Why the President Must Come Up With Demand-Side Solutions, And Not Go Over to the Supply Side

Robert Reich

Chancellor's Professor of Public Policy, University of California at Berkeley; Author, 'Aftershock'

Editor: The article below outlines one small step towards Social Credit



"I am concerned about the fact that the recovery that we're on is not producing jobs as fast as I want it to happen," President Obama said Tuesday, amid the flood of bad economic news, including last Friday's alarming jobs report.

Does this mean we're about to see a bold package of ideas from the White House for spurring growth of jobs and wages? Sadly, it doesn't seem so.

Obama says he's interested in exploring with Republicans extending some of the measures that were part of that tax-cut package "to make sure that we get this recovery up and running in a robust way."

Accordingly, the White House is mulling a temporary cut in the payroll taxes businesses pay on wages. White House advisors figure this may appeal to Republican lawmakers who have been discussing the same idea. It would, in essence, match the 2 percent reduction in employee contributions to payroll taxes this year, enacted as part of the deal to extend the Bush tax cuts.

Other ideas under consideration at the White House include a corporate tax cut, accompanied by the closing of some corporate tax loopholes.

Can we get real for a moment? Businesses don't need more financial incentives. They're already sitting on a vast cash horde estimated to be upwards of $1.6 trillion. Besides, large and middle-sized companies are having no difficulty getting loans at bargain-basement rates, courtesy of the Fed.

In consequence, businesses are already spending as much as they can justify economically. Almost two-thirds of the measly growth in the economy so far this year has come from businesses rebuilding their inventories. But without more consumer spending, there's they won't spend more. A robust economy can't be built on inventory replacements.

The problem isn't on the supply side. It's on the demand side. Businesses are reluctant to spend more and create more jobs because there aren't enough consumers out there able and willing to buy what businesses have to sell. Full article published here