Barack Obama sends his American Jobs Act to Congress today. Supporters are thrilled that the president is taking his fight to the people. Even many skeptics are saying that at least Obama is offering a first step, while acknowledging that the plan is not enough.
Unfortunately, the facts are more prosaic. Obama’s proposals are simply the same as since the start of 2009: temporary tax cuts (half the new program) and temporary spending increases. These policies are not effective.
The theory behind Obama’s policies is Keynesian: that a temporary package of tax cuts and spending increases can provide a short-term boost while the economy returns to self-sustaining growth. Many economists agree with this logic, but the underlying economic theory is much weaker than supporters realize. It fails on two counts.