Can Obama Be FDR? -- Or is he Hoover?

RANDALL WRAY, WrayR at umkc.edu

Currently in New York, Wray, is professor of economics at the University of Missouri-Kansas City. He recently wrote the piece "With $300 Billion, The President Could Reduce Unemployment to Zero," which was published by TruthDig and is available on Wray's blog: https://neweconomicperspectives.blogspot.com

He said today: "President Obama gave a good, strong speech and the $450 billion plan is 50 percent bigger than rumored. Still, most of the provisions simply extend programs set to expire (the payroll tax holiday for workers, unemployment benefits), or continue tried-and-failed schemes to raise business confidence (tax credits for investment, cutting red tape). Extension of the payroll tax holiday to employers is a good idea, but it won't create many jobs since firms need sales before they will hire. Ditto business tax cuts or deregulation: firms are laying off workers because sales are down, not because they are burdened with taxes and regulations. They need sales before they will hire, and consumers will not buy until they get jobs. We are in a Catch 22 that business confidence cannot resolve.

"Finally, the President's insistence that every dollar in the plan will be 'paid for' by spending cuts or tax hikes elsewhere means that the net benefits must be quite small. Private economists have estimated the plan will create 1.5 million new jobs -- I expect that will prove to be optimistic. But in any case we need 25 million jobs to employ all those seeking work. And note that for $450 billion we could easily create those 25 million jobs if we followed President Roosevelt's example and simply created the jobs directly, through a WPA [Works Progress Administration] new New Deal type program. That could also be used to create all the infrastructure President Obama spoke of plus provide all the public services that we need to bring our nation into the 21st century. And those new WPA workers will generate the sales that firms need to justify more hiring. Now that would really be an American Jobs Act." Wary is also senior scholar at the Levy Economics Institute and his books include "Understanding Modern Money."

THOMAS FERGUSON, thomas.ferguson at umb.edu, https://www.newdeal20.org/author/thomas-ferguson

Ferguson is professor of political science at the University of Massachusetts, Boston and a senior fellow of the Roosevelt Institute. He said today: "We have known for a long time that President Obama is no Franklin Roosevelt. The urgent question now, though, is whether he is Herbert Hoover.

"We won't see the real plan until next week, but here is one way of thinking about his speech. The output gap - the difference between what we could produce and what we are producing - is at least a trillion dollars. Never mind conservative claims that Keynes is dead; the multiplier on government spending right now is probably about 1.5. So a $447 billion plan amounts to a bit more than a half measure. But the chances that our money-driven, highly partisan Congress will enact it all are zero. And I'll believe the talk of large scale mortgage refinancing schemes when I see bankers fly. And that's no detail, it's key, along with measures to make bankers lend instead of buying back their stocks and paying bonuses. Most alarming of all, much of the 'new' spending simply extends existing programs, such as unemployment insurance. It will just hold up aggregate demand at current levels.

"So think of it in Zen terms: we are likely to get half of the famous glass that is half full. But with banks and consumers still intently 'deleveraging' (paying down debts), in the end the new package may, like the earlier stimulus, strike many people as a lot of nothing." Ferguson's books include "Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems."