Obama calls for a jobs bill

It is a measure of how successful President Obama's foes have been at marginalising him, that what was meant to be a major speech on the economy ended up looking so minor. Postponed by a day, sandwiched in before a ball game, bereft of initiatives worthy of the scale of the challenge he faces, Mr Obama's speech to Congress last Thursday was his attempt to regain the initiative.

With congressional Republicans determined to cut spending and taxes, and with Mr Obama having been seemingly tricked into their corner during the summer's debt-ceiling negotiations, his options are few. He'd love to be the rich kid on the block, heading down to the corner store with enough money to treat everyone he sees. Instead, he's the poor kid timidly begging his parents for an extra nickel of allowance so that he can supersize his soda.

Most economists agree that what America needs is a big stimulus package. The markets seem to be saying much the same thing. As Martin Wolf argued in the Financial Times this week, with investors driving government bond yields to historic lows, they are all but throwing money at the government in the hope it will do something constructive with it.

Determined to give it back

As fast as it comes in, Republicans are determined to give it back. What panicked investors will do with it then is a mystery: probably put it in gold or silver, since they detect few big economic opportunities in America at the moment. The thing is that America has got it all wrong. Keynes said you should save in bad times, spend in good. Back in the 1990s boom, rather than put money away for a rainy day, Americans went into debt. Now times are bad, they're all trying to crawl out of debt. Since they're tightening their belts, the economy worsens, and the downward spiral begins.

Modest as it may be, Mr Obama's proposed package of tax cuts and spending increases could, if enacted, have a modestly positive effect on the economy over the short term. But it is perhaps too much to hope for that congressional Republicans will approve all of it. It will almost certainly get whittled down, unemployment will remain high, and the economy might yet go back into recession.

Yet, Mr Obama confronted Republicans in his speech, in effect reversing Teddy Roosevelt's dictum by talking tough while carrying a small stick. His overly accommodative stance during the debt-ceiling negotiations lost him support in his own party and he's trying to claw it back ahead of next year's election. With his approval ratings sinking, and his own base unhappy, Mr Obama's best hope is that the Republicans nominate someone from the conservative fringe, and emerge as a party beyond the pale of America's mainstream.

At the moment, there is a good chance of that happening. Congressional Republicans may well continue to look intransigent. They may well suffer for it at the polls next year. But it's a non sequitur to assume that Obama will then benefit.

Risky business

Equally, while the White House will no doubt smile to see Texas Governor Rick Perry emerging as the front-runner for next year's Republican presidential nomination, such complacency might be risky. Historically, it is extremely difficult for a president to win re-election at a time when unemployment is rising. There is every indication the situation next year will be no less dire than it is today. How Mr Obama will finesse that is anyone's guess.

Mr Obama's best hope, and his country's as well, is that good sense will prevail, and the bill passes substantially into law. Its effect on the economy will provide relief through next year's election, and a chance for Americans to decide how best to face their country's long-term challenges - which remain considerable.

But I don't know if I'd want to bet on it.

John Rapley is a research associate at the International Growth Centre, London School of Economics and Political Science. Email feedback to columns@gleanerjm.com and rapley.john@gmail.com.