STOCK MARKET WATCH -- Wednesday, 25 January 2012

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24. That’s Obama’s Jobs Plan?

http://www.slate.com/articles/business/moneybox/2012/01/state_of_the_union_president_obama_s_muddled_plan_to_boost_employment_by_hindering_trade_.html

The bold, transformative Barack Obama, painter of grand vistas, is gone, replaced in his State of the Union address by a Clinton-esque figure, reciting laundry lists of small-bore proposals. There were some very good ideas for attacking the crisis of mass unemployment. Extending the payroll tax cuts without another round of policy riders and protracted negotiations should be a no-brainer. Legislation to make it easier for millions of Americans to refinance their mortgages at today’s low interest rates is a great idea that should bolster consumer demand and make it easier for the entrepreneurially inclined to start businesses. His call to avert a massive spike in student loan debt interest payments is sound, and the promise to create a federal task force on foreclosure fraud seems very smart.

But framing the entire economic message of the speech was a strikingly retrograde, self-contradictory, and confused agenda of reviving American prosperity through mercantilism.

Think of it this way. One idea for putting Americans back to work would be to raise the gasoline tax and use the proceeds to buy manufactured goods that we then dump into the middle of the Atlantic Ocean. This would, I promise you, work perfectly well. The previously unemployed folks with the new factory jobs would thank us for our trouble. But it would be a curiously prosperity-destroying way of bolstering the economy. When Obama brags that “over 1,000 Americans are working today because we stopped a surge in Chinese tires,” he’s implementing a small-scale version of a similar idea. Blocking an influx of cheap Chinese tires does, indeed, preserve jobs for tire-makers. But tire-buyers pay higher prices and presumably curtail their purchases of some other goods or services in exchange. Meanwhile, Chinese tire-makers have lost jobs and are now less likely to buy American soybeans or DVDs of our movies.
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There’s no doubt that globalization has inflicted massive harms on individual American families and even whole communities. The reality that Chinese economic growth—in many ways the greatest success story of our time—has been painful for many should be a great teachable moment for a progressive president to make the case for a generous social safety net. The conservative article of faith that hard work and determination guarantee economic security is a now a cruel lie. People lose jobs because of shifts in global trade patterns, because of new technologies, and because of macroeconomic currents beyond their control. This is the nature of a dynamic capitalist economy, and to acknowledge it and the need for government countermeasures is in no way to repudiate the considerable virtues of the system.