In August – President Obama Was the Deficit President; In September – President Obama is the Jobs President; In October ???

Previewing a Jobs Speech by the President



Why Starbucks Wouldn't Have Made it
in the 1930's



The Labor Department on Friday released the August employment report for the U. S. and the picture was not pretty.  No new net jobs were created, and the unemployment rate remained the same at 9.1%.  There were some pluses and minus; the Verizon strike reduced employment but the return of government workers to Minnesota was a positive.

The economy remains mired in the 3^rd stage of The Great Recesssion.  The three stages are

1. The Actual Recession:  Negative growth, which ended in June, 2009.

2. The Technical Recovery:  Lower jobs losses followed by job gains as a result of businesses rebuilding inventories, consumers replenishing items they had to replace and the Stimulus spending by the Federal Government.



In the 1980's and Early 1990's
Some Urged the U. S. to Become More
Like Japan - We Are Doing that Now



3. The Great Stall:  Insufficient aggregate demand to sustain employment increases combined with fiscal tightening, particularly at the state and local level causing the economy to neither grow nor contract.  This is sometimes referred to as the "Japanization" of the U. S. economy, named after the long term stagnant economy of Japan.

In August the Federal Government had to manage the totally fabricated debt ceiling problem, and so both the Congress and the President focused on the deficit.  Now that problem has given way to the reality that (1) jobs and employment are the real issue and (2) policy to decrease the deficit is policy to contract the economy and reduce employment.



The President's Political Capital



The response of the President - in September the Administration will focus on a jobs policy.  And so the President scheduled an address to a joint session of Congress, or rather tried to schedule an address to a joint session of Congress.  Republicans in the House saw a chance to embarrass the President and did so, forcing him to re-schedule the address. 

Another small slice of the President’s dwindling amount of political capital was nicely destroyed by the House Republican leadership.

So on Thursday September 8 Mr. Obama will address the Congress and the nation and lay out his job creation plans.  Both the source of the problem and the solution are straight forward.  The reason for job stagnation is the lack of demand for goods and services in the economy and the shrinkage of consumer incomes and spending.  The solution is for increased government spending to produce the increased demand for goods and services necessary to increase employment.

The solution is politically impossible.  Just a few short weeks ago the President and the Congress convinced the American people that the deficit was the great problem.  So fixing the jobs problem by increasing the deficit cannot be enacted.  A tax policy to increase taxes on wealthy Americans and use the proceeds to fund stimulus spending is also politically dead.  And so the policy recommendations will have to involve taxes, that is, paying businesses to hire workers the businesses neither want nor need.

All of this means that the President’s address is doomed before it even can be made.  The House will do nothing to help the President, and the proposals will soon be lost in the chaos of the 2012 campaign. 

This will not matter much for the politics of re-election.  Mr. Obama has consumed almost all of the political capital he generated upon entering office.  His re-election now depends upon the voters finding the Republican candidate less desirable than Mr. Obama.  The good news for the President, the Republicans seem to be doing everything possible to make that happen.