Obama’s trillion dollar folly?

Soumendra Mitra Old habits die hard, and the habit of fiscal adventurism by living out of one’s pocket is too firm and unromantic to get rid of. Perceived to be as an opening gambit of a new political season, US President Barack Obama’s much touted rescue ‘Act’ comes amidst the release of grim US employment data. And if the semantics are to be believed, it will ward off the US fiscal stagnation and bohemianism.

For the first time since World War II, Uncle Sam has failed to churn the economic engine to create new jobs. And for the first time since his 994 days of being in the office, did Obama realize the importance of real economy and the much needed change in the tax structure. After being ‘K-fed’ by the Federal Reserve whose phase of partial amnesia still looms with a hopeless chagrin on the average Americans, finally Obama decided to assert himself and take the Conservatives head on. His attempt to ward off the economic gloom by putting the US fiscal house in order through “American Jobs Act” comes with deft political overtures. Standing in-line with the equity based principle of ‘fair shake and fair share’, the proposed act proposes to do away with class warfare. And the road to end this economic clash of the classes leads to the generation old populist perception of capital realignment on the lines of economic equity. So to a certain layman, the intent part of the act sounds as if an ideal economic resurrection is in the offing as it speaks of creating more middle class jobs, increase the savings rate of the average American and make changes to the outrageous tax slab. However, the crude realities of a much more complex economic mechanism in play make the act appear too small to handle the mess. Moreover, as an antidote to the present economic stagnation, the USD 3-trillion deficit reduction plan over a decade has not been able to generate enough positive buzz. The crisis which the Jobs Act and the Deficit Reduction Plan aim to negate is not just a demand and supply mismatch or lower market sentiment. As an economic amalgamation of vectors like lower consumer demand, credit crunch, existing consumer debt, freeze in investment, government red-tapes and unhealthy scepticism of public towards the entire economic set-up, the crisis is beyond economics at the moment. Thus, the attempt of targeting any one of the economic forces divided over ideological planks instead of addressing the complex interplay is like getting lost in a Kafkaesque world. It is indeed strange to take note of the fact that the prime solution to the economic mess lies in building a healthy political consensus between the Democrats and the Republicans. However at the moment, that political consensus seems to be eluding all like the Holy Grail. The overwhelming penchant of the Democrats for more government spending to give a facelift to the consumer-spending stands in contrast to the Republicans demand for lower taxes and lesser regulations. So while the Democrats believe that just by pumping more government-spending, especially in infrastructure. Things will become hunky dory, its political counterpart is clung to the idea of lower taxes. But both the parties are failing to take a grander stand and are busy targeting one or the other economic vectors rather than taking a holistic stock of the situation which would include all the vectors. With the economic disaster exposing the worst of foibles in the US political spectrum, the bickering between the Democrats and Republicans is definitely not the democratic America of which the investors and Whitman used to be proud of. The hard-line approach adopted by both the parties without realizing the enormity of the situation is hitting and hitting hard the lives of the average American. It is just a matter of time that Obama’s plans worth trillions of dollars will become a folly if a just economic package fails to fill the political vacuum. All eyes are on Uncle Sam to see if this time around it walks the talk or not.