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Harry Moroz

Governing The Recovery

On Wednesday, President Obama articulated a rather forceful argument for the positive role government can play in meeting collective challenges. Lambasting the concept of the Ownership Society ("everyone is on their own"), Obama reminded us of some of the things that government is good at: maintaining a safety net, providing for retired workers, making sure most (!) people have access to health care. One of the hidden, and well-reasoned, implications is that capping oil wells just isn't one of them.

But Obama stopped there. While recognizing the "fragility" of the economy and the need to ensure a strong recovery, the President merely warned against "put[ting] on the brakes too quickly" as the country tries "to get our fiscal house in order." Even as he tied economic recovery - and its resultant boost to federal revenues - to an improving fiscal condition, he did not mount any sort of robust argument for the necessity of continued government action even as the economy recovers. His speech on the economy quickly became a speech about deficit reduction.

The administration's schizophrenic engagement with extending aid already being provided to state governments for education (and, separately, Medicaid) is revealing. Secretary Duncan raised eyebrows and hopes by sending a letter to Congress that requested inclusion of the education assistance in a supplemental appropriations bill. But the administration's support has never been made explicit.

Indeed, in his speech, the President carefully stated that "we have to work with state and local governments to make sure they have the resources to prevent the likely layoffs of hundreds of thousands of public school teachers across the country over the next few months." Though this may sound like an endorsement of more assistance, the phrase "work with" is a term of art: the administration supports more aid but, uncertain whether Congress can muster the support, is unwilling to stick its neck out and directly endorse it.

A defense of continued federal support for the economy is so necessary because the recovery which we are said to be experiencing is not only fragile but extremely limited. The private sector added only 41,000, total non-census employment appears to be flattening out, and, as Matt Yglesias points out, the public sector lost - lost! - 21,000 non-census jobs. This means that we are neglecting the easiest means to create jobs while pursuing half-baked schemes to stimulate employment through tax credits. Worse, abandoning education assistance would result in layoffs for hundreds of thousands of teachers, make a serious dent in public sector employment.

We know that unemployment lags in an economic recovery and we know the same is true for state revenue. But we also know that unemployment assistance has always been extended well beyond the technical end of a recession and that aid for states is a quick and easy way to save jobs.

Federal support for job creation is needed just as much halfway through 2010 as it was at the beginning of 2009. It is tepid reaction to this challenge of governance that the Obama administration should be criticized for, not some vague "failure of leadership" on the Deepwater Horizon oil spill.

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Posted at 2:24 PM, Jun 04, 2010 in Economy
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