Buffeted by glum economic news and frustrated by chronic joblessness despite $1 trillion in stimulus spending, the Obama administration has begun exploring a plethora of new proposals aimed at jump-starting the economy.
Cuts in payroll taxes, reductions in the corporate tax rate, opening the Strategic Petroleum Reserve to reduce gas prices, and persuading Republicans to buy into more stimulus programs are just a few of the concepts reportedly being discussed.
The administration has been battered by a spate of bad economic reports. Among them: Unemployment in May jumped to 9.1 percent, its highest level this year; real estate values have dropped to levels not seen since 2002; new jobless claims continue to be higher than expected.
Also, the National Federation of Independent Business reported Tuesday that a majority of small businesses plan to trim their payrolls -- the first time that’s happened since September 2010. And the core measure of inflation rose .03 in May, the largest one-month increase since July 2008, according to the U.S. Department of Labor.
How much the bad economic numbers are hurting President Obama’s standing with voters depends on which poll you read. His personal likeability remains strong: 75 percent of respondents in a recent CNN/Opinion Research poll said they like him personally. But in that same poll, only 48 percent approved of his actual job performance as president.
A Gallup poll released Friday showed Obama trailed an unidentified, “generic” Republican presidential opponent by 44 percent to 39 percent.
That suggests voters are increasingly skeptical of Obama’s ability to turn around the lackluster economy. But Obama comes out on top when matched in the polls against specific Republican alternatives, such as former Massachusetts Gov. Mitt Romney or Minnesota GOP Rep. Michele Bachmann.
Polls aside, the White House clearly understands Obama’s biggest political vulnerability in 2012 stems from chronic unemployment. And despite the lack of support in Congress for further Keynesian spending programs, the administration continues to cast about for ways to get people back to work.
On Tuesday, the president met with his Council on Jobs and Competitiveness in Durham, N.C., to discuss how collaborations between private companies, community colleges, and universities could be leveraged to add jobs to the economy.
Another proposal was reforming the federal permitting process to expedite construction of new infrastructure projects.
When Council members informed the president that getting federal permits is so difficult constructions projects “in many cases” are abandoned, Obama replied “Shovel-ready was not as . . . uh ... shovel ready as we expected.”
Obama carried North Carolina by only 15,000 votes in 2008. The Tar Heel state currently has 9.7 percent unemployment -- the 10th highest in the nation.
Some conservative economists are already voicing skepticism over the new Beltway schemes to boost the economy, predicting that they will fail to reverse the slide in consumer confidence.
A CNN/Opinion Research poll reported the stunning news recently that nearly half of all Americans -- 48 percent – expect the country to fall into another Great Depression within the next year.
On Wednesday, President Obama said he’s interested in extending stimulus measures that were included in December’s compromise of tax cuts “to make sure that we get this recovery up and running in a robust way.”
Congress has shown no interest in additional stimulus measures, but that could change if employment continues to deteriorate.
Now that the administration’s $800-plus billion stimulus package, along with a second money-supply expansion by the Federal Reserve, have failed to hold unemployment below 8 percent as initially projected, economists and White House officials are casting around for other approaches.
One complication for Team Obama: Almost anything they do would require the consent of the same GOP-controlled House of Representatives.
Even Democrats are sounding alarms over the deteriorating economic indicators. Former Clinton-era Labor Secretary Robert Reich called the May jobs report “a disaster” on his blog.
He also warned that another recession would doom Obama’s hopes of winning re-election.
“The recovery has stalled,” said Reich. “We’re not in a double dip yet, but the odds are increasing.”
Among the last-ditch alternatives to resuscitate the economy now being discussed:
• Temporarily cut payroll taxes for business by 2 percent. “I don’t think that’s a good idea,” CATO tax-policy expert Chris Edwards tells Newsmax. “It’s pushing up the debt and pushing more taxes into the future. And if it’s temporary, which is what Obama and Republicans propose, what company is going to go out and hire someone for just a year? That doesn’t make much sense to me.”
• Begin releasing oil from the Strategic Petroleum Reserve to drive down gasoline prices. The real problem, Edwards says, is a hodgepodge of regulations that different formulations of gasoline in different parts of the country. “The SPR is going to be a small drop in the ocean of the global oil supply, and global oil supply determines world oil prices,” Edwards says.
• Enact more stimulus. Even if Democrats call stimulus by another name, there’s not much chance it can win much support. “That idea’s completely silly,” Edwards tells Newsmax. “[President Obama] has had deficit spending of $1.5 trillion three years in a row now, and yet unemployment is still over 9 percent. The Obama stimulus idea has so dramatically failed, it’s astounding that anybody still supports it.”
• Prop up failing European economies, so America’s economy isn’t dragged down by their defaults. On Tuesday, Obama called Greece’s economic problems a “disastrous” risk to the global economy, and pledged to work with the International Monetary Fund to help. But Edwards says bailing out Greece would be a big mistake. “The lesson here is that governments borrow too much money,” he says. “So if Greece defaults and has a hard time doing any new borrowing in the future, that’s probably a good thing -- because it will teach them to not borrow so much money. So absolutely we should not bail them out. Because essentially you’d just be bailing out the European bond holders who hold Greek government debt, and that’s really none of our business. We shouldn’t be involved in that.”
• Cut the corporate tax rate. At 39.2 percent, the U.S. has the second highest corporate tax rate in the world behind only Japan’s 39.5 percent. Edwards applauds proposals to reduce that rate. “I can’t think of a single free-market proposal that has come out of this White House, with the one possible exception that [Treasury Secretary Timothy] Geithner is starting to discuss corporate tax reform,” Edwards tells Newsmax. “Good for them -- that would be a real way to boost jobs and the economy.”
The administration did get some good economic news last Thursday: U.S. exports appear to be gaining strength, with the U.S. trade deficit unexpectedly shrinking in April.
The $175.6 billion in goods and service the United States sold abroad that month represented the highest level of exports on record. April’s trade deficit of $43.7 billion was 6.7 percent less than the trade gap reported in March
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