The right-wing media has claimed President Obama has no plan for the economy if re-elected. In fact, Obama has proposed numerous economic policies, including legislation that economists agree would lower unemployment and grow the economy.
Right-Wing Media Claim Obama Has No Plan For The Economy
Wall Street Journal: Obama Is “A President Without A Plan.” After the October 16 presidential debate, The Wall Street Journal published an editorial headlined: “A President Without A Plan.” The editorial asked of Obama “What's his case for four more years?” and opined:
Judging by Tuesday's debate, the President's argument for re-election is basically this: He's not as awful as Mitt Romney. Mr. Obama spent most of his time attacking either Mr. Romney himself (he invests in Chinese companies), his tax plan as a favor for the rich (“that's been his history”) or this or that statement he has made over the last year (“the 47%,” which Mr. Obama saved for the closing word of the entire debate).
Mr. Romney will have a chance to do better on foreign policy next week, but Mr. Obama seems out of ammunition for the next four years. [Wall Street Journal, 10/17/12]
Sean Hannity: Obama Hasn't Explained “Why A Second Term Will Be Any Different.” On the October 16 edition of his radio show, Sean Hannity claimed one thing President Obama “hasn't done is explain why a second term will be any different. ... He hasn't given a narrative.” Hannity claimed voters should ask “why should we believe you'll do it better next time?” [Premiere Radio Networks, The Sean Hannity Show, 10/16/12]
Jennifer Rubin: Obama Did Not Present “A Weighty Agenda” For His Campaign. On the Washington Post's Right Turn blog, Jennifer Rubin claimed “Obama lacks an agenda to compensate for his record” and claimed “he lacks something that can be characterized as a meaty pro-growth, pro-jobs plan”:
Obama's serial attacks on Mitt Romney's economic plans have fallen flat in large part because the president's own economic management is so putrid and because he lacks something that can be characterized as a meaty pro-growth, pro-jobs plan. Many voters in essence are concluding: Okay, we hear your attacks Mr. President, but you've got nothing. We should try this other guy.
The media dwelled for weeks on the Romney campaign's dilemma as to whether this could be a referendum election or a choice election. Romney managed to make it a choice election. Ironically, Obama hadn't prepared by presenting a weighty agenda of his own. [Washington Post, Right Turn, 10/18/12]
In Fact, Obama Has Laid Out An Economic Agenda Economists Say Will Help Grow The Economy And Create Jobs
Economists Say Obama's Public Sector Investments And Small Business Tax Cuts Would Boost Employment And Grow The Economy
Obama Has Proposed The American Jobs Act, A Package Of Tax Cuts And Investment To Create Jobs. The American Jobs Act, legislation proposed by President Obama, combines investments in infrastructure with targeted tax cuts designed to benefit small businesses and create jobs. [White House, 9/8/11]
Mark Zandi: American Jobs Act Would Add Nearly 2 Million Jobs. Mark Zandi, chief economist at Moody's Analytics, estimated that the American Jobs Act would increase employment by nearly two million jobs, cut the unemployment rate by a full point, and increase the size of the economy by 2 percent:
President Obama's much-anticipated jobs plan is a laudable effort to support the struggling economy. The plan would go a long way toward stabilizing confidence, forestalling another recession, and jump-starting a self-sustaining economic expansion. If fully implemented, the Obama jobs plan would increase real GDP growth in 2012 by 2 percentage points, add 1.9 million jobs, and reduce the unemployment rate by a full percentage point, compared with current fiscal policy. [Moody's Analytics, 9/19/11]
Macroeconomic Advisers: American Jobs Act Would Be “A Significant Boost To GDP And Employment.” In a post on its blog, Macroeconomic Advisers estimated that the American Jobs Act would be “a significant boost to GDP and employment”:
We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.
- The various tax cuts aimed at raising workers' after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:
- Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
- Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline.
- The program works directly to raise employment through tax incentives and support to state & local governments for increasing hiring; it works indirectly through the positive boost to aggregate demand (and hence hiring) stimulated by the direct spending and the increase in household income resulting from lower employee payroll taxes and increased employment. [Macroeconomic Advisers LLC, 9/9/11]
Economic Policy Institute: American Jobs Act Would “Increase Employment By About 4.3 Million Jobs.” On the Economic Policy Institute (EPI) blog, EPI research and policy director John Irons provided a “preliminary breakdown of the package and a first pass look at the job impact” of Obama's jobs plan:
Overall the package would increase employment by about 4.3 million jobs over the next couple of years. The new initiatives would boost employment by about 2.6 million jobs, while the continuation of the two temporary provisions (EUI and the payroll tax holiday) would prevent a backslide of over 1.6 million jobs.
Irons included the following graphic in his post:
[Economic Policy Institute, 9/8/11]
EPI: Public Investments “Are Highly Cost-Effective Ways To Boost Aggregate Demand And Employment.” In an analysis of Obama's and Romney's economic plans, the Economic Policy Institute found that policies proposed by Obama are particularly stimulative, while Romney's plans reduce economic growth. From the study:
First, government spending on infrastructure, aid to state governments, and safety net supports are highly cost-effective ways to boost aggregate demand and employment. Conversely, cutting government spending in today's economic environment is highly damaging (Exhibit A: the U.K.), as spending is particularly stimulative in a depressed economy. Second, tax cuts -- particularly those targeted toward corporations and upper-income households -- are highly inefficient at spurring growth. Consequently, coupling high bang-per-buck spending with low bang-per-buck upper-income tax increases is a recipe for job growth (e.g., Obama), whereas regressive tax cuts coupled with government spending cuts will retard growth (e.g., Romney). [Economic Policy Institute, 9/26/12]
Obama's Proposal To Invest In Infrastructure Will Boost Economic Growth
Obama Has Proposed Several Policies Designed To Increase Investment In Infrastructure. In a March 23 report, the Council of Economic Advisers (CEA) noted that President Obama's budget included “a bold new plan to renew and expand America's infrastructure” including the creation of the National Infrastructure Bank. From the CEA:
President Obama's FY 2013 Budget proposes a bold plan to renew and expand America's infrastructure. The plan includes a $50 billion up-front investment connected to a $476 billion six-year reauthorization of the surface transportation program and the creation of a National Infrastructure Bank. In support of this commitment, the Department of the Treasury, with the Council of Economic Advisers, has updated our analysis of the economic effects of infrastructure investment. [Council of Economic Advisers, 3/23/12, via the Treasury Department]
CEA: Research Shows A Strong Link Between Infrastructure Investment And Economic Growth. A Council of Economic Advisers report noted that research found a direct link between public infrastructure and economic growth with public works having “higher returns than private capital investment.” From the report:
Influential research by David Aschauer and others has explored the link between public infrastructure investment and economic growth. Aschauer's research and numerous other studies have found evidence of large private sector productivity gains from public infrastructure investments, in many cases with higher returns than private capital investment. Since much of the public capital stock is owned by state and local authorities, more recent research has compared the economic benefits of infrastructure investments between regions in the United States, generally finding smaller but economically significant benefits in comparison to Aschauer's estimates. [Council of Economic Advisers, 3/23/12 via the Treasury Department]
EPI: Infrastructure Spending Good For Short- And Long-Term Growth. A report on infrastructure investment claimed that it is “the most efficient fiscal support one can provide to a depressed economy -- a finding supported by nearly all macroeconomic models and forecasts. Further, public investment provides a long-term growth payoff as well as a near-term boost to the job market.” [Economic Policy Institute, 4/18/12]
CBO: Spending On Infrastructure Is More Stimulative Than Tax Cuts For Wealthy. The Congressional Budget Office's report on the estimated impact of the stimulus on the economy found that transferring money to state and local governments for infrastructure spending provided one of the highest returns on investment of various policy proposals for increasing economic growth:
[Congressional Budget Office, February 2012]
Moody's: For Every Dollar Spent On Infrastructure In 2009 Stimulus, $1.57 Was Returned To The Economy. In its July 2010 analysis of the stimulus, Moody's Analytics found that every dollar of infrastructure spending resulted in $1.57 returned to the economy. It also found that tax cuts had little stimulative value:
[Moody's Analytics, 7/27/10]
Obama's Tax Plan Will Reduce Income Inequality Without Harming The Economy
Obama Has Proposed Ending Tax Cuts For Wealthiest Citizens. As part of his tax plan, President Obama has proposed ending the Bush-era tax cuts for people earning over $250,000 a year while maintaining the lower tax rates for low- and middle-class earners. From USA Today:
President Obama said today that the nation faces a stark economic choice: Continue giving tax breaks to the nation's wealthiest citizens or risk gutting essential programs that help grow the middle class.
“Let me me ask you, what's the better way to make our economy stronger?,” Obama told an enthusiastic crowd in Boca Raton, Fla. “Do we give ... tax breaks to every millionaire and billionaire in the country? Or should we make investments in education and research and health care and our veterans?”
Obama also told students at Florida Atlantic University that “what drags our entire economy down” is when “the gap between those at the very, very top and everybody else keeps growing wider and wider and wider and wider.” [USA Today, 4/10/12]
Congressional Research Service: Cutting Top Tax Rates Has “Little Association With Saving, Investment, Or Productivity Growth.” A study of top income and capital gains tax rates since 1945 shows a weak association between lower taxes and economic growth. However, lower tax rates have clear effects on income inequality. From the Congressional Research Service:
There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. [Congressional Research Service, 9/14/12]
NY Times: "Income Inequality May Take Toll On Economic Growth." An October 16 New York Times article reported that income inequality has risen to the highest levels since the Great Depression and that as the top 1 percent of earners makes more in comparison to the rest of the population, economic growth decreases:
The yawning gap between the haves and the have-nots -- and the political questions that gap has raised about the plight of the middle class -- has given rise to anti-Wall Street sentiment and animated the presidential campaign. Now, a growing body of economic research suggests that it might mean lower levels of economic growth and slower job creation in the years ahead, as well.
“Growth becomes more fragile” in countries with high levels of inequality like the United States, said Jonathan D. Ostry of the International Monetary Fund, whose research suggests that the widening disparity since the 1980s might shorten the nation's economic expansions by as much as a third. [The New York Times, 10/16/12]
Mother Jones: “Study: Income Inequality Kills Economic Growth.” On October 4, Mother Jones reported on a study which found that income inequality was stifling economic growth and decreased inequality “was the most important factor in preventing a major downturn”:
“Countries where income was more equally distributed tended to have longer growth spells,” says economist Andrew Berg, whose study appears in the current issue of Finance & Development, the quarterly magazine of the International Monetary Fund. Comparing six major economic variables across the world's economies, Berg found that equality of incomes was the most important factor in preventing a major downturn.
In their study, Berg and coauthor Jonathan Ostry were less interested in looking at how to spark economic growth than how to sustain it. “Getting growth going is not that difficult; it's keeping it going that is hard,” Berg explains. For example, the bailouts and stimulus pulled the US economy out of recession but haven't been enough to fuel a steady recovery. Berg's research suggests that sky-high income inequality in the United States could be partly to blame. [Mother Jones, 10/4/12]
Economists Say Obama's Proposal To Extend Payroll Tax Cuts Would Reduce Unemployment
Obama Has Proposed Extending Payroll Tax Cut Into 2013. The Treasury Department's explanation of the Obama administration's fiscal year 2013 revenue proposals included a recommendation to extend the holiday on payroll taxes by 2 percent:
The Administration proposes to extend the 2.0 percentage point reduction in the Social Security tax on employees to the first $110,100 of taxable wages and salaries received during 2012. Similarly, the Administration proposes to extend the 2.0 percentage point reduction in the Social Security tax on the self-employed to the first $110,100 of taxable self-employment earnings received during 2012. The Social Security Trust Fund will be held harmless and receive transfers from the General Fund equal to the reduction in payroll taxes attributable to these reductions in the payroll tax rate.
The proposal would be effective upon the date of enactment. [Treasury.gov, accessed 10/16/12]
Economist Robert Frank: “Perhaps The Most Promising” Policy To Reduce Unemployment “Is A Payroll Tax Holiday.” In a June 25, 2011, New York Times op-ed, Cornell University economics professor Robert Frank wrote that extending the payroll tax holiday is “perhaps the most promising” policy to reduce unemployment:
Perhaps the most promising is a payroll tax holiday. The payroll tax was originally meant to pay for Social Security, and in recent years, employees and employers have each contributed 6.2 percent of total salary -- with no additional levies on salaries beyond $106,800. Congress should both declare an immediate payroll tax holiday for employees and exempt employers from making contributions for newly hired workers -- and keep both provisions in effect until the end of next year. [The New York Times, 6/25/11]
Economist Laurence Seidman: “To Boost Private Sector Spending And Jobs,” Congress Should Implement An “Immediate Suspension Of The Entire Employee Payroll Tax.” In a July 17, 2011, op-ed in [[the]] Wilmington, Delaware's News Journal, University of Delaware economics professor Laurence Seidman recommended that congress extend the payroll tax holiday in order to lower the unemployment rate and prevent a relapse into recession:
To boost private sector spending and jobs, any budget deal negotiated by the president and Congress should contain an immediate suspension of the entire employee payroll tax through 2012.
Why? Because leaving more money in people's paychecks will cause them to spend more, and in response to their spending, private sector employers will expand production and create private sector jobs. Without this stimulus to the private sector, the economy is likely to fall back into a deep recession.
According to the simulations, if the suspension begins promptly, then in the fourth quarter of 2012 the unemployment rate would be 1 percentage point lower than it would have been without the temporary employee payroll tax suspension. [News Journal, 7/17/11, accessed via Nexis]
Former Council Of Economic Advisers Chairwoman: Jobs Plan Should Include “At The Very Least” An Extension Of “The Temporary Payroll Tax Cut For Employees.” In a September 6, 2011, post in The New York Times' Room for Debate blog, University of California, Berkeley professor and former Council of Economic Advisers chairwoman Laura Tyson called for extension of the payroll tax cut as one measure that could “increase private spending and promote job creation”:
The labor market is suffering from two problems: first, an immediate jobs gap, primarily the result of the collapse in demand after the 2008 financial crisis, and second, a long-term gap in rewarding jobs for American workers, primarily the result of skill-biased technological change and global competition.
The jobs gap requires additional fiscal measures to increase private spending and promote job creation. At the very least, the temporary payroll tax cut for employees enacted at the end of 2010 should be extended and a temporary payroll tax cut for employers that increase their payrolls or a tax credit for new hires should be introduced. [The New York Times, 9/6/11]
Center On Budget And Policy Priorities: “Failure ... To Extend The Temporary Payroll Tax Cut” Would Remove “Needed Support From The Still-Weak Economy.”
Failure by Congress to extend the temporary payroll tax cut enacted last December would reduce all paychecks starting on January 1, withdrawing needed support from the still-weak economy. The measure, part of the tax cut-unemployment insurance deal between President Obama and Republican leaders, reduces the employee share of the Social Security payroll tax, boosting workers' take-home pay by an estimated $120 billion in 2011. The tax cut is worth $934 to the average worker.
By extending the payroll tax cut -- and the provision of additional weeks of unemployment benefits to workers who have exhausted their 26 weeks of state-funded UI benefits without finding a job -- policymakers can avoid increasing the risk of renewed recession. But they should do more to reduce the probability of a double-dip recession and increase the probability of a sustainable recovery that generates sufficient jobs to shrink the massive jobs deficit. While a discussion of various steps needed to shore up the economy is beyond the scope of this paper, in the payroll tax arena, policymakers should consider strengthening the payroll tax reduction as part of a larger set of economic measures. [CBPP, 9/7/11]
Obama Has Proposed Numerous Other Policies For Boosting Employment And Growing The Economy
Obama Administration's National Export Initiative On Track To Double Exports By 2014. After proposing the National Export Initiative in his 2010 State of the Union Address, exports have increased by 16% and the initiative is on track to double exports by the end of 2014. From a White House post by Export-Import Bank Board of Directors member Patricia Loui:
March 11 marked the second anniversary of President Obama's Executive Order 13534 which created the National Export Initiative (NEI). The President's goal of doubling exports by the end of 2014 is on track, with exports increasing almost 16% last year to $2.1 trillion. Although the bar seemed high at the outset, the focused efforts of the Obama Administration through the National Export Council - which includes the U.S. Departments of State, Commerce, Labor, Energy, Agriculture, Treasury, the Small Business Administration, the U.S. Trade Representative, the Export-Import Bank of the U.S., the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, as well as congressional and business leaders - is delivering. At the Export-Import Bank last year, for example, financing authorizations for exports grew 34% to $32 billion, with 85% of transactions to small and medium sized enterprises. [White House, 3/13/12]
Obama Has Proposed Extending Exclusion From Income To Certain Home Mortgage Debt. Obama's fiscal year 2013 budget proposal calls for the extension of a clause that excludes certain types of debt from gross income. The type of debt excluded primarily deals with acquisition or construction on homes, a measure designed to boost home values:
The exclusion for income from the discharge of QRPI [qualified principal residence indebtedness] would be extended to amounts that are discharged before January 1, 2015, and to amounts that are discharged pursuant to an agreement entered before that date. Thus, for example, the exclusion could apply to delayed discharges that occur after trial periods that were agreed to before January 1, 2015. An extension beyond January 1, 2015, may be appropriate to correspond to the availability of additional homeowner relief as a result of government actions or other arrangements. [Treasury.gov, accessed 10/16/12]
White House Sent “Startup America Legislative Agenda” To Congress To Benefit Startup Businesses. The Obama administration proposed the Startup America Legislative Agenda to benefit startup and small businesses. According to the White House's fact sheet, the agenda “builds on the President's record of signing into law 17 tax breaks specifically for small businesses”:
The President is sending the attached, detailed Startup America Legislative Agenda to Congress to expand tax relief and unlock capital for startups and small businesses that are creating jobs. Most new jobs are created by start-ups and small businesses. Helping these businesses is at the core of the President's Blueprint for an America Built to Last. As part of his American Jobs Act plan in September 2011, the President called for reducing regulatory burdens that prevent some small and young businesses from raising capital. He proposed expanding mini-offerings, allowing crowdfunding, and creating an “IPO On-Ramp” consistent with investor protections. He reaffirmed this call to action in December. [White House, Startup America Legislative Agenda, accessed 10/16/12]
White House Budget Overview Includes $140.8 Billion For R&D Overall And “Expands And Makes Permanent The R&D Tax Credit.” President Obama has proposed expanded funding for research and development, including increased investment in non-defense and manufacturing R&D:
$140.8 billion for R&D overall; increase the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall budgets decline; maintains the President's commitment to double the budgets of three key basic research agencies (National Science Foundation, Department of Energy's Office of Science, and National Institute of Standards and Technology Laboratories); expands and makes permanent the R&D tax credit. [Office of Management and Budget, accessed 10/16/12]
White House: “Obama Administration Takes Immediate Actions To Help Small Businesses” With New Markets Tax Credit. President Obama has introduced the New Markets Tax Credit which would “make it easier for small firms to access loans and tax credits”:
The President believes that entrepreneurs and small businesses are engines of innovation and economic growth and are at the forefront of the nation's economic recovery. This is why the Obama Administration has worked to enact 18 small business tax cuts and numerous measures to help more small businesses access the credit they need to invest, hire, and grow.
Today, the Obama Administration is announcing additional initiatives that build on this record of progress and will help our nation's small businesses expand and create jobs. Five of these initiatives are immediate executive actions that will accelerate Federal payments, reduce paperwork, and make it easier for small firms to access loans and tax credits, and one is a legislative proposal to raise the amount of investment small businesses can expense next year.
(6) Align New Markets Tax Credit with the needs of investors in growing small firms: The Obama Administration is working on a set of regulatory reforms to the existing New Markets Tax Credit that will make it easier for community development entities (CDEs) to attract private sector funds for investment in startups and small businesses operating in lower income communities. The forthcoming regulations are designed to encourage CDEs to invest in other types of small local businesses by relaxing the reinvestment requirements for CDEs investing in certain operating businesses. The Treasury Department is also considering regulatory reforms that would further simplify the requirements for these CDEs and intends to publish these for comment in the future. [White House, 7/11/12]
Obama's New Markets Tax Credit Would Provide "$2 Billion In Credits For Qualified Investments." According to the president's 2013 budget, the New Markets Tax Credit would provide $2 billion in tax credits over the course of three years:
The proposal would authorize two more rounds of NMTC allocations (for 2012 and 2013), with an allocation amount of $5 billion for each round. The Administration estimates that within this $10 billion, at least $500 million ($250 million per year) will support financing healthy food options in distressed communities as part of the Healthy Food Financing Initiative. The proposal also would permit NMTC amounts resulting from QEIs made after December 31, 2011, to offset AMT liability. [Treasury.gov, February 2012]
The Obama Administration Has Proposed Several Targeted Tax Relief Proposals. According to the Treasury Department, in his 2013 budget, released in February 2012, President Obama proposed several more policies designed to promote economic growth. Among these are policies such as:
- Temporary 10-Percent Tax Credit For New Jobs And Wage Increases. The Obama administration proposed creating a tax benefit for employers who invest in wage increases or creating new jobs.
- Extend The American Opportunity Tax Credit. President Obama proposed expanding the American Opportunity Tax Credit, which increases the affordability of college for low- and middle-income families.
- Expand The Earned Income Tax Credit For Larger Families. President Obama proposed making the expansion of the Earned Income Tax Credit for larger families permanent. The credit provides tax incentives for low-income, working families.
- Provide Tax Incentives For Locating Jobs And Business Activity In the United States. The Obama administration proposed creating a new business credit for companies that move a business or jobs into America from an outside nation.
- Double The Amount Of Expensed Start-Up Expenditures. Obama proposed increasing the tax deduction start-up businesses can claim in order to create new business activity.
- Create Growth Zones To Encourage Economic Development In Specific Geographic Regions. The Obama administration has proposed creating 20 growth zones which would create tax incentives for local investment in economic development. [Treasury.gov, February 2012]