With less than two months to go until the November midterm elections, President Barack Obama’s team has now fully taken on board the message that his party’s chances in the coming election depend on a near laser-like focus on creating jobs and re-energising the US economy. By BROOKS SPECTOR.
The best guess these days in Washington DC circles is that the Democrats will take a beating in the upcoming election because of the persistent economic chill and near 10% unemployment – and they may even lose control of both houses of congress. Not surprisingly, over the past several days, Obama has been rolling out a series of job-friendly proposals that are the foundation for his party’s last-ditch effort to hold a Republican onslaught in November at bay. Simultaneously, he is now laying out the charge that Republicans are trying to ride on the back of peoples’ fears about the country’s economic circumstances as voters gear up for the midterm election.
Thus it was probably inevitable that on Labour Day (America’s May Day and Workers’ Day), in Milwaukee, Wisconsin, a day that is traditionally the last day of America’s summer vacation season and the time when election campaigns really start to pick up steam, Obama called for a new $50 billion infrastructure investment plan to generate hundreds of thousands of new jobs and finally make a dent in the unemployment rate. Perhaps not surprisingly, Democratic senator Russ Feingold of Wisconsin is in the political fight for his life in this election.
Obama’s proposals are now including a new infrastructure bank to support projects over the long-term. This isn’t an entirely new idea for Obama. He first began thinking about this idea while he was a senator. More recently, this idea began to get some traction across the nation and among both Democrats and Republicans. Politicians as varied as California and Pennsylvania governors Arnold Schwarzenegger and Ed Rendell, and New York City mayor Michael Bloomberg as well, all support the idea. They, and others, agree it would spur innovation, allowing panels of experts to pick projects on merit, rather than from the traditional congressional “pork barrel” horse-trading process that can give the country lots of those “A Bridge to Nowhere” investments.
Obama followed his Monday speech on infrastructure funding with a second speech on Wednesday, this time in Cleveland, Ohio, where he challenged Republicans to support an economic agenda that includes an end to Bush-era tax cuts for wealthy Americans, saying the country cannot afford $700 billion in tax breaks that benefit “millionaires and billionaires” as well as his business investment tax credit proposal that should appeal to the country’s business community.
In choosing Cleveland, where just two weeks earlier, House of Representatives Republican leader and the speaker of the House hopeful, John Boehner had set out the Republican’s economic message, Obama was trying to make his economic plans distinctly different from the Republicans’ agenda. In fact, Obama cited Boehner seven separate times in his Wednesday speech. Promoting his proposals for a combined $180 billion in expanded business tax cuts and infrastructure spending, Obama told his crowd that, “Despite the fact that this has traditionally been an issue with bipartisan support, Mr. Boehner has so far said no to infrastructure.”
The Obama proposals, meanwhile, would allow businesses to deduct the full value of new equipment purchase, from computers to utility generators, from their taxes through the end of next year. This too will be aimed at swiftly ramping up demand for manufactured goods, thereby creating jobs.
The key element of this deduction proposal is that it would allow businesses of all sizes to hang onto more of their cash to expand their businesses – and it would give large ones, many of them already holding idle cash hoards because of continuing uncertainties about the economy, new incentives to spend and invest.
Obama’s tax credit plan would also expand (and make permanent) tax credits for corporate research and development expenses. This would replace the on again/off again version that exists now. For some three decades, this credit has been successively enacted temporarily because of its revenue cost, and then, fairly consistently, extended. However the provision has often been allowed to lapse before being debated and passed anew, thereby significantly confounding business planning.
And on Wednesday morning, as part of a new, more sustained effort to portray Republicans as the vicars of naysaying, presidential advisor David Axelrod told a National Public Radio interviewer, “We’ve been working on the economy day in and day out. There’s no silver bullet…. We’re working right along on trying to get this economy moving. We would like some cooperation.” Right there – there’s the start of the Obama campaign riff for the next two months.
Watch: Obama Pitches $300B in Business Tax Incentives. (PBS)
Traditionally, transportation infrastructure spending bills are bipartisan winners, but passage of Obama’s plan is no sure bet. Congress only has a few weeks of work left before members head out to campaign for the election and the Republicans are clearly in a lock-step frame of mind not to give in to anything that could be portrayed as a Democratic victory.
And, in fact, a government-run bank is going to be a tough sell in an election year when voters remain angered by the bank bailouts of the previous year. Republicans are already calling these infrastructure proposals “stimulus déjà vu”. John Boehner was already on the attack on Wednesday morning television, even before Obama had given his Wednesday speech. There you have the Republican’s campaign call to arms.
The Obama administration’s tactic – or, perhaps a prayer – is to attract enough Republican support so they can get these measures passed by Congress with no procedural obstacles, but the clock is ticking.
Under this proposal, the infrastructure bank would fit in under the treasury department. It could attract money from private institutional investors and then channel these funds to projects picked by an expert panel. This would make it something like a domestic version of the World Bank and it would – theoretically, at least – have the potential to reshape whole chunks of the nation, or even the national economy, the way the interstate highway system did when it was built in the 1950s and 1960s, and in the way the first transcontinental railway did when it was finished in 1869.
The interstate system was actually sold to the nation as a national defence measure during the Eisenhower administration that would – theoretically – allow the government to shift strategic resources quickly around the nation in time of conflict. The transcontinental railroad, chartered during Abraham Lincoln’s administration and constructed in large part during the Civil War was similarly proposed as a way to keep the country together – East and West – to avoid an alternative version of that then-current problem between the North and South.
And even earlier, the Eire Canal was the template for these national improvements (as they used to be termed). The canal opened up the upper Midwest, the Great Lakes region and even the Mississippi River Valley to commerce through New York City, making it the nation’s economic and financial capital.
In fact, it is startling how Obama’s proposals actually have a feel to them that reaches much further back, right back to Revolutionary War hero and the country’s first treasury secretary, Alexander Hamilton’s influential “Report on Manufactures” that was commissioned by George Washington in 1791. Hamilton’s report greatly influenced the course of the country’s debate over economic development and the proper role of the federal government in supporting growth and development. In fact, save for its 18th century English, Hamilton’s comments could have come right from the Obama White House and they are worth seeing again. (Substitute jobs for manufactures to make the fit even closer.) Hamilton wrote then:
“Improvements favoring this object intimately concern all the domestic interests of a community; but they may without impropriety be mentioned as having an important relation to manufactures. There is perhaps scarcely any thing, which has been better calculated to assist the manufactures of Great Britain, than the ameliorations of the public roads of that Kingdom, and the great progress which has been of late made in opening its canals. Of the former, the United States stand much in need; and for the latter they present uncommon facilities.
“The symptoms of attention to the improvement of inland navigations, which have lately appeared in some quarters, must fill with pleasure every breast warmed with a true zeal for the prosperity of the country. These examples, it is to be hoped, will stimulate the exertions of the government and the citizens of every state. There can certainly be no object, more worthy of the cares of the local administrations; and it were to be wished, that there was no doubt of the power of the national government to lend its direct aid, on a comprehensive plan. This is one of those improvements, which could be prosecuted with more efficacy by the whole, than by any part of parts of the union….”[Original spelling and usage preserved]
It is interesting to note that the US Congress rejected Hamilton’s plan and it may well turn down Obama’s bid. While Hamilton’s plan wasn’t US government policy, 19th century Austrian economist Frederick List was greatly influenced by it years later. Then, List’s ideas became a major impetus to the economic development and economic management of post-war Japan; and Japan in turn greatly influenced the policies of the Asian Tigers (Korea, Hong Kong, Singapore and Taiwan); and their experiences, in turn, had a real impact on the policies of places such as Brazil, India and China. DM
Photo: U.S. President Barack Obama speaks about the economy at the Cuyahoga Community College West Campus in Parma, Ohio, near Cleveland, September 8, 2010. REUTERS/Larry Downing
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