President Obama's Jobs Speech is His Last Real Chance

Sep 6, 2011Bo Cutter

If Obama doesn't go big in his jobs plan on Thursday, any proposals will disappear into the ether along with his chances for re-election.

President Obama has a big task ahead of him on Thursday. He has to be honest. He has to go long. He has to break some china. And he has to not care. Why? It's what the country needs. And he is a one-term president if he doesn't change the game.

Let's start with being honest. He must explain to the country where we are and where we will be if we do not act. Then he has to explain what we must do and why it seems contradictory.

What does all this mean?

This recession was different and this anemic "recovery" is different than our whole post-World War II experience. We will have high unemployment for years. (To bring unemployment down to five percent in five years, we would have to have monthly job growth higher than the 1993-2000 boom years.) This means a continuing squeeze on incomes and longer, higher long-term unemployment than we have seen for decades.

At the same time, our low rate of investment (both public and private), the state of our infrastructure, our eroding educational system, and the kinds of jobs we are creating combine to make achieving higher economic growth more difficult and virtually guarantee a continuing rise in inequality.

We really do have a deep debt and deficit problem. We do not have to solve it in the next year, but if we do not quickly get on the right path, markets will take the decision out of our hands.

There is a lot we can do to make this emerging situation better, but there is nothing we can do that will work quickly. And there is no indication of any kind that the political system is capable of producing the right mix of policies -- quite the opposite.

President Obama must say all of this. The nation has to have a context to understand why we are where we are and what we must do. Then he has to go long. If this is a speech about green jobs, the return of manufacturing, and the payroll tax, TV remote controls all over the nation will start switching channels, and the president and Congress will be talking to themselves.

The president should announce on Thursday night what I called a few weeks ago "The Project for American Renewal." Specifically, the president should demand the following:

(1) A short term stimulus of two to four percent of GDP to keep growth from cratering over the next year or so. The stimulus would be composed of a continued payroll tax holiday, including one for employers, and a jobs tax credit. I want something that spends fast and is not wrapped up in some fancy new program no one understands. And to be clear, this stimulus will not fundamentally alter our unemployment problem.

(2) Adoption now of the Simpson, Bowles, Rivlin, Dominici debt and deficit plan. (There isn't one unified plan, but there could be within a couple of weeks if the president asked.)

(3) A long-term infrastructure program amounting to about one to two percent of GDP per year for 10 years, with the money to be spent through a combination of an Infrastructure Bank and fund.

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I would prefer that the president announce the Project for American Renewal on Thursday, with an emphasis on short-term stimulus, and follow up with separate speeches on the debt and deficit and on infrastructure.

If he does all of this, the president will break a lot of china. He will be proposing a seemingly contradictory plan for short-term stimulus and longer-term debt reduction, changes in Social Security and Medicare, major income tax reform and lower rates, a new source of revenue that looks a lot like a Value Added Tax, 10 years of infrastructure spending, and a mechanism to avoid the Appropriations committees -- the heart of the feeding troughs today.

There is something big in this Project for everyone to hate. There is not the slightest chance it will pass before the election. No political adviser in this White House will be for it. The president cannot care.

In particular, the president cannot care about what his congressional Republican critics say or do. The level of hypocrisy they've attained cannot really rise any farther. But what the president can bank on is that their behavior is now widely recognized and understood. I was amazed to see the following comment by Martin Wolf of the Financial Times, perhaps the leading economic columnist in the world, and not close to a bomb thrower: "Mr. Obama wishes to be president of a country that doesn't exist. In his fantasy U.S. politicians bury differences in bipartisan harmony. In fact, he faces an opposition that would prefer their country to fail than their president to succeed."

Meanwhile, a Washington Post-ABC News poll published today says that:

• 20% of Americans believe the country is on the right track

• 17% of Americans think the president's economic policies are making the economy better

• 53% of Americans disapprove of the president's overall performance

• 62% of Americans disapprove of his handling of the economy

I have no idea if a big program, put forward with energy and defended consistently, can make a dent in these numbers. It is possible that by failing to put forward a clear economic story for two and a half years, the administration has dug too deep a hole for itself.

But these numbers are saying clearly that the president has to state a big, new course. A small, precious little program will disappear without a trace.

The polling numbers also say something else. While 53 percent of Americans disapprove of the president's performance, 68 percent disapprove of the Republicans in Congress. The president and the Republicans in Congress are in the same position as the two hikers and the bear. Bear charges. Hiker # 1 sits down to put on track shoes. Hiker # 2 says, "You're crazy, you can't outrun that bear." Hiker # 1 says, "No. But I can damn sure outrun you."

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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