KeithHennessey.com

The fiscal policy debate focuses only on deficits and ignores a major philosophical distinction between the two parties: different beliefs about the appropriate size of government. I am going to do my best to correct this by expanding its scope and introducing a new kind of graph. I call it a Budget Bubble Graph.

Conventional wisdom says the tenure of President George W. Bush was dominated by partisanship. This conventional wisdom ignores significant bipartisan legislative accomplishments led by President Bush. If President Obama wants bipartisan legislative success, he could learn a few things from his predecessor.

The recent anniversary of the stimulus law reminded me that I need to recap my views. I will highlight a point I think is being overlooked in the historic debate and comment briefly on the pending stimulus (sorry, “jobs”) bills.

Today President Obama’s Council of Economic Advisers, chaired by Dr. Christina Romer, released the annual Economic Report of the President. The economic projections in the report form the baseline for the President’s budget and all Administration policy making through the year.

I agree with the President that he inherited a tough situation, although I disagree with his explanation of the causes. Our fiscal car is driving toward a cliff. To avoid the cliff, the President might want to turn the wheel left, and I might want to turn right. At the same time, President Obama has the wheel. Complaining about the previous driver won’t prevent us from driving off the cliff. I hope the President will soon stop focusing on the last decade, and instead propose solutions for the next one.

President Obama: “Our government is deeply in debt after what can only be described as a decade of profligacy.”
Hennessey: “Which decade?”

If enacted quickly, the President’s new Small Business Jobs and Wages tax credit proposal will therefore create fewer (and maybe far fewer) than 165,000 – 297,000 jobs this year. For comparison, remember that the U.S. economy has lost 2.7 million jobs since a year ago, and 7.2 million jobs since the beginning of the recession in December 2007. 297,000 is 4.1% of 7.2 million, so you’re talking about a policy change that at best would restore fewer than 1 out of 25 jobs lost since the recession began.

The U.S. economy lost a net 85,000 jobs in December 2008. The unemployment rate held constant at 10.0%.

Here is the President’s new economic proposal, which he is not calling a stimulus.

Today’s employment report is good news.