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Five practical ways and one impractical way Congress could improve the economy by November

If elections are dependent on the economy, then the obvious question is what, if anything, can Democrats in Congress actually do to improve the economy between here and November? The answer, even if they had the votes, is probably not that much. But that's not to say nothing.

First, Congress can pass policies to keep things from getting, or feeling, worse. Unemployment insurance and state and local aid are probably the biggest players here. If unemployment insurance isn't extended, millions of unemployed Americans will stop getting checks. As angry as they are about the economy now, they'll be much angrier after Congress deserts them.

State and local aid exists in a similar space: With stimulus funds running dry and states facing a $200 billion shortfall this year, either the federal government has to step in or layoffs are going to get really, really bad. Aid now -- or even the promise of aid soon -- could prevent a lot of layoffs that states are going to make if they don't see any fiscal help on the horizon. Another state-related idea I heard was to provide the funding and loosen the rules so unemployed people could get on Medicaid.

The second question for Democrats is whether anyone will notice their efforts. "The Recovery Act has had a very significant impact," says Jim Horney, an economist at the Center for Budget and Policy Priorities. "You’ve got between 2.5 and 3.5 million people employed. But how many people think, 'wow, I’m better off?; Things that increase aggregate demand and may have more of an impact can't be pointed to as easily. That's why a lot of people thought Democrats should do a jobs tax credit where the jobs it created could be pointed to more easily."

As Democrats don't have the sort of time -- nor the votes -- needed to make a big change in the macroeconomy, they might simply try to put money in people's pockets. Money, as Horney says, that people notice. The obvious policy, which many Republicans have endorsed in the past, is a payroll tax holiday. For the reasons outlined here, that's not a very efficient form of stimulus. But if done correctly, it's a very efficient way for the government to signal that it's helping people out. The more targeted your tax credit gets -- think the Making Work Pay credit from the stimulus -- the more bang-for-the-buck you'll get, but the fewer voters you'll touch directly.

If Democrats don't want to go the tax cuts route, they could try for direct employment. Over the next few months, the jobs related to the 2010 Census will continue to expire, leading to 700,000 more people losing work. That was always anticipated: Census jobs are temporary jobs. But those were also real jobs, and their expiration will mean real unemployment. Something like George Miller's Local Jobs for America Act -- which earmarks $100 billion not just to fund state and local budget shortfalls but also to directly employ people -- could make up some of the gap.

But the best thing Democrats could do, by far, would be to invent a time machine, travel back to early 2009, and figure out some way to pass a bigger stimulus a year ago. "To measurably move the dial on employment and unemployment by November, there would have to have been action taken at the end of last year or the very early part of this year," says Larry Mishel, president of the Economic Policy Institute. "At this point, the economic outcome is pretty much set.” And that probably means the election is, too.

By Ezra Klein  |  July 12, 2010; 4:02 PM ET
Categories:  2010 Midterms , Economic Policy , Economy  
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Comments

Why is it that all Ezra seems to care about is the election of Democrats? Shouldn't the primary motivation of economic analysis to be more about getting the economy moving again to help people rather than the election of members of a certain political party?

Posted by: lancediverson | July 12, 2010 4:23 PM | Report abuse

The next best thing, I guess, would be to listen to the very same people who argued that the current policy was too little, too late. You know, the people who are arguing for a huge new jobs bill to rescue the country. But we're just DFH's, and therefore Not Serious.

Posted by: stonedone | July 12, 2010 4:24 PM | Report abuse

Re: lancediversion.

You're missing an essential point. At present, the Democrats control Congress. If you want to convince the Democrats to use that control to help the economy, you've got to package your argument in a way that is enticing to them. Democrats are terrified of the upcoming election. Packaging the argument as a way to help them stay in office is a good way of enticing them to take the right steps to help our economy.

Posted by: QuiteAlarmed | July 12, 2010 4:49 PM | Report abuse

Given the general agreement that the state of the economy affects elections, I'm surprised the list doesn't include more items that make folks feel good about their own living situations.

In September, when additional PPACA regulations take effect, most employed individuals will feel a severe paycheck pinch. Perhaps repeal of the PPACA might be more attractive as the summer progresses, even though "So average spending on insurance rises, and that’s a good thing." [Krugman, Paul. February 27, 2010, 11:45 am.]

My hunch is that voters aren't going to consider sharply rising costs "a good thing".

Posted by: rmgregory | July 12, 2010 5:06 PM | Report abuse

Maybe I am crazy, but why do we not hear more about the obvious fact that in America too few people control too much of the wealth of the country? There is plenty of money in our society; it is just concentrated in too few hands. There is plenty of work that could be done in our society: fixing aging water pipes; beach erosion control, cleaning the land and water, teacher aides for schools, bridge repair, making sure no one ever misses a healthy meal... I mean, the list is staggering.

But, as a society, we have decided that it is better for the rich to get richer and the rest of us fight for the crumbs. We are what we deserve to be.

Posted by: bokun59 | July 12, 2010 5:08 PM | Report abuse

Is this the same as the endless search for a solution to our poor educational results in which we continually overlook reduced student:teacher ratio? We know what the research shows will work, and we'll spend endless dollars and waste children's lives searching for a different answer.

If we implemented reduced student:teacher ratios now, it would improve education and employment both. Huh.

Posted by: lroberts1 | July 12, 2010 5:12 PM | Report abuse

All Democrats could resign and it would be the biggest lift the Nation could hope for.

Posted by: Bubbette1 | July 12, 2010 5:13 PM | Report abuse

Speaking of quotes, Senate Republican leader Mitch McConnell on February 26, 2010, (the day before Krugman's "So average spending on insurance rises, and that’s a good thing." comment) said "Healthcare is a winner of enormous magnitude for us".

Posted by: rmgregory | July 12, 2010 5:16 PM | Report abuse

Republicans in Congress have no interest in doing anything related to the economy.. they do not represent the American people. Republicans in Congress represent the Republican party ONLY. My guess is that very few Republican members of Congress even know what's going on in our country today. They are nothing more than a herd of sheep, following the party.

Posted by: deborahjbrown | July 12, 2010 5:17 PM | Report abuse

Or they could take credit for the falling unemployment rate as people leave the workforce,

while repeatedly putting measures they know the Republicans will filibuster up for cloture votes to try and point the anger of the unemployed away from themselves.

But yeah, aid to states should be passed if significant layoffs would otherwise occur before october (the september jobs report will be the last before the election).

Posted by: eggnogfool | July 12, 2010 5:19 PM | Report abuse

--"If elections are dependent on the economy [...]"--

Poor Klein. He's the joke of the blogosphere, the WaPo has credibility issues (only partly because of Klein), and it looks increasingly like the rabid leftists are going to be thrown out of office in the fall, and his premise there smells of desperation.

It may be that "elections" turn on "the economy" in a general sort of way, but there is a whole lot of dissatisfaction with Obama and the Dems (and some Rethugs, too) in areas other than "the economy". The Obama administration is widely perceived as being hell bent on ruining the country. People are sick of the overreach of agencies like the FTC, FCC, and the CPSC, among others. The nonsense over the borders. The failure to waive the Jones Act, and other incompetencies too numerous to mention related to the oil spill.

As for Congress, I don't think Nancy and Harry have endeared too many people. Only the hard core collectivists liked the way health reform was rammed through. And it's not going to solve anything. Etc. The process is out of control, awash in money and influence like never before, with no end in sight.

Sadly, even with a lot of new faces next year, it will likely be business as more or less usual, to the detriment of what's left of this once proud nation.

Posted by: msoja | July 12, 2010 5:37 PM | Report abuse

A bigger stimulus package....are you kidding me!?!?!? The progressive policies of Obama and his socialist buddies have not and will not work! Take America back in November!!!!!!!!

2010...WITHOUT DOUBT, VOTE THEM OUT!

http://eclecticramblings.wordpress.com

Posted by: my4653 | July 12, 2010 6:06 PM | Report abuse

OK, lets get something straight. The Dems are not a super majority, which means they have to go through debate to win any vote by a simple majority. Debate takes time and stops the business of congress so basically the Republicans can simply hold the house and the senate hostage by insisting on debate.

Secondly, this advice above really doesn't address what would bring jobs back to the US.

Closing the two tax loopholes that the Republicans are fighting tooth and nail that allow for offshoring of jobs and money from the US might help the bring back the 8+million jobs that are directly attributed to them.

Closing the H1 visas might help to clear some more jobs.

Not sending our tax forms overseas for processing or our federal contracts to companies that offshore the work might help.

At least it would be more productive than short term construction projects that only go to a certain part of the market.


Posted by: smg71 | July 12, 2010 6:58 PM | Report abuse

So, let me get this straight, Ezra dreams that dems could build a time machine and the first thing they should use it for is a bigger stimulus bill in early 2009? LOL Talk about myopic thinking!

I mean if we get to time machine level technology shouldn't we at least be thinking about sending terminators to kill the mothers of everybody involved in economic policymaking and major bankers of the past 30 years?

Posted by: mrnegative | July 12, 2010 6:59 PM | Report abuse

Time machine? 2009?

Duh, Ezra.....how about 2000? I even think Ray Bradbury wrote a story about that--you go back in time and kill a butterfly ballot, and the future changes.

Posted by: stevie314 | July 12, 2010 7:34 PM | Report abuse

Its a ridiculous Catch-22 (that need not be). The Democrats won't fix the economy because they are worried about the elections, but the Democrats will get pummeled in the elections unless they fix the economy. In the end, RESULTS will matter!

The argument of, "we let things go down the tubes because our polls said you liked the "down the tubes" policies," won't work so well if everything is actually down the tubes.

But most importantly, people are upset, and confused over what they're upset about.

I recently met a small business own whose business was located in a State Park. He said he was most upset about high taxes and high spending (on local, state, and federal levels), which would suggest one way to win his vote. But, after talking to him for a while, I realized that he was more pissed because the State had cut a lot of funds (and workers) at the State Park which was hurting his business. He did not see the contradiction between his two gripes and really seemed to believe there was a way to increase funding and hire new workers without it involving any spending, while simultaneously cutting taxes without the deficit going up.

When I pressed him about how this was possible, he seemed certain that there was simply enough ways to increase the efficiency of gov't and "waste" to be cut to accomplish his contradicting goals.

In short, he wants a free lunch and he thinks that free lunch is possible if only the government would get its act together.

Posted by: nylund | July 12, 2010 7:43 PM | Report abuse

"With stimulus funds running dry and states facing a $200 billion shortfall this year, either the federal government has to step in or layoffs are going to get really, really bad. Aid now -- or even the promise of aid soon -- could prevent a lot of layoffs that states are going to make if they don't see any fiscal help on the horizon."

If we really want to save jobs, then we should encourage states to cut salaries. If after a reasonable cut there is still a shortfall, then I'd be okay with a 0% loan to fill in the shortfall. But try cutting salaries first.

Posted by: justin84 | July 12, 2010 8:00 PM | Report abuse

"The failure to waive the Jones Act, and other incompetencies too numerous to mention related to the oil spill."

It is amazing to me that morons continue to dutifully repeat the lie about the "Jones Act," after it has been continuously debunked for weeks. The Jones Act has never been an issue in the cleanup. Here are the facts:

"So far, offers from six foreign countries or entities have been accepted and only one offer has been rejected. Fifteen foreign-flag vessels are working on the cleanup, and none required a waiver."

full story here:

http://factcheck.org/2010/06/oil-spill-foreign-help-and-the-jones-act/index.html

Posted by: Patrick_M | July 12, 2010 8:21 PM | Report abuse

Patrick_M, the propagandist's mother hen, citing a fact-challenged factcheck.org.

Some fact checked factcheck, and found it wanting.

http://www.freedomaction.net/profiles/blogs/factcheckorg-the-jones-act-and

Of course, Obama's biggest screw up in the Gulf is the banning of all deep water drilling, and playing dead on shallow water drilling permits.
That's real disgrace.

Posted by: msoja | July 12, 2010 9:01 PM | Report abuse

The Local Jobs for America act is a new jobs bill/state and local gov't aid bill. Didn't the Senate fail to get the votes for a package which included state and local gov't aid a couple of weeks ago? See AP chronicle, "How 2 million lost jobless benefits" (http://www.washingtonpost.com/wp-dyn/content/article/2010/07/12/AR2010071200676.html). Agree the time for getting these jobs bills was in 2009. We are where we are today - jobless recovery.

What Congress could do is to increase funding for the program mentioned by Bob Herbert (http://www.nytimes.com/2010/07/03/opinion/03herbert.html). It primarily targets those on welfare and seems to be working as a quick fix for entry level service jobs. It wouldn't help those seeking employment in professions requiring more skilled labor but would ease the pain for those on or near welfare. Not that you have to be on welfare to be feeling the pain of a jobless recovery.

Posted by: tuber | July 12, 2010 9:05 PM | Report abuse

The moronic mother hen of falsehood attaches higher credibility to the "Freedom Action Network" than to the Annenberg Policy Center at the University of Pennsylvania ( http://en.wikipedia.org/wiki/Annenberg_Public_Policy_Center ).

So I am sure he will not believe the Atlanta Journal Constitution:

http://blogs.ajc.com/jay-bookman-blog/2010/07/01/experts-agree-jones-act-has-no-effect-on-gulf-oil-response/?cxntfid=blogs_jay_bookman_blog

or the Miami Herald:

http://www.miamiherald.com/2010/06/30/1709204/gops-false-talking-point-jones.html

The Palm Beach Post:

http://www.palmbeachpost.com/opinion/editorials/the-myth-of-the-jones-act-obama-has-790969.html?cxtype=rss_editorials

or Admiral Tad Allen:

Allen said today that no Jones Act waivers are needed for vessels operating more than three miles from shore.

"At no time have we been inhibited by the Jones Act or Jones Act waivers," Allen said.

complete story:

http://blog.al.com/live/2010/06/allen_downplays_impact_of_jone.html

But why let the truth get in the way of a wingnut urban legend?

Posted by: Patrick_M | July 12, 2010 9:43 PM | Report abuse

--"Allen said today that no Jones Act waivers are needed for vessels operating more than three miles from shore."--

Sounds like typical bureau-bot speak, to me.

Vessels working the cleanup never have to visit a port to, say, offload the crude extracted from the sea water?

And what about those drilling bans, eh? And the slowdown on the renewel of other drilling permits? And all the cross agency confusions? And keeping the press away? eh?

Posted by: msoja | July 12, 2010 10:19 PM | Report abuse

You guys should stop complaining cuz one the health care we have now isnt as good as it was supposed to be. also the law has just been signed give it a try u guys are too hard on democrats they went to college and we voted for most of these people.so if u want to say u have the right to choose tell that to ur congress men or state official. as for obama people are just tryin to make it look like america made a mistake he has done things to help us and we had a full 8 years of a terrible president and i will be so as happy as ever when a obama fixes bush's mistakes. You can find full medical coverage at the lowest price from http://bit.ly/chE6zp obama has to put up with the wo0rld judging his every move and trying to fix the mess we are in we are lucky anyone wants to be our president. STOP COMPLAINING AND GIVE HIM A BREAK. i wanna see one of yall do what he sas done. some people are just so ignorant.

Posted by: bidzill | July 13, 2010 7:00 AM | Report abuse

@QuiteAlarmed: You're wrong, the Democrats DO NOT control Congress. True, they have a majority in the House that seems large enough to actually get some work done, but in the Senate the REPUBLICANS are in control because of stupid Senate rules that make it possible for any one Senator to bring proceedings to a halt until the other side can get at least 60 votes to "close debate." That's really a misnomer, because nobody has to do any debating any more, they just have to announce that they INTEND to debate. I thought it was stupid back in 2008 for the uninformed Fawning Corporate Media to be trumpeting that the Democrats had a "super-majority." They didn't then and they don't now. And never in history have we seen one party so solidly disciplined in holding the line against the other. Unfortunately, the Democrats stupidly allowed the idea to take hold that they DID have a super-majority and now they're going to pay for their idiocy.

@msoja: Jones Act waivers are not needed. The Jones Act requires that cargoes moved from one American port to another American port must be carried in American-registered vessels unless a waiver is issued. If they skim oil in international waters (actually anywhere outside the three-mile limit)and then bring that oil to an American port/refinery, they're not in contravention of the Jones Act.

Posted by: Acharn | July 13, 2010 7:15 AM | Report abuse

The Democrats may be the majority, but they are not in control of the government. The Republicans are not in control either; they can only complicate things and slow them down. The incumbents in office HAVE NO CONTROL; and wouldn't know what to do with it if they did. Vote them out!

Posted by: bwshook1 | July 13, 2010 8:35 AM | Report abuse

BO has to Fix everything Bush Did, LMAO !!! Evidently most seem to forget then Senator OBama voted for the Stimulus, Tarp, and many other Funding measures prior to taking office.... how soon we forget !!!

Ezra, Are you out of your Flipping MIND writing a story like this OMG !!! The notion of spending fund on HWY projects is so outdated, sure it worked back during the first depression we endured only because are roads then were nothing like they are today & it's benefits are limited !! If you want to stimulate this Country, cut the Capital Gains, cut the income tax, lower the FEderal Tax on most goods bought & sold within this Country, Start Kicking folks off welfare increase the TAX Import's, unleash the regulation on many of the small business so we can start making goods here in the USA again.

Tell the American people the VAT Tax idea is as good as DEAD, close down the EPA, DOE, DOeduc. , and start cutting salaries within the federal Gov't so there competitive with Private Sector Job's !!!

Gov't jobs does not create wealth cause Gov't does not manufacture and does not buy & Sell goods like the private Sector does. Gov't only Consumes. Americans need to start fending for themselves and stop relying on Gov't to hold there hands in everything they do today your adults deal with it !!!

Cut the funding to Universities, they've been double dipping for far too long from Gov't & the Private Sector while still increasing tuition for Students. By Cutting Gov't aid to College's Tuition cost would drop like a rock forcing Colleges to also cut the salaries of there "renowned" Professors like Bill Ayers, LOL !!!

BO should come out an Tell the American People were going to build 100 new Nuclear Facilities to start 2 in every state. Give back the 1,000's of Acres of land the Gov't has in Land Banks back to the private sector so the land can make money which can then be taxed by the Fed's & States.

Agencies like the DNR and other agency's should be self sufficient if they don't take in enough fees then close'em down. Provide real Tax Cuts for all middle Class folks a Tax Holiday isn't going to do squat it has to be significant in size several thousand would stimulate, not to go to those "Green Job's" that are a Joke if it needs Gov't funding it's not worth making period !!!

Posted by: dwenzel2 | July 13, 2010 10:00 AM | Report abuse

Face it, Mr. Klein. The several stimuli bills have failed to stimulate much of anything beyond the deficit. We've now spent more in two years on stimuli than we've spent on wars in nine years.
What the economy needs is certainty; predictability, to generate consumer and investor confidence. Right now, with new taxing and regulatory ideas emanating from Washington daily, no one has a clue about the future, near or far.

Posted by: Trucker49 | July 13, 2010 10:27 AM | Report abuse

Face it, Mr. Klein. The several stimuli bills have failed to stimulate much of anything beyond the deficit. We've now spent more in two years on stimuli than we've spent on wars in nine years.
What the economy needs is certainty; predictability, to generate consumer and investor confidence. Right now, with new taxing and regulatory ideas emanating from Washington daily, no one has a clue about the future, near or far.

Posted by: Trucker49 | July 13, 2010 10:28 AM | Report abuse

@Acharn: I share many of the sentiments that you express, but I'm not inclined as to give Democratic legislators a pass. I think that the legislative shortfalls of the past two years have as much to do with Democratic fears about this coming election as they do with Republican intransigence.

@msoja: Follow your link to the "Freedom Action" Blog critiquing Factcheck.com. Click on the link for the Canadian Financial Post opinion piece that the blog relies upon for support. Read the opinion piece the whole way to the end. You'll discover that the problem discussed by the author had nothing to do with the "Jones Act." The problem was the stringency of United States cleanup standards. There might be strong grounds to criticize the cleanup effort on the basis of the rigidity of those cleanup standards. You'd have a stronger argument if you'd focus on that actual problem and give up the fixation on the "Jones Act", which was a non-issue.

Posted by: QuiteAlarmed | July 13, 2010 12:25 PM | Report abuse

bokun59

You are correct--too much money is concentrated in too small a percentage of the population. Therefore, let's cap salaries for movie stars, musicians, sports figures, authors, attorneys, etc. Throw Congress too.

Posted by: NMRK1 | July 13, 2010 4:55 PM | Report abuse

How about taxing all of these profit-making corporations that are not hiring American citizens.

Republicans and Democrats will like the idea because it will lower our budget deficit.

Posted by: Siretch | July 13, 2010 10:32 PM | Report abuse

QuiteAlarmed:

"You'd have a stronger argument if you'd focus on that actual problem and give up the fixation on the "Jones Act", which was a non-issue."


Agreed that Jones Act wingnuts like msoja might someday arrive within striking distance of a valid argument if he or she did not rely so heavily and consistently upon such thoroughly refuted and obvious lies.

But they go with what they've got.

Posted by: Patrick_M | July 14, 2010 12:45 AM | Report abuse

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