Is the Outlook Dimming for Obama’s Job Plan?

Outlook Dimming for Jobs Plan? 

President Obama was in California early this week, speaking about his jobs plan at a Silicon Valley session sponsored by career-based social networking site LinkedIn. He then moved on to fundraisers in Los Angeles and San Diego.

One of the reasons we decided to revise The 2011-2012 AEC Market Guide to California before we even released it was because of the effect the Obama plan would have on California and the AEC Industry. Next year will have a very different look for both if Obama is successful in passing this plan or substantial parts of it.

Yet, with each Obama speech (and fundraiser), it appears less likely that anything meaningful will come out of his American Jobs Act (aka, The Obama Jobs Plan). This is because, in our opinion, the president is exhibiting either a stunning lack of political acumen or a shameful amount of political gamesmanship in the face of this prolonged economic crisis.

In the former case, it is delusional to believe that public opinion is a strong enough hammer to overcome the inevitable GOP opposition to the plan. Obama’s last stimulus plan received mixed reviews at best and his approval ratings have been on a steady decline. Does the Administration really think the president can rally enough support to force House Republicans to hand him a victory in this supercharged political climate?

On the other hand, if the goal is to create the campaign talking point “I tried to fix the economy but the GOP cared more about winning elections than helping Americans,” it’s a misfire because voters only remember what politicians did while in office, not what they tried to do.

Whether it’s simply naive or politically motivated, Obama’s approach doesn’t seem to be working.

This is too bad, because elements of the plan could help the U.S. and California economies, as well as the AEC industry.

Some argue that there is nothing meaningful in the $447 billion plan. Many of these critics are small-government, anti-Obama folks or political operatives with a clear agenda. Conservative economists who loathe the plan, such as former Reagan budget director David Stockman, are opposed to just about everything Obama proposes due to vast differences in economic and political philosophies. Their condemnation was predictable.

Liberal-leaning commentators, such as Paul Krugman, are more favorable to the plan, of course, with some calling for even more government investment and involvement.

Many middle-of-the-road economists and observers support at least some elements of the plan. Mark Zandi of Moodys.com, who once served as an advisor to Obama’s 2008 opponent John McCain, said:

“President Obama’s much-anticipated jobs plan is a laudable effort to support the struggling economy. The plan would go a long way toward stabilizing confidence, forestalling another recession, and jump-starting a self-sustaining economic expansion. If fully implemented, the Obama jobs plan would increase real GDP growth in 2012 by 2 percentage points, add 1.9 million jobs, and reduce the unemployment rate by a full percentage point, compared with current fiscal policy.”

As with the 2009 American Recovery and Reinvestment Act (ARRA), the Obama plan would almost certainly prop up the economy and the industry temporarily. The hope, as it was then, is that the rebound would be in full swing by the time the stimulus ran out of steam. This didn’t happen last time, but may have a better chance at this point in the recovery.

The White House says the plan, if implemented in its entirety, would do the following for California: a payroll tax cut for 710,000 firms, $3.96 billion in highway and transit modernization money, as much as $1.85 billion for local communities, $1.13 billion to community colleges and $2.81 billion for school infrastructure projects. (See the AEC Insight blog entry “Where the Work Will Be in 2012” for more on the effects of the Obama Plan on California.)

Zandi says that government action such as the proposal by Obama is necessary to overcome the current crisis of confidence among investors and the American public. However, he is not optimistic about its chances. “Given the current political environment, it is unlikely that much of what the president has proposed will become law, but nearly all the proposals have some bipartisan support. An extension of the current payroll tax holiday for employees seems most likely to pass. The proposed expansion of the employee tax holiday and the new payroll tax holiday for employers are also possible. The president’s spending initiatives, while worthwhile, seem like longer shots,” says Zandi.

If Zandi is correct, the measures most critical to helping the design and construction industries – the billions in investments in roads, schools and other infrastructure, as well as the aid to municipalities, and the infrastructure bank designed to spur more public-private partnership projects – have little hope of passing.

Should the infrastructure elements of the plan somehow pass, one area of concern for AEC firms – beyond the opposition’s contention that it may be a long-term drag on the economy – is the potential for other important infrastructure-related legislation to get lost in the political weeds. This happened with the 2009 stimulus; government programs that support transportation, public works and other markets critical to the industry still languish without resolution as Congress passes extension after extension to keep these programs on life support. 

What will it take to pass the Obama Jobs Plan?

If the president truly believes his plan will boost the economy and he wants the bulk of it to be enacted, he must make a political sacrifice. This isn’t 2009-2010, when he was fresh off election and had the public support and political might to do what he wanted (e.g., pass ARRA and the Health Care Plan).

He will need to compromise with Republicans on the issues most distasteful to them (i.e., raising taxes, increasing debt) and make sure that they are in position to receive an appreciable amount of credit should the plan succeed. Maybe Obama’s team is working with Republicans and skeptical Democrats in the background to craft such a compromise. Otherwise, there is no way this plan could overcome the political implications of handing Obama a solid, recovering economy – temporary or otherwise – on the cusp of an election year…especially with a candidate as vulnerable as Obama appears to be.

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