Chump Change

What to make of empty theater? Discussing something dead before arrival?*

Politically, the Boy King never looked so small, so pedestrian, so marginal. He’s just another cable marketer, flogging a cobbled together package of half measures and flinches. More Goldilocks Syndrome. If this was Obama’s idea of “going big” he’s obviously never even said ‘Supersize’ at McDonalds. And his small ball is already flat. So what was the point?

* (see Comment explaining Boehner and Cantor’s public posture of reasonableness)

It’s a mercy this all is going nowhere, left to fester in various committees. If the Republicans were truly cruel they would pass it all and reveal the sham as the economy remains moribund. Obama apparently doesn’t know what we all here do: this is not a turn of the business cycle, however severe. Nothing Obama said addressed the structural, fundamental dysfunction in an American economy unable to re-inflate itself by fabricating more bubbles. Tellingly, this Summer’s brief flirtation with launching another tech IPO reprise floundered.

This prism must be used to analyze Obama’s dead on arrival ‘plan’. Citing data from earlier recessions as if they are comparable, apples to apples, misses the magnitude of our crisis.

Obama To America: We Are All Supply Siders Now

Obama refuses to see the data of his own first three years. Many warned in 2009 during the first stimulus it was both too small and too loaded with non-stimulative tax cuts. Empirically, tax cuts are the least effective accelerator of economic activity. Naturally, the Obama Administration prematurely caved and embraced the tax cuts and received nothing in return.

So here stands the Boy King presenting a ‘plan’ that is 65% tax cuts and 35% actual stimulus. It’s simply craven. Various talking heads will try and spin various portions as immediately stimulative and ‘targeted’, such as the tax cuts for hiring new workers. Or adding to the existing payroll cut. The smart economists carefully preface their comments as ‘of all tax cuts’ they are stimulative. The honest ones concede the cuts are not going to be stimulative but retentive – i.e., help companies unsure to decide against further layoffs, etc.

Re cuts for new hires, if you’ve ever hired anyone yourself, you know that the actual long term overhead of an employee easily can be 40-45% (if not more) above their base salary. Corporate America sitting on $2 trillion in cash isn’t impressed and not the target. To the small business community? We wager only marginal, negligible impact on the overall hire decision. Assuming it gets out of Congress. We’re confident a year from passage the data will bear that out.

We emphatically disagree with gushing young media personas praising the ‘plan’. True, their first crush was Gwen Stefani and they still can remember the name of their Econ 101 professor. Although tout le monde seeks their economic expertise, it’s been proven a precarious thing before. Enthusiasm is fine. We prefer data.

Forget that Obama has accomplished the trick of moving the political conversation to fighting for Movement memes on Movement territory. When thinking of these tax cuts and the 2009 stimulus? Money is still essentially free. In fact, if done correctly, the U.S. will pay *you* to borrow. Bernanke has nothing left and his silence lately telling. Pushing on a rope, anyone?

Some ‘plan’ details are interesting small ball stuff. Infrastructure investments? An infrastructure bank? Go for it. Still, recall 2009-2010. Disbursement, procurement and actual start of construction is protracted. Sometimes with an 18 month or more lead time. Still worth doing. Hiring teachers? A nice sop to a base he’s ignored and kicked in the face. Parts of Obama’s proposal may even make it through the House. Everyone is up for election, after all.

Any one of the small ideas are sensible. Justify the Boy King wading into the Mekong on the Hill with a cut-and-paste ‘plan’? Perhaps.

But we ask you this: if Obama declares “let me be clear” and serves up a plan with Medicare/Medicaid cuts on the table and 65%-35% tax cuts to actual stimulus at the outset, where does he end up when he declares bi-partisan agreement? Seriously. Where?

In your heart of hearts, you know you’re afraid of that answer.