By Paul Goldman
The polls are clear: the American people think that creating jobs is job #1 for Washington. The two debt ceiling frameworks on the table right now – the Cantor/Boehner, all-cuts, short-term extension with the debt reduction equivalent of the Base Closing Commission; and the Reid/Pelosi, long-term, all-cuts extension with their debt reduction equivalent of the Base Closing Commission – are both either jobs neutral or jobs killing, based on generally accepted economic modeling.
To be sure, the real reduction in aggregate demand (less spending means less aggregate demand, which means fewer jobs, unless the cuts are offset with private investment or spending) is in the out years, meaning past the 2012 election.
BUT: With unemployment at 9% and public confidence waning, a pro-jobs image is what Democrats should want going into 2012. I said “image” because perceptions rule in politics, and within a year at the most, the public’s perception of the economy will be set for election day.
A year goes fast: It will soon be a year since the 2010 elections!
So I ask you: Why is the debt-ceiling debate being played between the sidelines of jobs neutral vs. job losing?
Let’s be honest: There isn’t going to be a default on August 2. A deal will be made one way or the other.
But right now, it will not have a Democratic pro-jobs plan attached in any way.
As Senator Reid has said, he is basically giving the House GOP everything they want in exchange for an agreement that puts the next debt ceiling soap opera off until 2013. So you either his GOP-lite plan or the real thing from Boehner and Company.
So why not get in return a tax credit package – Republicans love tax credits! – aimed at creating jobs? There are several we know work in the near term. The GOP will not reject them given the businesses who will be for them.
But you say: We are trying to avoid a short-term deal at any costs because we don’t want to go through this drama again in the presidential election.
My response: What are we afraid of? Democrats have the edge in the current situation. Moreover, next year, there will be a GOP presidential candidate who has to take a position. He/she can’t be seen as willing to allow a default. A one-year extension puts the issue right into his/her lap.
Democrats will have more leverage next year than this year for that reason, it will easy to pit the GOP presidential candidate against his own party.
The President has already said he is going to run on a platform that includes tax hikes, namely the expiration of key Bush tax cuts. So ,in political terms, it is all upside for him on the tax increases, since he would have already taken the downside regardless. He thus has the far easier debt ceiling posture next year.
Bottom line: We should be proposing a one-year debt ceiling extension, getting credits for the spending cuts and a pro-jobs package of tax credits.
President Obama should turn the tables, give them what they claim to want, with a pro-jobs kicker, and dare the GOP presidential nominee to default.
We have a year to set it up.
It is a sure winner.