Job talk

Barack Obamas big jobs speech,which his administration has been building up to for a while,did not disappoint in scope. The initiative he announced to be called the American Jobs Act will be carefully scrutinised in the weeks to come,but there are already more than enough details available to come to a couple of interesting conclusions. First of all,it is clearly the case that Obamas administration has,two-and-a-half years in,finally settled on a theoretically-solid Keynesian understanding of how to get Americas economy out of the trough in which it finds itself,combined with heterodox solutions to getting spending going again.

The nature of the consensus plan reveals current policy thinking,particularly in the sections which detail spending priorities. A national infrastructure bank is planned to use public sector funding to overcome viability gaps in modernising Americas creaking highways,railways and bridges,many of which date from a big push over half a century ago. Spending,therefore,will largely focus on restoring Americas long-term competitiveness and raising productivity. It is the tax-cut side of the plan that will focus on shorter-term amelioration of unemployment,with a cut in the payroll taxes paid by employers and employees alike,which should encourage small businesses to hire more.

Rhetorically,the speech was interesting in that it marks a departure from the earlier strand of Obamas economic thinking in which globalisation,openness and trade links were regularly held up as partly responsible for American job losses. There was no such gesture in this speech,a sign of the administrations growing maturity or perhaps the seriousness of the situation left no space for such suggestions. The rest of the world,Indias export-oriented sectors included,will be hoping that this plan will be sufficient to do both parts of the job at hand: to avert a downturn in unemployment that would shove America into the second dip of a recession; and to upgrade its productivity,in such a way that it can pull its associated economies back onto a higher growth path. Yet merely announcing the plan will not be enough; it must pass the US legislature; Obamas relations with Congress have been strained. It will require considerable political skill; but hearing Obama speak,it was difficult not to sense that he was opening his re-election campaign,and there is no doubt that,at campaign time,Candidate Obama discovers a lot of political skill.