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Establishing Your Pivot Foot

January 29, 2010

Keith Hennessey is pretty tuned in to the conservative psyche.  I sense that most conservatives don’t really know what the hell it means to “pivot to jobs” (I thought that was what the stimulus was for).  Thus, Keith gives us a nice post entitled “What does it mean to focus on jobs?”.  How apt:

Q1:  What, then, is the new focus?

A:  Two policies, and a reprioritization of legislative goals, with this bill as the new top priority.

I think there is an extremely high likelihood that this reprioritization will result in a signed law soon (I will guess within 4-6 weeks.)  The House has already passed a bill, and the President called on the Senate to take this up first.  The President’s State of the Union address and this signal to Congress will therefore have a real legislative effect.

Q2:  How much would the President’s new proposal increase employment?

A:  Assuming I’m reading CBO correctly, the President’s new “Small Business Jobs and Wages” tax credit would increase net employment in 2010 by less than 300,000 new jobs, and possibly much less.  The employment effects of the other components are difficult to estimate but almost certainly are much smaller than the impact of the tax credit.  Those are very small numbers compared to the size of the employment gap.

He then explains the X’s and O’s of the policy.  His conclusion:

The hard policy question is whether in the current economic environment you do something that is directionally correct but trivially small, and at the same time is very expensive.  Everyone’s political instinct is that doing something is better than doing nothing.  What makes it hard is that this something is expensive and we have a huge budget deficit.  Action has a small policy benefit and a medium-sized cost.  Inaction has no policy benefit and no policy cost, but a big political downside because you look like you don’t care about the problem.

By saying that jobs are “our number one focus in 2010,” and by having a specific legislative proposal that is likely to become law, the President is once again raising expectations that he can deliver improved economic results.  Just over one year ago now-CEA Chair Christina Romer and now-VP economic advisor Jared Bernstein projected that enactment of a stimulus proposal would reduce the unemployment rate so that it would peak at 8 percent.  This optimistic projection helped sell the stimulus and later proved to be wildly inaccurate.

The risk to the President is that he repeats this political and communications mistake, whatever your view on the policy.  By making jobs his number one focus, he raises expectations in the Nation and in the Congress that policy changes can quickly make things much better.  They cannot unless you’re willing to do far more aggressive policy than the President has proposed.  Doing so would have somewhat larger GDP growth and employment benefits, and enormous deficit costs.

At the same time, to lower expectations he must explain that his policy proposal to focus on jobs will have only a minimal benefit, and will result in a still dark employment picture for the foreseeable future.  That’s a pessimistic message that could undercut his ability to enact his proposal.  He is boxed in by a painful policy reality.

The President and his Congressional allies are courting political disaster by raising expectations that their new “number one focus on jobs” will result in a measurably improved employment picture as we approach Election Day.  They better start lowering expectations fast, because they are setting themselves up (again) for political failure.

Interesting take (and probably spot-on).  As Sullivan angrily points out, it’s not like he completely ignored jobs and then just now realized he needed to address that issue:

Let’s review: a stimulus package that has clearly helped turn the economy around and was skilfully structured to ensure that it didn’t entirely fade away when the second year came around, a third of which was tax cuts; a bank bailout that is now being paid back; a lifeline to the car industry; major investment in infrastructure; extension of unemployment benefits; avoidance of a second great depression and a return to fragile but real growth after the financial and economic abyss of a year ago … I mean he didn’t address the main issue??

I agree with little of that, but it’s a good point—there is no “pivot to jobs”.  It’s simply a renewed focus (politically speaking) on decreasing unemployment so the Dems won’t get as clobbered in November as they otherwise would.  Now, Keith thinks unemployment will not even have changed by then, so that makes this strategy essentially worthless and politically damaging.  I’ll probably save my lambasting until November actually rolls around.  But this at least clears up what some of us have been confused about for a while: the “pivot to jobs” is just a talking point.

EDITOR’S NOTE: I changed the word “damage” to “damaging” in the last paragraph.  Sue me.

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