prosperity when the misery level of the population has decreased. Or I guess we can let the market function like it has the past twenty years, spawning booms and busts, driving the concentration of wealth into a smaller and smaller share of the population, profiting responses to economic incentives that harm the overall health of the country, shrinking the middle class into nonexistence, and creating a permanently distressed economic underclass. Hope the transition works itself out because if it doesn't, then revolution.

As for the political issue gladly conceded. It is not a practical program, not in so far as it can't be paid for or wouldn't have beneficial effects, but Congress would not pass it now. Congress probably won't even pass the limited program Obama has proposed. This is an indictment of our present political system. The gridlock is almost certainly going to contribute heavily to the next recession. Regrettably that means a GOP candidate will win in 2012, and being beholden to the Tea Party, will proceed to slit the throat of the economy in the name of austerity and paying down the deficit and "ending big government." The future will belong to China, and the wealthy in America will get even more obscenely wealthy at the expense of everyone else. Until their penthouses are burned down around them by the new class of sans-culottes.

And yes Japan tried to spend its way out of the last two decades and it didn't work. Of course Japan was (and is) also fighting deflation, a financial system that absolutely refused to reform, a housing bubble that made subprime derivatives look tame, and a shrinking population. It's construction sector was a key part of the corrupt system that kept the LDP in power, so much of the "stimulus spending" was wasted in projects that were ludicrously overvalued. For all of that, Japan's unemployment has barely gone over 5%, and what GDP growth it did have handily outpaced the growth (and then loss) of the population, and wealth is distributed much more evenly in Japan, with lower household debt... so the perception of misery was much deadened. In any case the US does legitimately need trillions of dollars in infrastructure upgrades and replacements and need to put millions of people back to work, which was not the case in Japan which even in the early 1990s already had extensively modern infrastructure thanks to the role construction companies played in the LDP political structure.

[Meest]

Was pretty good from my view if it isn't all talk when the actual writing comes through next Monday. My problem with Obama is he's giving a lot to get a little, but at least now he's trying to get a little instead of just rolling over, needs to be opposite, fight for a lot you might get a little, instead of fighting for a little and not getting anything.

[MKSheppard]

Marshall, by the time any useful infrastructure projects clear the planning and procurement stage and jump regulatory hurdles, the second dip of this recession will be over and the economy will be limping along growing again.

That's a very important point that has to be made.

If it takes 10-12 years to clear all the hurdles and then construct a high voltage transmission line; the entire cycle becomes a bit self reinforcing regarding motivation (or lack thereof); because the average corporate executive operates on a five year planning cycle; since beyond that things become too unstable to reliably forecast with confidence.

[Simon_Jester]

Plus the hazard of things getting approved under one administration and cancelled under the next- a serious concern with recent examples like the Constellation program to look at.

[Chirios]

Apparently the investment banks think this is going to be a good thing. Course, it's debatable whether a 2% increase would be anywhere near enough.

The U.S. economy would get a boost of up to 2 percent under President Barack Obama’s $447 billion jobs plan, say economists at Goldman Sachs Group Inc., Moody’s Analytics Inc. and JPMorgan Chase & Co.

“The U.S. is on the cusp of a recession,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “The plan would go a long way toward stabilizing confidence, forestalling another recession and jump-starting a self-sustaining economic expansion.”
The proposal, which would raise infrastructure spending and cut in half payroll taxes paid by workers and small businesses, would add 2 percent to next year’s GDP, create 1.9 million jobs and lower the unemployment rate by one percentage point compared with current policy, Zandi said.

Obama announced his plan to a joint session of Congress a week after a government report showed that hiring unexpectedly stalled in August, raising concern the recovery was grinding to a halt. Unemployment has hovered at about 9 percent or more for two years, damping consumer spending.

Tax cuts account for more than half the dollar value of the plan, which includes a $105 billion in infrastructure spending for school modernization, transportation projects and rehabilitation of vacant properties. The proposal includes $35 billion in direct aid to state and local governments to stem layoffs of educators and emergency personnel, according to a White House fact sheet.

Unemployment Benefits

A reduction in government spending and the end of the payroll-tax holiday and an expiration of extended unemployment benefits would have cut GDP by 1.7 percent in 2012, according to JPMorgan chief U.S. economist Michael Feroli. Instead, the Obama proposal more than makes up for that potential loss and may add a net 0.1 percent to the economy, he estimates.

“It offsets what would otherwise have been a huge drag from the fiscal restraint” that was due next year, he said. “The plan reduces the risk of a recession in 2012, though it doesn’t do much for growth in the second half of this year.”
Goldman Sachs estimated the plan would add 1.5 percent to the economy, while Macroeconomic Advisers LLC said 1.3 percent and UniCredit Research, up to 2 percent.

“This plan would reduce the odds of a recession to very low levels,” said Joel Prakken, senior managing director of Macroeconomic Advisers in St. Louis, which estimated it would add 1.3 million jobs next year. “The biggest immediate boost is from consumer spending from the payroll-tax holiday and extension of unemployment benefits. If people get more income, they will spend it.”

Stocks, Treasuries

Stocks sank and 10-year Treasury yields fell to a record yesterday as concern grew about Greece’s debt crisis. The Standard & Poor’s 500 Index dropped 2.7 percent and has declined 15 percent since July 7. Ten-year Treasury yields slid as low as 1.89 percent. They have plunged from 3.18 percent in July amid signs of a slowing economy.

Public opinion of Obama as well as Congress has plummeted to new lows since a partisan fight in July and August over raising the government’s debt limit that took the country to the edge of default.

Obama’s monthly job-approval rating in a Gallup Poll dropped to the lowest of his presidency, with 41 percent of U.S. adults saying they approved of his overall performance.

Some economists were less impressed with his proposals. With time running out for any measures to be felt before next year’s election, limited options for providing a short-term stimulus, and Republicans resisting more spending, Obama opted for ideas that have already won a measure of bipartisan support.

‘Pedestrian Package’

“It looks like an amalgam of things we’ve already seen,” said Stephen Stanley, chief economist at Stamford, Connecticut- based Pierpont Securities LLC. “I don’t know why you would demand a joint session of Congress to deliver such a pedestrian package.”

The Obama plan may result in less consumer spending than expected because people may save tax cuts, said Harvard University economics
professor Martin Feldstein, in an interview on Bloomberg Television “Surveillance Midday” with Tom Keene.

“People are too nervous, they are paying down debt, they are not going out and going to spend it,” said Feldstein, who served as chief economic adviser to President Ronald Reagan. “Until we fix the housing program, it is hard to see how consumers are going to have confidence, net worth and the willingness to spend.”

Forecasts Cut

The U.S. economy will expand at a 1.6 percent rate in 2011 and 2.2 percent in 2012, according to the median forecasts of 63 economists surveyed Sept. 2 to Sept. 7 by Bloomberg News. The median forecast has been cut from 1.7 percent and 2.4 percent a month earlier. Economists have raised the odds of a recession to 35 percent.

The unemployment rate has averaged 9.5 percent the past two years, and recent reports have shown manufacturing is slowing, consumer confidence and home values are sliding. Bond prices are climbing as investors shun stocks for safer fixed-income securities.

“A substantial fiscal consolidation in the shorter term could add to the headwinds facing economic growth and hiring,” Federal Reserve Chairman Ben S. Bernanke said in a Minneapolis speech this week. While Congress needs to put spending on a sustainable path over the long run, “fiscal policy makers should not as a consequence disregard the fragility of the economic recovery.”

Hiring has been hurt by a decline in government payrolls this year, with federal, state and local agencies cutting 17,000 jobs last month and 37,000 in July.

‘Significant Dent’

The Obama plan “is a collection of stuff that collectively could probably make a significant dent in unemployment, not huge, but it would make a noticeable difference in the economy,” Nobel Prize-winning economist Paul Krugman said in a Bloomberg News interview in Yaroslavl, central Russia.

Government spending contributed a combined 1.1 percentage points to growth from 2008 to 2010, as the economy overall expanded 0.3 percent, according to the Bureau of Economic Analysis. Zandi said growth was supported by Obama’s stimulus package, which has been criticized by House Republicans as ineffective.

[Dominus Atheos]

Wow, this got hijacked quickly.

On topic, MSNBC is reporting something I can't fine any other source for:

Obama was proposing what he called the American Jobs Act, which he said would... make permanent a temporary cut in the individual tax rate, which was reduced from 6.2 percent to 4.2 percent for this year only.

Does anyone know if that's true or not?

I think this was the social security or medicare tax rate.

I thought it was a really well delivered speech, but we'll see if it's just more talk, or if something worthwhile gets done.

I know that, I'm concerned about the "permanent" part. Surely even Obama can't be that stupid.

[J]

Other steps will require Congressional action. Today you passed reform that will speed up the outdated patent process, so that entrepreneurs can turn a new idea into a new business as quickly as possible. That's the kind of action we need.

To make matters worse, H.R. 1249's shift from the current first-to-invent system to a first-to-file system will probably only make the backlog worse, because it will encourage applicants to file on every incremental improvement they make in a product, rather than waiting and filing one application on all of it when they're done with their R&D cycle. Of course, one would normally expect this to not be a problem, since one would assume that the PTO would use all the extra money from the additional application fees to hire more Examiners. Unfortunately most of that money will be taken by Congress and spent on other things. So...yeah. Don't expect the patent process to speed up any time soon.

Actually, it gets worse. Excerpt from a US Small Business Administration letter on the first to file process:
http://www.connect.org/news/pdf/Coaliti ... -15-09.pdf

No one has studied or evaluated the expected effects on U.S. patenting practices, the balance of costs and risks for
small and large U.S. businesses, the adverse effects on patent quality, or the increased USPTO workload from such
a change. Noteworthy is the recent McGill University study of the Canadian transition to FTF in 1989, finding
adverse effects on small businesses in Canada and generally negative effects on patent quality in Canada. We urge
the U.S. Small Business Administration (SBA) in cooperation with the USPTO to undertake a study that addresses
the concerns we present here prior to any support or enactment of FTF provisions that overturn more than 200 years
of American patent law.

Abstract from the McGill University Study:
http://papers.ssrn.com/sol3/papers.cfm? ... id=1394833##

A switch to a first-to-file patent regime from its first-to-invent system has become imminent for the U.S. To learn about probable effects of such a policy change, we examine a similar switch that occurred in Canada in 1989. We find that the switch failed to stimulate Canadian R&D efforts. Nor did it have any effects on overall patenting. However, the reforms had a small adverse effect on domestic-oriented industries and skewed the ownership structure of patented inventions towards large corporations, away from independent inventors and small businesses. These findings challenge the merits of adopting a first-to-file patent regime.

[MKSheppard]

I can't wait for high speed rail between LA and San Francisco.

You mean the $40 billion white elephant they propose to build?

It's worth noting that nobody talks about the fate of Japan National Railways, which built the Shinkansen -- they went bankrupt from all the costs incurred in building the Shinkansen lines -- the debt JNR incurred to build the lines was about ¥28 trillion.

The privatized JR railroads which took over the Shinkansen lines only paid in total ¥9.2 trillion to acquire the Shinkansen network.

By contrast, Amtrak needs $12.3b over 15 years to replace 1,300 cars and 350 locomotives to maintain present service levels.

Think of all the money that's tied up in sexy sexy HSR that could revitalize a significant portion of Amtrak's fleet, and allow more solid improvements, like multiple trains a day, rather than the "single amtrak train a day" the majority of stations get.

Or just look at this map:

Multi-Tracked Mainlines in the USA

Considering it costs about $2-4 million per mile to add a signalled single track line...and that the railroads still own the un-used right of way where things used to be double, triple, or quadruple tracked, thereby massively lowing your costs...

[Simon_Jester]

Plus, in a country the size of the US, high speed rail is never going to be able to compete with civil aviation for speed, not over distances of more than a few hundred miles. Even with the fastest trains anyone's ever seriously envisioned building, a trip from Chicago to Los Angeles is a basically an all day/overnight thing, whereas with flight you can still leave in the morning and show up in the afternoon.

So the draw of high speed rail really isn't what it would be in a country like France, or even Japan.

[Phantasee]

I thought most HSR proposals focused on regional networks, and not cross country connections? In Canada the most suitable corridors for HSR are the Montreal to Windsor corridor and the Edmonton to Calgary corridor. For the former the idea isn't to connect Montreal to Windsor, of course, but Windsor connecting to the Golden Horseshoe connecting to Toronto connecting to Ottawa connecting to Montreal and so on.

[Count Chocula]

I just read this thread again, and a couple of things came to me. First is this little gem:

We all remember Abraham Lincoln as the leader who saved our Union. But in the middle of a Civil War, he was also a leader who looked to the future - a Republican president who mobilized government to build the transcontinental railroad; launch the National Academy of Sciences; and set up the first land grant colleges.

Okay, accurate so far.

He's continued his speechifying for the "Jobs Bill," but apparently his TelePrompTer guys have made a goof in programming, which he keeps repeating. He got it right in the first speech, but now:

"We’re the country that built the Intercontinental Railroad,"...
That's what the president of the United States flat-out said Thursday during what was supposed to be a photo op to sell his jobs plan next to an allegedly deteriorating highway bridge.

A railroad between continents? A railroad from, say, New York City all the way across the Atlantic to France? Now, THAT would be a bridge!

Oh yeah, and Ray LaHood is in the house!

Wow. Transcontinental railroad. He's really the smartest President ever? Hey, mayby Amtrak will sell me a ticket on that transcontinental railroad so I can tour the 57 States, and maybe squeeze in a visit to Paris or Teotihuacan! That would be cool.

Then, another tidbit trickled to my forebrain: The One specifically called for RAIL projects! Maybe all of that panning of the Atlas Shrugged movie (mine included) for being stuck in the past was actually prologue to the future! Government rail projects in 2011! To quote another "One:"

HANK REARDEN LIVES!1!1!

[Kodiak]

Wow. Transcontinental railroad. He's really the smartest President ever? Hey, mayby Amtrak will sell me a ticket on that transcontinental railroad so I can tour the 57 States, and maybe squeeze in a visit to Paris or Teotihuacan! That would be cool.

Enjoy- it's called "Information"

[Thanas]

Wow. Transcontinental railroad. He's really the smartest President ever? Hey, mayby Amtrak will sell me a ticket on that transcontinental railroad so I can tour the 57 States, and maybe squeeze in a visit to Paris or Teotihuacan! That would be cool.

Do you enjoy getting warnings for posting racist doublespeak? Because until you come up with an explanation real fast, you'll get another one.

[Flagg]

I don't get it, what's racist?

[Wing Commander MAD]

I don't get it, what's racist?

Doesn't the number 57 have some special significance for Neo-Nazis?

[Thanas]

Look at the link Kodiak posted.

[Flagg]

Jesus. I knew Cunt Choculol was a racist fuckwit, but that's some out-there obscure racism right there. I almost have to admire him for it.

[Thanas]

And that is enough from you on this issue as well, unless you too enjoy extra mod attention.

[Count Chocula]

Thanas, you're warning me because of a link Kodiak posted? I don't get it, where's the racism in my post? Hint: not there.

[Thanas]

I was not going to warn you if you could provide an explanation as to why rather infamous cryptic racist speech was suddenly turning up in your post. I am still waiting on that one.

Also note that I will not warn you unilaterally, I will talk about this with the other N&P mods.

[Count Chocula]

And again, Thanas, I have no idea WHAT cryptic racist speech is in my post.

What the fuck are you talking about?

[Panzersharkcat]

From that very article Kodiak posted:

It's true that during a May 9, 2008 campaign stop in Oregon, Barack Obama said he had visited 57 states.

Then it links to this.
That is all that Count Chocula referred to. He said nothing whatsoever about Obama being Muslim and he said nothing about the supposed 57 Islamic states. From what I can tell, he's just making fun of the screw-ups of Obama's teleprompter people.

[Thanas]

After conferring with colleagues, it has been determined that there is not enough evidence to determine that it was racist. The matter is now closed.

In the future, I would advise Chocula not to do it again.