Will Obama produce a New Deal to get US back in work?
As he makes history today by becoming America’s first black President, Barack Obama has hit some choppy waters on Capitol Hill regarding the size and focus of his massive economic stimulus package proposal.
President-elect Obama has issued stark warnings in recent days about how dire the economic crisis is now, and how truly calamitous it could yet become.
In a land that shed a staggering half-million jobs last month — pushing 2008’s total to 2.6 million (the biggest loss since 1945) — he's warned that America’s current 7.2% unemployment rate will soon reach double digits unless his $800bn stimulus package is passed by mid-February,.
He’s also conjured up visions of US annual deficits of a trillion dollars for many years to come.
So why are some on Capitol Hill balking at his prescriptions? And is their opposition enough to stymie the 44th President’s game plan? Most details about President Obama’s American Recovery and Reinvestment Plan (ARRP) have come in the form a 14-page analysis of it written by Christine Romer, who will head President Obama’s Council of Economic Advisors and Jared Bernstein, an economic advisor to Vice President Joe Biden.
With the caveat that their predictions are ‘subject to significant margins of error’, the pair say the ARRP will create or save between three and four million jobs by the end of 2010.
To the dismay of liberals who favour government-driven jobs programmes akin to Franklin Delano Roosevelt’s (FDR) New Deal during the 1930s, the authors emphasise that more than 90% of ARRP created jobs — from manufacturing to renewable energy, to infrastructure repair — will be private sector born.
That revelation drew the ire of some Senate Democrats last week, some of whom likened the plan to the trickle-down economics theory championed by Ronald Reagan.
Other Democrats insist the ARRP must be broadened to include assistance to the millions of Americans facing mortgage foreclosure.
President Obama included business tax cuts partly because he wants massive bi-partisan passage of the package, which he believes will demonstrate a critical Congressional unity during these uncertain and frightening times.
The one-term Illinois senator rode into office on the promise of bringing change to the way Washington does business.
However, as sincere or noble his intentions may be, the multiple centres of power on the Potomac operate their own agendas and strategies.
When President Roosevelt pushed though massive public works and social spending programmes that saved millions from poverty during the Great Depression, many US conservatives accused him of implementing of an insidious form of pseudo-socialism. Conservatives spent decades trying to reverse FDR’s schemes, their efforts reaching their zenith during the Reagan and George W Bush years.
Many Republicans are now in shock over the speed and magnitude of recent government interventions in the financial and banking sectors.
As the price of their acquiescence to President Obama’s ARRP, they want him to severely pare back government spending and bureaucracy.
With a half million jobs vanishing each month, it would political suicide for any politician to be seen overtly blocking action by the new president.
Still, while President Obama may yet succeed in getting the stimulus package he wants — and even in softening Washington’s divisive political climate, he will have to do so via various tried and true tricks of power politics — including calculated obfuscation, amorphous proposals and back room wheeling and dealing.
The more things change, the more they stay the same.