President Obama’s speech and what happens next

President Obama gave a rousing speech last night in which he called for public investments in our country’s schools, roads and bridges, as well as large tax cuts for the middle class and small businesses. As the President noted, the individual components of the package have typically received bipartisan support. These tax cuts and investments are particularly needed right now as the economy is slumping, teachers are being fired across the country and our infrastructure is crumbling. The President also promises that it will be payed for.

Several economists have given preliminary scores to this $450 billion plan. All think it will help the economy. Mark Zandi, chief economist at Moody’s thinks the plan will create almost 2 million jobs. That seems to be the average estimate from economists surveyed by the Wall Street Journal. The economists also expect that passing the plan will increase growth by about two percent and bring the unemployment rate down a percentage point or more in the next year. But with Republicans opposed to almost everything the President puts forth, what is the chance that this package will pass through Congress?

First, the political dynamics at work here:

  • An improving economy helps President Obama’s approval rating and makes it more likely he will be re-elected. If the economy improves between now and the election it will be seen as a vindication of his economic leadership.
  • Passing a popular, bipartisan bill also helps President Obama’s brand. He has cast himself as a bridge-builder and as the responsible adult in the room. If he can bring Congress together around a jobs plan, that will help how he is viewed in the public eye.
  • Refusing to consider a jobs plan that is entirely made up of bipartisan proposals (as Obama’s is) probably hurts Congressional Republicans. They are already the most unpopular members of a very unpopular Congress and flat out refusing to consider a bill to put people back to work would hurt their brand even more. It is entirely possible (though unlikely) that voters could throw both Congressional Republicans and President Obama out of office next year, so Republicans must be careful.
  • That being said, Republicans don’t want to do anything that might damage their nominee’s chances of winning next year.

Taking all that into account, what is the most likely course of action for Congress to take? My prediction is that Congressional Republicans will make a show of considering the President’s proposals. They will wait for something to derail the proposals or for the jobs bill to fall out of the news, but their leadership will not come out and dismiss it.

If Obama and Democrats can force the issue and keep up the pressure on the Republicans, I think that they will agree to pass a few limited portions of the bill. This may include some of the payroll tax cuts and some of the tax breaks for small businesses. It is less likely that Republicans will agree to pass the infrastructure-repair, or the proposals aimed at helping teachers and schools. The GOP will complain that they cost too much or that they remind them too much of the stimulus bill, or that they’re too tired to take them up when they have so much else going on, or something of that nature.

Splitting up the bill and only passing some of it, has already been suggested by GOP majority leader Eric Cantor. This option has several advantages for Republicans. By passing some of  the President’s proposals, they can claim that they did indeed work with the President and extended a hand across the aisle. The proposals that they accept will likely be the ones that are most in alignment with their own principles and also the least likely to produce serious job growth over the next year.

By accepting only Obama’s weakest and most conservative proposals, Republicans will hope to get credit for being bipartisan, and rob Obama of his last chance to improve the economy before the election. That helps the Republican brand but also denies the country a chance at economic recovery. Afterall, an economic recovery makes it more likely that Obama will be re-elected.

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  1. September 10th, 2011

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