In light of our nation’s continued economic strife, President Obama has recently proposed a new stimulus package officially titled the American Jobs Act.
At roughly $447 billion, the proposed bill is roughly half the size of its $800 billion predecessor. If passed, the Jobs Act will hopefully decrease unemployment through tax breaks for small businesses and increase federal investment in public service jobs.
However, some wonder whether Obama’s proposition is aimed more at political than economic gain. Taking into account the close proximity to election year, Ryan Parker, an entrepreneurship major at Eastern Michigan University, expresses his concern.
“I feel like Obama’s also trying to help himself out for re-election by getting in people’s good graces again,” Parker said.
Dr. Jeffrey Bernstein, professor of political science at EMU, neither dissents nor agrees.
“I don’t think the two extremes are mutually exclusive,” Bernstein said. “I think Obama very definitely wants to be re-elected. I also think he believes this stimulus will drive unemployment down, will make things better, and if that’s how he gets re-elected … I think saying that he’s doing this to get re-elected if it’s actually going to make things better” is oversimplification. “I don’t think the two are mutually exclusive.
“It comes from politics, no doubt. It’s certainly a more Democrat-looking stimulus bill, but I think it comes from a very real sense of economic turmoil right now. This is a prolonged period of high joblessness, and that creates a lot of stress on the economy and on the country.”
Politics aside, what is most relevant is whether this bill is economically prudent. James Krolik, a lecturer at EMU’s College of Business, has his concerns.
“My general comment would be, how is it different from the first job bill that was passed?” Krolik said. “What’s really the difference? I only say that because I hope it does create jobs, but we don’t know.”
Michael Marsh, a junior computer science major at the University of Michigan with a rather pessimistic view of the previous stimulus package, is fairly certain the Jobs Act will not be any different.
“I would say overall it’s going to damage the economy,” Marsh said. “The market went through a period of poor investment where the wrong things were produced, and now it needs time to readjust. Things like bailouts and the stimulus plans just keep pouring money into the wrong things and delay that process.”
Marsh, articulating the viewpoints of many of Obama’s opponents, believes the market must be permitted to regulate itself, and government intervention tends only to damage the economy.
“In a healthy economy where interest rates are not being artificially manipulated, as people save more money, interest rates are pushed down because the supply of money to loan goes up,” Marsh said.
“Our problem is that we had a boom period with the housing bubble where capital was invested in the wrong things.
Everyone thought that housing prices were going to go up forever, so the cartelized banking industry did all kinds of bad investments and investment schemes based on rising housing and low interest rates.
“Those low interest rates pushed businesses and entrepreneurs to invest in long-term projects. Then it turned out that people weren’t actually saving more money. When the projects started to come to fruition, people didn’t actually have money saved up. The interest rates were being artificially held down by the Federal Reserve.”
Dr. David Crary, an EMU associate professor of economics, disagrees in part. Though he concurs an ideally healthy economy will self-sustain, he asserts during desperate times, it is necessary to undertake for the government to intervene temporarily.
“We probably need the stimulus now to make sure we keep going forward,” Crary said. “Our economy is like a patient who’s extremely sick with an infection. We’ve had several rounds of antibiotics administered, and the patient’s not quite back to health yet. That’s where we are.
The hope was that, by this point, the economy would be healthy enough to move forward on its own.
“Over the summer, we saw a virtual halt to job growth, unemployment start to go up again and a slowing of output growth. We’re just not where we would like to be in terms of the economy and jobs creation.”
As Crary said, the American economy had been improving until this summer, at which point its momentum was sapped. This was largely due to political and economic crises in Europe that seem to indicate imminent recession for the European Union.
According to Crary, the Jobs Act is motivated partly out of fear that a recession in Europe would further debilitate the progress the U.S. economy has made.
“The big thing right now in the news is the crisis in Europe,” Crary said. “Their economies are probably going to come to a near standstill this fall. There’s significant and increasing concern that we might fall back into recession. All of Europe is teetering.
That makes it worse for us, because if they’re in poor health, they’re not demanding products we ship to them. That puts a drag on our economy to get along with other problems we’ve been having.
“I think most economists, particularly economic forecasters, are increasingly expecting that we could be at risk of going back into recession. This is not political. Some of these concerned economists are part of the non-partisan congressional office that does forecasts. Some of them are business forecasters and so on. Across the political board, forecasters are increasingly worried.”
Despite the conviction the economic stimulus provided by the Jobs Act is necessary, Crary expresses concern for the bill’s survival:
“One of the things that’s going to be a huge question mark about whether any of it gets passed is the republicans have stated they wanted this roughly $450 billion program to be paid for somehow. Usually we would spend now and pay in the future by tax increases and expenditure reductions.
“President Obama wants to pay for it long-term by eliminating some tax credits and benefits for wealthy individuals. Republicans want nothing to do with that. So right away, there’s this tension whether we do anything or whether there’s anyway to pay for it long-term that the parties are going to agree on.”
Bernstein believes the Republicans’ concerns aren’t realistic.
“These are moderate small changes being made,” he said. “For everybody who is looking at Obama saying, ‘This thing is much too large,’ you’ve got another core looking at him saying, ‘This is much too small.’ The costs of it are largely born by the upper class, by individuals making above $200,000, married couples making above $250,000.
“It’s a Democratic bill, but I don’t believe Obama is a crazed left-wing liberal. I think he’s governing as a left-of-center moderate. I think the bill is creating incentives for employers to hire.”
This bill is very complicated and has received mixed responses for a variety of reasons.
As Bernstein said, it goes without saying the bill is politically motivated, at least in part. However, as vital as it is for legislators and citizens alike to scrutinize the President’s motivations, Bernstein warns it is equally important to question those of his Republican opponents.
At a time when everyone is feeling the strain of a burdened economy, Bernstein looks ahead to the election and questions the prudence of the current Republican strategy of non-compliance without negotiation.
“If the Republican plan is to run out the clock and wait him out, I don’t think that will be a winning strategy,” he said.
