Politics & Policy

Obama’s Stimulus Dilemma

His favorite policy isn’t popular.

‘Let’s rebuild America!” Pres. Barack Obama urged a crowd of cheering supporters Monday at an outdoor town-hall event in Cannon Falls, Minn., the first stop on his three-day bus tour across the Midwest. Solving the debt-and-deficit problem, he assured attendees, was really “not that complicated.” Therefore, it was time now for Congress (because they hold all the power in Washington, apparently) to stop worrying about it and turn their focus to re-stimulating the economy as soon as possible. “In the short term, we should actually make more investments that would get people to work and get the economy moving,” Obama said, proceeding to lay out a series of “stimulus” measures, none of them new — an embarrassing acknowledgement of the fact that when it comes to creating jobs and growing the economy, this administration is, quite simply, out of ideas.


This is the cornerstone of Obama’s plan to “rebuild” the country, literally, through the creation of a National Infrastructure Innovation and Finance Fund, which would “directly provide resources for projects through grants, loans, or a blend of both.” The idea would be to leverage public funds (about $5 billion per year) in order to attract significant private-sector investment in infrastructure (up to $640 billion) over the next decade. Obama predicted this would “put 100,000 folks to work right now . . . rebuilding our roads and our bridges and our vital infrastructure all across the country.”

It is an idea that enjoys support across party and ideological lines. Legislation to establish the infrastructure bank is sponsored by Sens. John Kerry (D., Mass.) and Kay Bailey Hutchison (R., Texas), and it has the approval of such odd counterparts as Thomas J. Donohue, president of the U.S. Chamber of Commerce, and Richard Trumka, president of the AFL-CIO. However, as Conn Carroll of the Washington Examiner accurately points out, the proposal is likely to amount to little more than “just another stimulus boondoggle.”

It was a mere two months ago that Obama wryly quipped to members of his own Council on Jobs and Competitiveness that “shovel-ready was not as, uh, shovel-ready as we expected” in an attempt to account for the obvious shortcomings of the original stimulus package, Carroll reminds us. Particularly given the fact that the administration will be tasked with hiring the federal employees who will be responsible for dishing out these new “grants, loans, or a blend of both,” is there any reason to expect a different result? Perhaps they could funnel some of the money toward the administration’s beloved “affordable” high-speed-rail initiative, which in California is already proving to be not as, uh, affordable as they expected.


By suggesting an extension to the payroll-tax holiday, originally enacted in December 2010 during the lame-duck period and set to expire at the end of this year, Obama is clearly attempting to make Republicans an offer (tax cuts!) they can’t refuse. However, that’s precisely what they’ve been doing thus far.

At an annual cost of about $112 billion, Republicans are questioning the efficacy of another temporary tax reprieve, and arguing for a more permanent, comprehensive tax reform instead. “They’ve tried this once, and it hasn’t seemed to be working,” said Rep. Jeb Hensarling (R., Texas), a newly appointed member to the so-called “supercommittee” on deficit reduction. Sen. Lamar Alexander (R., Tenn.), a member of the GOP leadership team, concurred. “We don’t need short-term gestures, we need long-term strategies that build into our system simpler taxes, lower taxes, fewer mandates, lower costs, more certainty,” he said. “If short-term government programs work, we wouldn’t have 9 percent unemployment today, because the government has tried it. So we’ve proved that doesn’t work, unfortunately.”

And as always, there’s a catch. The president wants to pair the payroll-tax extension with an extension of soon-to-expire unemployment benefits, at a cost of about $43 billion. A failure to do both, Obama has warned, “could mean 1 million fewer jobs and half a percent less growth.” This coming from the same people who insisted that the stimulus was necessary to keep unemployment below 8 percent.


The president has repeatedly scolded Congress for failing to act on three pending free-trade agreements — with South Korea, Colombia, and Panama — that could have a genuinely stimulative effect on the economy. What he conveniently fails to mention is the fact that Congress can’t act on these agreements, which most analysts predict will create up to 100,000 jobs, because the White House has yet to submit them for ratification.

The pending trade agreements, which were originally negotiated during the George W. Bush administration and blocked by then–House Speaker Nancy Pelosi’s (D., Calif.) Democratic majority, have been stalled because the Obama administration has insisted on attaching a Trade Adjustment Assistance (TAA) measure to the largest of those agreements (South Korea). While not a novel concept — NAFTA included a TAA provision, for example — TAA, which is designed to provide relief for domestic workers displaced due to foreign competition, was generously redefined in the 2009 stimulus package, opening the programs to workers in the (mostly unionized) service industries and broadly defining “foreign competition” to include countries outside the scope of the trade agreements.

In truth, Democrats never really gave up on their quest for additional stimulus. Throughout the bipartisan negotiations led by Vice President Joe Biden, they were angling to include well over $100 billion in increased spending as part of a package to raise the debt ceiling while reducing the deficit. But as even the Obama’s own advisers have acknowledged, political reality has forced the president to choose between doing what he thinks is in the best interest of the country, or doing what is in the best interest of his reelection campaign. A recent article in the New York Times paints an almost comical portrait of this ongoing dilemma within the administration:

There is little support for [a stimulus-focused] approach inside the administration. A series of departures has left few economists among Mr. Obama’s senior advisers. Several of his political advisers are skeptical about the merits of stimulus spending, and they are certain about the politics: voters do not like it.

As a result, the president is forced to half-heartedly defend a litany of stale proposals, while seeking to sneak in whatever spending measures he can through the back door, whether by attaching a new stimulus measure to popular bipartisan trade agreements, or announcing a how-could-you-possibly-oppose-it new jobs programs for returning veterans, dubbed the “returning hero tax credit.” If that doesn’t do the trick, certainly a new “Department of Jobs” will get things going again. And if, or perhaps, when, the economy fails to recover, the president will make sure the American people know who is really to blame. “There is no shortage of ideas to put people to work right now,” Obama told the crowd in Cannon Falls. “What is needed is action on the part of Congress.”

More from the Times:

White House officials said Mr. Obama did not plan to roll out major new economic initiatives on the [bus] trip, though his advisors were busy developing plans that might be introduced later. But the tour will give the president the chance to make his case to the public that the partisan warfare in Washington must end.

Oh good.“Major new economic initiatives” that might be introduced later, after the president has had sufficient time to rail against “some in Congress” for blocking his agenda.

“I don’t think a stunt is what the American people are looking for,” White House press secretary Jay Carney said at a press briefing last week, in reference to the president’s bus tour and jobs-agenda rollout.

Certainly not, but that’s exactly what they’re going to get.

— Andrew Stiles is the Franklin Center’s 2011 Thomas L. Rhodes Journalism Fellow.

Andrew StilesAndrew Stiles is a political reporter for National Review Online. He previously worked at the Washington Free Beacon, and was an intern at The Hill newspaper. Stiles is a 2009 ...


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