Zakaria: Obama's jobs proposals not enough
September 9th, 2011
12:57 PM ET

Zakaria: Obama's jobs proposals not enough

Editor's Note: The following is a Q&A with Fareed Zakaria about President Obama's Thursday night speech on jobs.

Amar C. Bakshi: What did you think of President Obama’s jobs speech?

Fareed Zakaria: Obama made a very good speech Thursday night. Many of his proposals were strong, especially his focus on upgrading U.S. infrastructure. But overall, the President’s proposals are temporary and short-term. What we really need is to start transitioning to a longer-range plan of investments for the next generation of growth in America. Let’s face it, the last generation of growth in America was caused by an expansion of consumption fueled by easy credit. This will not work going forward.

Why do you think President Obama is setting out primarily short-term fixes?

The President seems trapped within Washington’s current debate about deficit reduction. Yes, we need to get the deficit under control but you can’t cut your way to a new generation of prosperity, to a new generation of industries and to a globally competitive position. Deficit reduction is incredibly important, but the only way to really get at it is through entitlement reform, which means long-term changes to Social Security, Medicare and Medicaid.

At the heart of the Republican skepticism about Obama’s new jobs bill is the belief that his prior stimulus was unsuccessful. But that’s not true. The stimulus worked. What most Americans don’t realize is that the stimulus was relatively small. Also, a third of it was just tax cuts. These were truly wasted because giving temporary tax cuts to people feeling strapped doesn’t result in new economic activity; people just pay down their debts or save the money. Nevertheless, a lot of the stimulus money went to state governments so they didn’t have to fire schoolteachers, firemen and policemen. That money worked as intended. And about $100 billion was put into infrastructure projects which, by in large, worked as well.

Critics of further stimulus are right to doubt the value of doling out cash in the form of subsidies and extensions of benefits; ultimately this isn’t the solution. It’s a stopgap measure. And there is still too much of an emphasis on simply trying to resuscitate the consumption economy that the U.S. has relied on for years. Our over-reliance on consumption, in fact, has been part of our problem for a long time. For four decades, consumption in the U.S. was around 62-63% of GDP. Starting in the 1980s, that figure rose to 70% of GDP where it was before the 2008 crash. That is not the profile of a healthy economy and Americans are probably not going to get back to their pre-crisis levels of consumption because it was all based on credit, not on any real increases in income.

So what should Obama do?

What we really need is a long-term growth strategy from the government that is focused on spurring investment - not consumption. Investing in infrastructure, research and development of new technologies should be done in the smartest way possible, leveraging private sector capital. For example, we still build infrastructure in America in an amazingly socialist manner; we don’t involve the private sector like many other countries do. As a result, there is a tendency to view every bridge being built as just more government spending. But not all government spending is alike. Government spending that is simply giving people subsidies to build larger kitchens is one thing. Government expenditure that goes toward building a bridge that will increase economic activity or building a smart grid that is going to create a whole new energy system is a completely different thing. The latter investments are pro-growth and are generally favored by the private sector. Overall, we really need a much more ambitious strategy
for investing in our future.

Conservatives are saying this is just more big government.

The view I’m outlining doesn’t correspond to the simple, sterile ideological debate that has seized Washington between those who believe “government is good” and those who believe “government is bad.” The truth is that in some areas there is too much government spending and we have to pare it back. Meanwhile, in other areas, such as investments in research and development, we have too little government spending. We have to find a way to get beyond this debate about “good government” and “bad government”. Instead, we should talk about improving how government does its crucial tasks, and scaling back its involvement in sectors where it’s not so helpful. This should be done with ruthless pragmatism. And this should be done with a constant eye on figuring out what is best for the long-term growth of the U.S. economy and for the long-term wages of the average American worker.

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Topics: Economy • Jobs • President Obama

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soundoff (105 Responses)
  1. Curtis Gwin Jr

    Ahh Fareed you obviously aren't unemployed, even short term solutions will help. Obama won't be able to do anything long term until he wins reelection, he won't be able to get the do nothing Republicans to sign on to anything-but WE CAN!!! Each and everyone in this country who truly cares about it and our future has the greatest nation ever on this planet so far has to let the Republicans know how short their political futures will be if they don't get off their duffs and do what we sent them there for!! Time for us to wipe the smug smiles off their tan faces and let them know That We The Are Their Worst Nightmares-FEAR US!!!

    September 10, 2011 at 9:38 pm | Reply
  2. amarjeet s sehmi

    It is enough for Republican majority in Congress to digest in 1st phase. Rest can be done after 1st phase is completed to launch 2nd phase with necessary reforms & measuring performance of earlier commitment with needed corrections of new drive when economy & jobs will start giving dividends..

    September 10, 2011 at 11:24 pm | Reply
  3. sr

    What will work is for Obama to change the tax code and provide a 2X deduction for every American employed in an American business – small or big. Yes this will mean a huge tax cut but US employment will go through the roof and allow American companies to compete on an even footing with China and India.

    September 11, 2011 at 6:14 am | Reply
  4. sr

    It is cheaper and safer for startups today to hire workers from India or China or locate manufacturing in Asia instead of the U.S. Solyndra would not have gone down if they had manufactured from the start in China – just like Apple does.

    The only way to reverse this is is to significantly reward American jobs by giving companies small and big a 2X labor cost deduction. This will help bring back the Trillions that big business has overseas.

    September 11, 2011 at 6:24 am | Reply
  5. sr

    Example take a $10M business, if $5M is labor cost if U.S based or $2.5M is labor cost if Asia based then the business would choose Asia. The business will be taxed for the extra $2.5M profit made by choosing Asia.

    If a 2X labor cost deduction is offered by choosing U.S then now the business will have no tax and can reinvest its profits for the future expansion and hire more. The tax will be paid now by the Americans employed and it will be on a $5M salary basis. Nett result Americans get employed, tax collection for U.S doubles and businesses get more profitable and can grow.

    September 11, 2011 at 6:50 am | Reply
  6. JSilver

    Fareed is one of the smartest guys out there. Too bad average Americans could not see the obvious. Growth driven by consumerism (i.e. jobs are exported to low wage producers and then stuff is bought back for cheap) in not sustainable. Also, you can not save your way out of a recession, just not happening. Companies are hoarding cash. A tax on deposits maybe?? Spend, spend, spend... this is the perfect time to upgrade infrastucture, research facilities, etc. Reduce globalization exposure. Stop thinking about our children's debt and realize if we do not spend now, we'll be a second world country in 10-20 years as China, India, Brazil pass us.

    September 11, 2011 at 7:27 am | Reply
    • kp

      I agree with you that Fareed is a very smart man and there are many who do not undertand him.

      BUtm he never said Spend, Spend, Spend. He actually said US cannot sustain the economy based on consumerism alone where personal spending has become more than 70% of the GDP (based on borowwed money). That is only delaying the inevitable.

      What he is saying is investments in infrastructure and R&D that will spur new growth into areas that did nto exist and hence create new jobs (and I am thinking, implying increase through exports).

      September 16, 2011 at 4:06 am | Reply
  7. JJ Pieksma

    No offence to anyone, but isn't President Obama right? To dispence with all poilitics for a couple of months and actually do something contructive to save the economy? There is no right answer to this crisis, it's just too complicated. The US is in the unique position where they can implement new tax breaks and measures far more decisive and quickly than most other countries, with an added bonus that the measures and steps taken will have a profound effect all over the world.

    And yes, we know ( I live in the Netherlands ) that it's hard in the US, and that it's difficult with the political situation. my honest opinion? BS. we need to get around the fact that all countries all inked through business, and that this is a problem that can only be fixed by the US. In Europe we're all legally being robbed by the Greek, and due to the democratic systems in most european countries, actual decisions are few and far between. Asia is in shambles as well, despite the economic growth in the region.

    so give the man you all put in that office a chance to fix and clean up the mess! worst case? you'll have better brigdes and highways, and construction workers are the new lawyers. If i'm wrong please tell me, but the politics should be left out of this. period.

    Regards JJ

    September 11, 2011 at 8:24 am | Reply
    • Paul F

      JJ – here's the problem. We just did this 2 years ago with nearly $900 billion, double the current deal, and it did little but save government jobs and union jobs. The majority of Americans not only were not helped, we continued to lose jobs, homes, and our life savings.

      We are pretty tired of seeing billions wasted on bailing out banks and wall st and government, while we languish and the rich and ruling class remain largely unscathed. Obama made this political, and what's worse, lied about this debacle being paid for, while also not producing the bill that he told Congress they had better pass now.

      The guy takes a working vacation, takes his time getting to the "big speech", and then shows up with NO BILL, just more lies. Check out the FactCheck on his speech – it's embarrassing. If he were a CEO he would be fired and maybe sued by stockholders.

      September 11, 2011 at 4:55 pm | Reply
    • sdabby

      I verfy much agree with your point of view. Unfortunately even before President Obama took office, he has been under relentless attack by talk radio and FOX news. The hateful speech has led to a great deal of polarization in this country.

      At some point, people will vote in their self interest - but right now the polarization continues.

      September 11, 2011 at 8:55 pm | Reply
  8. Paul F

    Here is my fundamental problem of Government bailing out government. Why are their jobs more important than ours?

    We already pay a pile of taxes, trillions annually, for all these people to have good paying jobs.

    I've taken a hit of more than 50% in salary, plus I've lost benefits, as a professional, and have had to spend way too much of my retirement savings in order to survive this past 4 years. I am 51, divorced, own no home, and now have no hope of retiring before my early 70's.

    I'm actually not complaining, but am pointing out that this has been a devastating time for actual taxpayers, people like me who have generated millions in revenue for the companies I've worked for since I was 16.

    So why is the government worker getting bailed out, AGAIN, while Joe Q Public is basically on his own?

    September 11, 2011 at 4:47 pm | Reply
  9. RobC

    Balance Sheet or Income Statement. Infrastructure investments also add to the balance sheet; not just short term stimulus. While there is a cost, there is a value from the long-term return of the "bridge". What is the "replacement cost" of the road and buildings that had previously been invested in and what value are they delivering every day?

    September 11, 2011 at 7:34 pm | Reply
  10. sdabby

    My understanding is that the application for SBA loans is very complex. If it can be streamlined, there would be a lot more startups.
    We are launching a new business on October 1. The business is funded by 10 private investors There is no bank debt. The agreement with the investors is relatively short and straight forward - 3,053 words total (yes, three thousand and fifty three words).

    I'd like to see the SBA loan application limited to 6,000 words.

    September 11, 2011 at 8:35 pm | Reply
  11. Coach Lew

    I suppose not Zacharia. You want him to keep giving our country away and making huge promises so he can get re-elected. Man you make me sick.

    September 12, 2011 at 1:04 am | Reply
    • info

      How has he done that?

      September 16, 2011 at 4:11 am | Reply
  12. RickMeister

    The problem I see is continuing to try top-down recovery. From TARP, Stimulus, etc.
    My plan: mail every taxpayer with a gross income below $100K a check for $5,000.00 and demand is back.

    September 13, 2011 at 3:46 pm | Reply
  13. Erik Wassenich

    The America Jobs Act will be unsuccessful unless the US invites China to invest in the USA, open factories, hire people. China must have the same rights and responsibilities as all other US partners. China has been in business for longer than any other country, to them business is common sense. Where is America's common sense if the Chinese are not invited. About China stealing US high technology – China is a much bigger market than the US, all technologies will be there sooner or later. Where is America's common sense??

    September 14, 2011 at 1:03 pm | Reply
  14. kazport

    Fareed all i can muster up to say is you are dillusional. No need to go into detail. So out of touch.

    September 14, 2011 at 5:48 pm | Reply
  15. clearick

    You're talking about moving forward without even understanding the problems, which are multiple. First we have the actual economy and it's output. Then we have the distribution of the wealth created from that output. Both of these should be maximized because it's important for the society to be productive. Then you have trade with other countries which remains one-sided because of currency manipulation and unequal pollution, pension and health care provisions. Finally we have the banking system and government which are really one in the same since it takes a huge amount of wealth to sway an election by buying TV access. For far too long they have ignored America's decline and instead picked the fat off the American carcass. It's easier to make money this way than doing sound things like investing for the future or maintaining proper credit standards. They bilked the stock market and now they've bilked the housing market, blowing bubbles in each and letting them crash. These people are criminals, not good leaders! And even worse it's not the politicians but the money behind them that enabled them to repeal the Depression Era legistlation designed to prevent a real crash! The first thing the Government has to do is protect the people from themselves, from unbridled greed and arrogance. If the government is corrupt this is what you get. So the first thing is to break the control of the wealthy because what is in their interest is not in yours. You go and die in a war that they started to make money at their munitions plant. How does that help you? Find a way to get money out of politics or level the playing field so we get a real difference in candidates with different ideas to solve this problem. It's not a secret to revive an economy, but you need to coordinate trade policy and economic policy in concert with others to accomplish anything. The current status quo is bad for American business.

    September 14, 2011 at 8:46 pm | Reply
  16. rightospeak

    We will just print more paper, give people ficticous jobs till election time and then, it is the same b.s. The off-shored jobs are not coming back so there will be no real jobs created. We are giving more technology to China -they have a clout with us ,debtors.Tthe border with Mexico is wide open. Unless the jokers in Washington are replaced with some patriotic souls , we are doomed.
    Let me be "perfectly clear ", as Nixon would say, our economy was lost by stupid politicians and it will take smart ones to bring it back. Get rid of Obama and all the useless people in Congress !

    September 16, 2011 at 6:14 pm | Reply
  17. Trueman

    It's a pretty sad day when a Journalist has better ideas and philosophies than the politicians...

    September 16, 2011 at 9:49 pm | Reply
  18. Helen

    To Trueman. Politicians don't get elected on their smarts. They have social skills and communications skills. Most of them like the limelight. Unfortunately intelligence only attracts a few voters. Obama is smart, but he got elected on his ability to inspire hope, build coalitions, and avoid divisiveness. I wish there was a way to ensure that leaders were knowledgeable people with sound logical and ethical reasoning skills. Is there a way to do this democratically? Got any ideas?

    September 16, 2011 at 10:41 pm | Reply
  19. Chance Novak

    So CNN is now interviewing its journalists? What makes this reporter such an expert on economics? Has he served as a top-level advisor to a president? Served on the Federal Reserve Board? Won the Nobel Prize? (oh, yeah, that's easy now, strike that).

    September 18, 2011 at 12:50 pm | Reply
  20. josephgordon

    Where is our 'industrial policy" in this matter. Virtually, MIA. We need a strong "industrial policy", like Germany. "Declining American production" is the root of our jobs problem. It has virtually "fallen off a cilff" and left us with low paying service jobs. The truth is we have exported our technology for decades all over the globe. Not just China the most agregious case of somebody playing by other rules, but we exported jobs to almost everyone that we have a negative trade balance with. We need an "industrial policy" that takes care of us first. I say turn this ship around right now! Stop threatening tarrifs, it will not work. Simply lower taxes over 5-years on domestic production, while raising taxes over 5-years on foreign production targeted to this market sharply. Fed. gov. should get with states to offer incentives over 5-years to invest and employ a certain number of people. It will result in the greatest jobs renaissance in history.

    October 2, 2011 at 3:49 pm | Reply
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