A Quick Note on the American Jobs Act and Entitlements

Liberals in general appeared to be pleasantly surprised by President Obama's speech to Congress last Thursday in which he proposed a $447 billion package of tax cuts and spending increases designed to spur job creation. For example, while Paul Krugman had some reservations about the President's proposal (mostly concerning the effectiveness of tax cuts), he wrote in his column that he "was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected." Liberals, however, may be less happy about how the political need "to pay" for this package may impact long-term deficit reduction proposals that will be produced by the new super committee created by the debt limit legislation.

According to media reports, the White House has outlined some tax proposals to cover the $447 billion package. However, effectively the $447 billion will be added to the amount the super committee has to find in order to prevent automatic spending cuts. This implies that entitlement programs, such as Medicare, Medicaid, and Social Security are likely to be even more inviting prospects for spending cuts, given the larger amount of deficit reduction measures that need to be found in order "to pay for" whatever jobs legislation eventually is enacted.

The American Jobs Act proposal seems to have a dual purpose, to jump start the economy and to achieve entitlement reform. In other words, it is an attempt by the Administration to reach an elusive "grand bargain" that was not achievable during the debt limit negotiations.

Some conservatives, donning the mantle of being "responsible," are saying that this is all to the good and the Republicans should take a deal of short-term stimulus for "serious" entitlement reform. (For example, see this column by David Brooks.) When it becomes clearer that President Obama is trading temporary spending increases and payroll tax cuts for permanent reductions in key New Deal and Great Society programs, liberals are likely to feel disappointed once again. While some elements of the Republican Party have implausibly attempted to paint Obama as some kind of socialist, liberal Democrats are realizing that the President is not as liberal as they once thought.