President Obama has a chance Tuesday to counter the impression that, amid all his talk of guns and immigration, he is neglecting what remains for millions a punishing economy. But it won’t be easy.
No matter how much time he devotes to jobs in his State of the Union address, Republicans inevitably will say it wasn’t enough. And whatever he says, they’ll find ways to disagree. Sen. Marco Rubio, R-Fla., who will deliver the nationally televised GOP response to Obama, didn’t even support the fiscal-cliff deal that the Senate passed 89-8 amid widespread predictions that its failure would ignite an economic meltdown.
So what’s a president to do?
Goosing the economy isn’t glamorous, especially in a time of limited resources and polarized politics. We’re not talking about revving up science, technology, and defense by vowing to put a man on the moon, or adding millions to the federal payroll via a modern-day Works Progress Administration. Modest ambition and minimal flash, the hallmarks of our fiscally obsessed times, seem to be on tap for Tuesday.
As Obama signaled to last week to House Democrats at a retreat, he’ll again argue that investments in education and energy, along with a “fairness agenda” for the middle class, will lead to growth. As for the more immediate unemployment problem, he is expected to talk about infrastructure upgrades and he could revive other stimulus proposals that Congress did not pass. Among them are school repairs, aid to state and local governments beset by layoffs, and tax breaks for small businesses. The blueprint coming in April from Senate Budget Chairman Patty Murray could well include similar measures.
Democrats see these as logical steps, given that unemployment is high and borrowing costs are low. They are particularly keen on infrastructure, from broadband and the electric grid to roads, bridges, airports, and mass transit. “There’s lots of public and business support for it, and politically it is a twofer,” party strategist Geoffrey Garin told me. “It speaks to job creation in the short term and economic competitiveness in the long term.”
But there are few if any indications of receptivity from Republicans, who see such steps as unaffordable and ineffective. Former Mitt Romney adviser Kevin Hassett, director of economic policy studies at the conservative American Enterprise Institute, says infrastructure investment could pay off in the future, “but it’s not a jobs program.” Obama, he told me, “appears to be totally out of ammo” on the economy. Hassett recommends fiscal reform (such as spending cuts), lowering the corporate tax rate, and pegging Social Security payments to prices instead of wages. He doesn’t expect to hear any of that on Tuesday night, because Obama “thinks only Keynesian thoughts.”
From the perspective of economist Jared Bernstein, a former adviser to Vice President Joe Biden, Republicans think only austerity thoughts — and that’s dangerous. They’re pushing for near-term spending cuts “even while the numbers show that whether it’s here or in Europe, that doesn’t work,” he told me. He added: “I was amazed to see some people arguing that somehow the GDP report suggests we need more spending cuts.” That report showed an unexpected 0.1 percent contraction in the last quarter of 2012, driven by a large drop in defense spending and other decreases in government outlays.
Though they are on opposite sides of the ideological chasm, Bernstein and Hassett do offer the same crumb of encouragement based on the history and possibilities of big deals.
Bernstein says that bits of stimulus, such as a payroll tax cut or extended jobless benefits, sometimes get thrown into broad agreements that “defuse some fiscal bomb” for a while. “Perhaps when we revisit the sequester or the debt ceiling it will happen again” with infrastructure spending or another item on Obama’s agenda, he says.
Hassett says flatly that Republicans will not vote for higher taxes in a deal to avert the next fiscal cliff, but doesn’t rule it out in the context of large-scale tax reform down the line. “Republicans would be in bliss” over an overhaul that closed loopholes, lowered corporate rates and was revenue-neutral, Hassett says, but “you could certainly stop at less than 100 percent” neutrality in a negotiation with Democrats.
The lesson is clear: Think big. As Senate Majority Leader Harry Reid said recently about immigration, “We’re not going to do anything piecemeal, that’s over. We’re going to do comprehensive.” And as Obama said Thursday to the House Democrats, “I want to do something big to provide certainty and steadiness for the economy and for American families.”
Obama says he is still in search of that so-far elusive “balanced” grand bargain on spending, entitlements and taxes. He ought to devote his whole State of the Union speech to sketching out grand bargains on all of those topics plus jobs, immigration, education, and energy. It’s the right strategic move, since it holds out the possibility of giving Republicans some of what they want. It’s the right policy move, since all those topics are related to the economy. It’s also the right move rhetorically: aspirational, a reminder of common goals, and a signal that Obama has faith in Washington to transcend its paralysis over the nation’s economic future.