This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series.



Here’s the policy reality facing the president: The economy is stuck in the mud and the American people are losing faith that policy makers can do anything about it. As long as GDP growth is persistently below trend—trend being around 2.5 percent—the unemployment rate won’t be going anywhere good anytime soon. Paychecks, meanwhile, are declining in real terms, so we’re stuck in a cycle where the weak job market hurts household budgets, which trims consumption, which discourages investors.

The only games in town are fiscal or monetary stimulus—there, I said the ‘s’ word—but the president is boxed in, it is said, by three forces: First, he’s got no job-creation bullets left; second, even if he did, and American people don’t believe the government can help on the jobs front (a pathetic 26 percent have confidence in Washington’s ability to solve economic problems); and, third, Republicans in Congress will block any idea he proposes anyway. Thankfully, none of these challenges are as insurmountable as they might seem, and pushing relentlessly to overcome them is the president’s best, and only, chance to change the fundamental direction of the debate, find his footing, and create some momentum for the economy and for himself.

TO BEGIN, the first hurdle—that the government has no more job-creation bullets—is simply false. Despite S&P’s misguided judgment, borrowing costs remain very low for the Federal government. “Bullets,” are cheap, in other words, and virtually every economic indicator is crying out for more fiscal stimulus—not in the form of another large-scale Recovery Act, but in the form of targeted jobs measures.

President Obama’s second obstacle—disbelief that government can help on the jobs front—is a real challenge. He and every other policy maker in Washington have been talking past the public on this issue for months. To make a convincing pivot, he should avoid talking about debt and instead build the case for government’s integral role in the economy right now. Fortunately, there’s lots of evidence that the government can and does create jobs, and not just government jobs. The recent two-week shutdown of the Federal Aviation Administration provides one great and timely example. The shutdown led to furloughs for 4,000 federal workers, sure, but another 70,000 private transportation and construction workers were also laid off of projects they were completing for the agency.