You would think that with his historic inaugural only 11 days away, the presidential campaign would be over.
But Barack Obama is still on the stump.
[img]286|left|||no_popup[/img]
This time he is selling his economic stimulus plan.
With the unemployment numbers showing the loss of another 524,000 jobs in December, culminating the worst year of firings since 1945, the task of selling his plan should a no-brainer.
Covering Every Corner
The President-elect, however, is not leaving anything to chance.
Today, the Labor Department reported that the nation lost 2.589 million jobs in 2008, with the unemployment rate climbing more than economists had forecast, to a 15-year high of 7.2 percent in December. Even though the S&P 500 has rallied 21 percent since hitting an 11-year low on Nov. 20, the dreadful employment statistics add to the perception that the economy is in a free fall.
These dramatic numbers should intensify the pressure on lawmakers to act. Yet many on both sides of the political aisle remain skeptical about giving the green light to another financial package.
These doubters fall into two camps. One group of lawmakers believes that first $700 billion they approved at the urging of President Bush has been squandered. The other is concerned that the long-term negative deficit consequences of Obama’s package may ultimately outweigh its short term benefits.
Learning from History
To promote his stimulus plan, the President-elect has taken a page right out of the Reagan and Clinton playbooks.
His political team has also adopted the same type of strategy President Bush employed when his White House sought to repeal the estate tax. To successfully roll back a measure that he believed was too punitive; President Bush built political momentum and public support by recasting the estate tariff as the “death tax.”
In their effort to garner Congressional support for the Obama stimulus program, the President-elect’s political advisors are encouraging lawmakers to use more positive terms like “recovery” instead of recession and “investment” rather than “infrastructure” when referring to the package. Much like they did throughout the campaign, Obama’s savvy team is making broad use of opinion polls and focus groups to shape their political pitch.
Obama’s “linguistic fusion” has won high praise from political operatives in both parties.
Yes, But Will This Work?
Political kudos aside, there still remains the question as to whether a recovery package of the magnitude sought by the incoming President will put the brakes on the economic slide, or whether it will simply be more window dressing to assuage the public perception while the economy runs its course.
In many ways, the passage of any stimulus plan at a point may be like the treatment of the common cold.
If you treat a cold with bed rest, fluids and a little chicken soup, it usually lasts four to five days. On the other hand, if you combine this conventional treatment with any of number of over-the-counter cold remedies, your cold symptoms will abate in four to five days.
Does It Really Matter?
Similarly, most economists seem to agree that a $500 tax break for individuals coupled with $1000 for families and additional tax relief for businesses will do little to moderate the gravitational pull exerted by the massive economic decline. Likewise, in the short run, the level of infrastructure spending proposed by Obama will probably not be enough to overcome the impact of the immense downturn in the employment market.
No matter what package finally is signed into law, everyone agrees that the real goal is to moderate public perception and to buoy the otherwise depressed consumer psyche. Given this objective, neither Obama nor the Congress can be seen as doing nothing in the face of this economic calamity.
Even if this is the objective, the core question still remains; are we needlessly chasing our tails by sending more good money after bad, when in the end, the outcome will likely be the same?
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
