2011 Federal Budget: Timidity Instead Of Transformation

For a short period on NYTimes.com today, there was a compelling juxtaposition of stories: In one column, President Obama proposes a budget that "pivots to trim future deficits." Next to that story is a photo of firefighters in New York City fighting a blaze in which five apartment building residents died, accompanying a story about the city's attempt to close 20 fire companies, which could mean more than 500 firefighters would lose their jobs.

The Times' coincidental pairing of the two stories recalls one of the factors that must be weighed when judging the adequacy of President Obama's proposed 2011 budget for jump-starting the economy: Does it contain proposals strong enough to counter the impact of state and local efforts to cut their own budgets and put people out of work? In a word, no.

In unveiling its $3.8 trillion budget, the administration has been trumpeting a $100 billion plan "for immediate job-creating investments in small business tax cuts, infrastructure, and clean energy," of which fully a third is a small business job-creation tax credit that former Kennedy and Johnson administration aide (and current U.S. Court of Appeals judge) Richard A. Posner says "is unlikely to have an appreciable effect on employment."

In the meantime, the Center for Budget and Policy Priorities last week released a report projecting that states would have a budget gap of as much as $180 billion in their fiscal 2011 budgets. That's a gap that states can only close by further cuts in spending, and the loss of as many as 900,000 jobs, or higher taxes.

But that's just one narrow slice of the foreboding economic picture. For those, particularly conservatives, who say that it is the private sector that creates jobs, there is the reality that banks that are growing fat again off of the 2008-2009 Wall Street bailout are still not stepping up their lending into the Main Street economy to promote job growth. Their excuse is lack of demand, and while that is highly debatable based on the anecdotal evidence of thousands of business owners who have had their requests for loans rejected in the past 18 months, the truth is the federal government is not doing enough to conclusively take that excuse off the table.

What would be enough? Today Jobs for America Now—a coalition of groups that includes the Campaign for America's Future—released a statement that praised the administration for "a good start" but added, "This proposal does not roll back the unemployment rolls. It does not go far enough to fundamentally alter the dire jobless crisis we face today. According to the Economic Policy Institute, the nation’s unemployment rate is expected to climb to about 10.7 percent by the end of the third quarter of this year. In nine states – California, Florida, Kentucky, Michigan, Nevada, Ohio, Oregon, Rhode Island and South Carolina – the unemployment rate will be over 12 percent, in some cases well over 12 percent. We currently are mired in a jobless recovery and only a big and bold effort by the federal government can extricate us from this economic and moral crisis.”

When the AFL-CIO released its five-point jobs program in late 2009, it released a chart that dramatized the depth of the economic hole that the nation must dig itself out of: It would take the economy producing more than 583,000 jobs a month in order to by the end of 2011 re-employ the workers who have lost their jobs since mid-2007 as well as new entrants into the work force. That rate of sustained jobs growth has never occurred in the last 30 years, so even in the best of times stimulating the economy to meet that goal would be a daunting task. Last year's Recovery Act, which was also roughly two-thirds spending (about $500 billion) and one-third tax relief, was estimated by the White House to have created or saved about 1.2 million jobs in 2009. That was enough, according to many economists, to shave just under a percentage point off the unemployment rate, but as we all know, the unemployment rate nonetheless went up to 10 percent by the end of 2009.

What that proves is that those of us who argued a year ago that the first recovery package should have been at a minimum a trillion-dollar effort—and that the Obama administration and Democratic leaders in Congress should have spent the considerable political capital it would have taken to enact a spending package that large—were on the right side of history. An additional million people working on a broad range of jobs—from basic public works activities to cutting-edge green-energy and technology jobs—would have meant a significantly different economic and political climate today for the other urgent priorities that the administration wantes to pursue on behalf of the American people.

Having made that error, it is grievously wrong for Congress to compound the error by accepting timidity when transformation is necessary. By the administration's own admission, its proposals would result in unemployment averaging 10 percent throughout this year, with unemployment only dipping to 8 percent at the end of 2012. Yet, facing this reality, the Senate appeared earlier today poised to do significantly less than what the administration proposed, and much less than what the House of Representatives has earlier passed.

There is much to be applauded in the Obama administration's budget. One notable example is a proposal to end nearly $40 billion in tax breaks to the fossil fuel industry. How badly do oil companies need this tax break? Exxon Mobil today recorded profits that in 2009 fell 57 percent from the previous year—and it still earned annual profits of $19.3 billion. Clearly, Exxon Mobil does not need to nurse from this teat of the federal treasury.

But when it comes to the kind of game-changing, transformational leadership that the nation needs to get its economy on track—and to sensibly address the federal debt over the long term—this budget proposal only offers a shadow of what we actually need. The question that Congress must answer now is how many of its members are prepared to support bold solutions to a serious economic crisis, and how many will be under the illusion that timidity is a winning strategy for either the economy or their own political futures.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future