President Obama unveiled his $447 billion jobs program last Thursday. Most of the elements make sense and it will be far better than the $800 billion stimulus package put together by the then House Speaker, Nancy Pelosi in 2009. Several economists done cartwheels over the program, most notably Mark Zandi of Moody's, arguing that the program has the potential to increase economic growth by a full two percentage points next year. Trust me, Mark is either dreaming or totally in the tank for the Obama Administration.
In its essential elements the program envisions a 3.1% cut in payroll taxes for workers, up from the current 2%($175 bil.) a 3.1% cut in payroll taxes for businesses for incremental payrolls up to $50 million(($65 bil.)an extension of emergency unemployment benefits( $49 bil.) teacher and public employee retention($35 bil.), modernizing transportation infrastructure ($50 bil.) fixing schools($35 bil) and a few other things. First, most forecasters already modeled in the existing 2% payroll tax cut and the extention of emergency unemployment benefits. Second, not all of this will pass. Third, no forecaster has made any allowance for the contractionary effects of increasing taxes and/or cutting other spending to pay for the $447 billion program. Remember the President said the program will be paid for. If it is paid for concurrently, there is no Keynesian stimulus. Nevertheless, as I have been arguing for over a year, at least the Administration is trying to do something about the scourge of mass unemployment facing our country. Net net, it will help but not a whole lot.
Why? There was no mention energy development in the speech a private sector way of creating jobs. There was no mention of fast-tracking environmental approvals for the transportation project which means it will take forever for them to get started and of course all of this will be subject to costs and the rulemaking asociated with the prevailing wage requirements of the Davis-Bacon Act.
Buried in the speech there was a ray of hope on entitlement reform. The President admitted with respect to Medicare,"with an aging population and rising healthcare costs, we are spending too fast to sustain the program." He later added, "We have to reform Medicare to strengthen it." A very big admission and it opens the way for an entitlement deal later in the year.
Saturday, September 10, 2011
Saturday, September 3, 2011
Hiding from the Numbers
Yesterday brought with it horrible data on employment. Job creation stalled with ZERO job growth reported for August. The unemployment rate remained at 9.1% and hourly wages and hours worked were actually down. Ugly numbers. But where was President Obama? He was nowhere to be seen. If the numbers were good he would have been in the Rose Garden promoting his economic policies. He shouldn't really do that either. Good data speak for themselves.
Our President unfortunately forgets that his task is to level with the American people. He failed yesterday. A great leader does not hide from bad news he discusses it in a straight forward manner. For example, in 1940 when the French Army collapsed in the face of the Nazi onslaught, Winston Churchill went on the air with "The news from France is bad."
The lesson here is simple, don't hide from the American people.
Our President unfortunately forgets that his task is to level with the American people. He failed yesterday. A great leader does not hide from bad news he discusses it in a straight forward manner. For example, in 1940 when the French Army collapsed in the face of the Nazi onslaught, Winston Churchill went on the air with "The news from France is bad."
The lesson here is simple, don't hide from the American people.
Tuesday, August 23, 2011
Bloomberg Endorses Shulmaven View for Infrastructure Projects
Bloomberg News has joined Mort Zuckerman of US News and Noam Sheiber of The New Republic in endorsing the Shulmaven view of fast-tracking environmental approvals and waiving the prevailing wage requirements of the Davis-Bacon Act for new infrastructure projects. Their editorial calls for a $100 billion program. Hopefully President Obama will see the light.
Full url: http://www.bloomberg.com/news/2011-08-23/a-public-works-spending-deal-even-the-republican-party-can-embrace-view.html
Full url: http://www.bloomberg.com/news/2011-08-23/a-public-works-spending-deal-even-the-republican-party-can-embrace-view.html
Sunday, August 21, 2011
An Open Letter to President Obama on Jobs
Dear Mr. President:
I hope you are enjoying your working vacation in Martha's Vinyard. You sure could use a break from Washington and the emerging bear market on Wall Street. You told us that you will address the nation on the need to create jobs after Labor Day. I hope you come up with some good ideas in the clean ocean air. We surely can use them because we have a real employment emergency that is draining both the economy and the spirit of our nation.
Given the emergency, I assume that you are open to a few new and some old ideas about job creation. All the ideas you mentioned on your midwest tour such as ratifying the free trade agreements, passing the new patent law, extending the social security tax cut and extending unemployment benefits are mostly helpful, but they really won't do a whole lot in the short run.
So here are a few ideas that might move the dial.
1. We need an all out domestic energy program. That means more offshore drilling, establishing clear rules and best practices for hydraulic fracturing drilling technolgy that has the real potential to limit our dependence on foreign oil and approving the privately financed Keystone XL Pipeline that will bring Canadian oil to our gulf coast. Note that all of the above does not involve tax dollars. On the public side keep up and step up the research into energy alternatives, but have no illusions about all of the "green" jobs it will create.
2. Spend big on infrastucture. The $50 billion infrastructure bank is small potatoes and may take awhile to launch. Spend $200 billion, but fast track or eliminate the environmental approval process and waive the prevailing wage requirements of the Davis-Bacon Act. With very low interest rates and high unemployment, now is the time to borrow and spend for worthy projects.
3. Give employers a 5% tax credit for increasing their wage bill subject to FICA employment taxes. I think this would work far better than your current payroll tax cut.
4. Have Treasury sit down with the business lobbies and cut a deal on corporate tax reform to present to the Congress. I fear the normal process might take forever.
5. Fund the above with a combination of a one-time lower tax rate for repatriating foreign sourced corporate earnings that are idling overseas, a higher gasoline tax and a down payment on entitlement reform. By the way, if you can get it, going big on a grand bargain for reducing our structural deficit is good idea, but you have to convince yourself and your friends in Congress that the real heavy lifting has to be on the spending side.
None of this will be easy, but when you are President all the easy stuff gets decided before it gets to you. Enjoy your vacation and come back with a real program.
Sincerely,
David Shulman
I hope you are enjoying your working vacation in Martha's Vinyard. You sure could use a break from Washington and the emerging bear market on Wall Street. You told us that you will address the nation on the need to create jobs after Labor Day. I hope you come up with some good ideas in the clean ocean air. We surely can use them because we have a real employment emergency that is draining both the economy and the spirit of our nation.
Given the emergency, I assume that you are open to a few new and some old ideas about job creation. All the ideas you mentioned on your midwest tour such as ratifying the free trade agreements, passing the new patent law, extending the social security tax cut and extending unemployment benefits are mostly helpful, but they really won't do a whole lot in the short run.
So here are a few ideas that might move the dial.
1. We need an all out domestic energy program. That means more offshore drilling, establishing clear rules and best practices for hydraulic fracturing drilling technolgy that has the real potential to limit our dependence on foreign oil and approving the privately financed Keystone XL Pipeline that will bring Canadian oil to our gulf coast. Note that all of the above does not involve tax dollars. On the public side keep up and step up the research into energy alternatives, but have no illusions about all of the "green" jobs it will create.
2. Spend big on infrastucture. The $50 billion infrastructure bank is small potatoes and may take awhile to launch. Spend $200 billion, but fast track or eliminate the environmental approval process and waive the prevailing wage requirements of the Davis-Bacon Act. With very low interest rates and high unemployment, now is the time to borrow and spend for worthy projects.
3. Give employers a 5% tax credit for increasing their wage bill subject to FICA employment taxes. I think this would work far better than your current payroll tax cut.
4. Have Treasury sit down with the business lobbies and cut a deal on corporate tax reform to present to the Congress. I fear the normal process might take forever.
5. Fund the above with a combination of a one-time lower tax rate for repatriating foreign sourced corporate earnings that are idling overseas, a higher gasoline tax and a down payment on entitlement reform. By the way, if you can get it, going big on a grand bargain for reducing our structural deficit is good idea, but you have to convince yourself and your friends in Congress that the real heavy lifting has to be on the spending side.
None of this will be easy, but when you are President all the easy stuff gets decided before it gets to you. Enjoy your vacation and come back with a real program.
Sincerely,
David Shulman
Tuesday, August 2, 2011
The Debt Ceiling Deal: Looking for Cuts in All of the Wrong Places
At last the debt ceiling deal is done. Our nation won't default and there will be about $2.2 trillion in cuts,although there maybe some tax increases included in that number. However $2.2 trillion represents a small downpayment on the $8 trillion that will ultimately be required. Yes, $8 trillion. The much discussed $4 trillion grand bargain was also only a downpayment on what is needed. Moreover with the economy softening much of the $2.2 trillion will be washed away with lower tax collections and higher automatic spending. Thus don't be surprised if we see both tax cuts and spending back on the agenda in the Fall.
The real problem with the deal is that the cuts are in the wrong places. Too be sure much Nancy Pelosi's stimulus package of two years ago had to be undone, but our nation still needs infrastructure, research and yes, defense spending. In my opinion we will come to regret the steep cuts in the defense budget.
What should have been cut are the three big drivers of the longer term deficit: medicare, medicaid and social security. The Republicans made a huge mistake in not offering up some tax increases to achieve cuts in these areas. Unfortunately we will have to wait until 2013 until painful cuts have to made in the major entitlement programs. What I am writing about is not politics, but rather arithmetic. Bluntly put, medicare, medicaid and social security are not sustainable. Indeed it is likely that in a few years we will say the same thing about Obamacare.
As an aside an elegant deficit reduction plan would have kept the taxes embedded in Obamacare and delayed implementation of the spending for three years. But the President and the Democrats really don't care about deficit reduction, just as the refusal of the Republicans to to accept modest tax increases demonstrate that, they too, do not care about deficit reduction either. The Simpson-Bowles Commission had it right and President Obama's biggest political mistake was his failure to endorse the their recomendations.
The real problem with the deal is that the cuts are in the wrong places. Too be sure much Nancy Pelosi's stimulus package of two years ago had to be undone, but our nation still needs infrastructure, research and yes, defense spending. In my opinion we will come to regret the steep cuts in the defense budget.
What should have been cut are the three big drivers of the longer term deficit: medicare, medicaid and social security. The Republicans made a huge mistake in not offering up some tax increases to achieve cuts in these areas. Unfortunately we will have to wait until 2013 until painful cuts have to made in the major entitlement programs. What I am writing about is not politics, but rather arithmetic. Bluntly put, medicare, medicaid and social security are not sustainable. Indeed it is likely that in a few years we will say the same thing about Obamacare.
As an aside an elegant deficit reduction plan would have kept the taxes embedded in Obamacare and delayed implementation of the spending for three years. But the President and the Democrats really don't care about deficit reduction, just as the refusal of the Republicans to to accept modest tax increases demonstrate that, they too, do not care about deficit reduction either. The Simpson-Bowles Commission had it right and President Obama's biggest political mistake was his failure to endorse the their recomendations.
Thursday, July 14, 2011
Letter to The Wall Street Journal, July 14, 2011
Your front-page article "Canada Has Plenty of Oil, But Does the U.S. Want It?" (July 8) highlights the fact that the U.S. environmental lobby and its helpers in Congress are truly the "party of no."
It seems that the environmental lobby is against developing the Canadian oil sands, drilling offshore, drilling in the Alaskan wilderness, hydraulic fracturing, mountain-top coal mining, electric transmission lines connecting solar power to the grid in the California desert and nuclear power.
To be sure, there are and always have been environmental issues associated with energy development, but I wonder where the environmental lobby is going to get the power to air-condition its plush offices in Washington, D.C. We may just as well mail in the keys to our nation to Saudi Arabia if we are going to say "no" to all energy development.
Full url - http://online.wsj.com/public/page/letters.html?mod=WSJ_topnav_na_opinion
It seems that the environmental lobby is against developing the Canadian oil sands, drilling offshore, drilling in the Alaskan wilderness, hydraulic fracturing, mountain-top coal mining, electric transmission lines connecting solar power to the grid in the California desert and nuclear power.
To be sure, there are and always have been environmental issues associated with energy development, but I wonder where the environmental lobby is going to get the power to air-condition its plush offices in Washington, D.C. We may just as well mail in the keys to our nation to Saudi Arabia if we are going to say "no" to all energy development.
Full url - http://online.wsj.com/public/page/letters.html?mod=WSJ_topnav_na_opinion
Saturday, July 9, 2011
The End of a Dream
As a child of the space age I am especially saddened that with the final voyage of the space shuttle Atlantis we are witnessing the end of the manned space program. I vividly remember watching the first moon landing on a grainy black and white TV in my Fort Bragg orderly room on a hot July night in 1969. If you asked me then what the future would bring, I would most certainly have said that by 2011 we would be launching star fleets to Mars and Venus. We dreamed big things back then. Now our dreams seem pitifully small and we can't even do little things like fixing roads and bridges.
I think the political process grossly underestimates the need a society has for heroes and big projects. I was at astronaut John Glenn's ticker tape parade in 1962 after he returned from space. Glen was a real hero. Although President Kennedy was not as popular when he was in office than he is today, the space program was among his most popular efforts.
It was the space program that inspired millions of students to become scientists and engineers and we have been living off of that legacy for decades. The astronauts were far better roll models for kids to look up to than the reality television of today.
I know that latter thought proves that I am a curmudgeon, but trust me, with this last flight, we are losing something real.
I think the political process grossly underestimates the need a society has for heroes and big projects. I was at astronaut John Glenn's ticker tape parade in 1962 after he returned from space. Glen was a real hero. Although President Kennedy was not as popular when he was in office than he is today, the space program was among his most popular efforts.
It was the space program that inspired millions of students to become scientists and engineers and we have been living off of that legacy for decades. The astronauts were far better roll models for kids to look up to than the reality television of today.
I know that latter thought proves that I am a curmudgeon, but trust me, with this last flight, we are losing something real.
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