Analysis: Obama, Bernanke out of ammo to boost jobs, growth:
The United States has a jobs problem and there's not a lot President Barack Obama or Federal Reserve Chairman Ben Bernanke can do about it.
In the face of rising risks of a recession that could imperil his re-election chances next year, Democrat Obama wants Congress to extend a payroll tax cut and emergency unemployment benefits that are due to expire in December.
But the Republican-controlled House of Representatives is emboldened by budget concessions it made Obama swallow to lift the country's debt limit this week and he has little political leverage to win significant fresh spending to aid growth.
"Obama does not have much presidential persuasion left. He is running out of capital," said James Thurber, of American University's Center for Congressional and Presidential Studies.
Obama's political opponents have been openly scornful of the impact of two previous stimulus packages, which were accompanied by extraordinary measures by the Federal Reserve to kick-start the U.S. economy.
"It seems we've thrown everything at it. We've had QE1 and QE2, Stimulus 1 and Stimulus 2, and the unemployment rate is still 9.2 percent," said John Makin, an economist at the American Enterprise Institute in Washington. "Maybe there are just not many options here at this point," he said.
No, no, there's plenty we can do. First, we still haven't done enough of what we should have done at the beginning, namely, combine (a) deficit spending (but we've had plenty of that of course) with (b) strong action to bring the long-run fiscal situation under control, so that investors won't worry so much that profits from projects undertaken now will be confiscated. Adopt Paul Ryan's plans on Medicare. Raise the retirement age. Index Social Security benefits to inflation rather than wage growth, and maybe means-test them at the high end. Repeal Obamacare. The debt deal may help there, but we need to go further. And tax reform too.
Second, reform immigration already! Naturally when you're waging war against millions of productive workers, that's bad for the economy. The crisis started with a drop in housing prices, and a rise in housing prices would end it. And it's easy to get that: boost demand. Let in more home buyers. Give the people who are already here and living in homes-- and might buy them-- assurance that they can stay. I'll throw out a third one, borrowed from Charles Krauthammer, not to advocate it but just to show that there are options:
Charles Krauthammer: "An index of how spent he is sort of intellectually on the issue of jobs is the campaign speech he gave today, the fourth in 10 days, in which he pivoted, he did his pivot, and he announced five initiatives. Listen to them. Payroll tax extension: We already have that. Unemployment insurance extension: Already have that. Trade deals: He's had it for two and a half years and done nothing. Spending on more infrastructure: a perennial -- you know, more dams, more bridges and roads. And the last one, I love that. Here's the real new one that will get us out of our doldrums: patent process reform. Now that I think is the key to economic explosion, getting us out of 9 percent unemployment.
"He's out of bullets, he's out of arrows, he's looking for stones on the seashore. And it shows that he may want to have a jobs agenda, he may want to do a pivot -- there's nothing left in the cupboard. He did a huge Keynesian gamble, and it failed."
I don't know if the patent process reform I have in mind is the same as what Krauthammer/Obama are thinking of-- actually I'm sure it's not-- but I think the best form of fiscal stimulus would consist of patent buyouts. Let the government run auctions to buy a whole lot of patents (to make the auction genuine they only buy some of the patents people bid for), and then retire them, so that anyone can make the products in question. Prices of lots of goods drop, helping consumers. There are lots of opportunities for start-ups to make stuff that was proprietary before. And former proprietors of intellectual property find themselves losing revenue streams, and need to invest to get new ones. Now, I'm hesitant to actually endorse this approach, since it involves government spending. But it's not true that the government is out of options to stimulate the economy.