How to Cover the Romney Appearance in Allentown

Mitt Romney will be in Allentown to take a cheap shot at President Obama on the closed Allentown Metalworks, which Obama visited previously to sell the stimulus. I’ll credit the Romney campaign for good political theatre, but on the substance, the premise is total crap.

What the Romney campaign is doing here is playing a silly game with causation:

1. Obama visited the Metalworks to sell the stimulus.
2. Now the Metalworks is closed.
3. ???
4. We should blame Obama for the Metalworks closing.

It’s deeply stupid. Yes, the economy certainly did lose a lot of jobs after Obama was sworn into office. But did the economy lose those jobs because of Obama? Did the ARRA make the economy worse? The answers to these questions are not subjective. There’s no evidence at all to support either of these views.

So for reporters covering this event, when Romney says Obama made the economy worse, there are two very simple questions to ask:

1. When Obama took office, the economy was shrinking. Now it’s growing. In what way is that “worse”?

2. When Obama took office, the economy was hemorrhaging jobs. Now it’s gaining jobs. In what way is that “worse”?

Shovel-Ready Projects Watch

Man, if only we had a bunch of jobless construction workers:

Shrinking budgets are forcing PennDOT to make a tough choice. Do they fix bad bridges or bumpy roads first? It’s a no win situation…

New numbers from PennDOT show more bridges in our area are classified as “structurally deficient” in spite of a state bond approved in 2008 to fund bridge repair…

But the news is also bad for roads, 18 percent of all state highway miles in our area are classified as “poor condition.”

Of course there is an obvious opportunity for a win-win situation here. There’s high unemployment in the construction sector and interest rates on 10-year Treasury bills have never been lower. The problem here is the lack of money, which is absurd because the federal government can’t run out of money. We could very easily put a lot of people back to work if the federal government borrows money to pay for these projects.

[Source: John Craven]

Financial Times Editorial Board Calls for More Stimulus

FT:

In recent months, both the European Central Bank and the US Federal Reserve have become more vocal in their desire to raise rates. This temptation must be resisted. The west’s inflation problem stems from the voracious demand from Asia’s new industrial powerhouses. This must give hope that a mild dose of stagflation is simply the temporary symptom of an inevitable economic shift. Squeezing domestic inflation to offset it would be counter-productive. In abnormal times, policymakers should also be alive to the balance of risk between inflation and unemployment. Letting the latter rise and become entrenched at a time of weakness would risk hardening the economic arteries further. The real peril now is a double-dip recession rather than inflation. This is no time for tightening.

A Stimulus Plan That Doesn’t Need to Pass Congress

The recovery is increasingly looking like it’s in jeopardy, which is terrifying since there’s no way more stimulus can get through Congress. But even though Congress is totally worthless right now, there is more that the President can do unilaterally to fix the housing market and boost demand. Brad Delong has a plan:

Private mortgage financing in the U.S. right now is broken. The U.S. government owns Fannie and Freddie–the Treasury Secretary votes the shares.

Announce that the U.S. government is increasing its ownership of Fannie and Freddie from 79.9% to 100%, is consolidating them with the general government balance sheet. Announce that the Federal Reserve stands ready to support the price of Fannie and Freddie’s bonds. Announce that the Treasury now regards Fannie and Freddie’s obligations are now full faith and credit obligations of the U.S. government. Announce that Fannie and Freddie will buy up all mortgages at 95% of face value. Announce that Fannie and Freddie will then refinance any past mortgages they hold at 4.0% plus a shared-equity kicker.

That would be a substantial macroeconomic stimulus program. That might be expensive for the Treasury in the long run. (But it might well not: it would depend on whether the equity kickers balanced out the foreclosure costs, and on what happens to the government’s cost of funds.)

As best as I can see, the benefits of such a program would be that it does not require congressional action–merely the cooperation of the Treasury and the Federal Reserve Board.

And the entire housing, real estate, construction, and homeowner lobby would get behind such a plan in a big, big way.

The Last Minute Deal

Dean Baker makes the most important point:

According to analysis from Moody’s Analytics and Goldman Sachs, the original package of $61 billion in cuts put forward by the Republicans would lead to a loss of over 700,000 jobs. (The logic is simple. There is less spending, therefore fewer people are employed. Even a Washington Post reporter should be able to get that one.) Since the final package includes roughly two-thirds of these cuts, it is reasonable to infer that it will lead to a loss of close to 500,000 jobs.

Right now, in a liquidity trap, all spending is good spending. Less spending means fewer jobs. Just as the tax cut extension deal was said to be expansionary because it increased the deficit, the continuing resolution deal is contractionary and will harm the economy. It’s just not the time to be withdrawing government support for the economy. There is still a lot more that we should be doing to create jobs. It’s appalling that the President is acting like this is anything but a loss for the economy. A shutdown may have been worse, but there’s absolutely no reason we should be cutting spending right now and the President should say so.

Price Is Right

Mark Price brings us this helpful chart showing how much more severe job losses would’ve been without government intervention to stabilize the economy. Here are his suggestions for what can be done at the state level to create jobs:

•The state should increase its bond-financed investments in infrastructure, transportation, schools, and energy efficiency retrofits. By ramping up construction projects now, the state will not only create additional jobs; it will also get much better value for money because bid prices can be as much as 20% lower when the industry is in the doldrums and contractors are desperate for business.

•The state should modernize its unemployment insurance rules and capture $289 million in federal dollars still available for the low-income unemployed.

•The state should join 17 other states by enacting a work-sharing law that allows employers, on a voluntary basis, to permit their workers to claim part-time unemployment insurance benefits when those workers see their hours cut back because of the slow economy. This helps avoid layoffs and allows employers to retain workers with valued skills.

•Fourth, the state should invest in innovative workforce and economic development programs that help strengthen Pennsylvania’s critical industries.

•Fifth, to get started on the wage deficit, the legislature should raise the state’s minimum wage and enact an economic development accountability bill requiring companies receiving state business subsidies to pay market-based wages that are not near the bottom of their industry. The new administration and the legislature should also establish a “Task Force on the Pennsylvania Middle Class” to generate additional proposals for lifting wages and reducing income polarization in the private sector.

Reservations About the Tax Cut Deal

Mike Konczal argues pretty persuasively that the Obama-McConnell tax deal should look more like this than the chart the White House was sending around on the Hill:

James Kwak makes a similar case here. The more I read about this, the more I think we should be concerned about the Democrats’ will to let the payroll tax cut expire, the less I think it will have a significant impact on the economy.

It may be the case that this really is the most stimulus we could have gotten at this point, but I find it very unnerving when I see the term “second stimulus” being ascribed to a policy that is just not going to produce results anywhere close to what we need. And when its all spent and we still have 8% unemployment, and economists and the Fed call for more stimulus to close the output gap, we’re going to hear John Boehner say something like: “Democrats got two failed stimulus bills and now they want another one? When are we going to wake up and realize that more government spending isn’t going to put people back to work?” And of course he’ll still be dead wrong, but this will no doubt seem to be a very persuasive political argument to the public.