In crushing news for the U.S. economy and President Obama, the unemployment rate rose from 9.6 percent to 9.8 percent last month as the economy added only 39,000 jobs, well below the expected boost of 150,000.
The crummy jobs report – the most important indicator for the voters of the health of the economy – weakens Obama’s hand as he seeks to negotiate a Bush tax cut deal with the Republicans. Not only has he been rejected at the polls, but the optimism he and economists had been stoking as private sector hiring appeared to be bouncing back has vanished.
The move by the House Thursday to raise taxes on higher income earners, and the plan by Senate Majority Leader Harry Reid to pull the same stunt Saturday by putting up a bill that will never get through the Senate, further strengthens the Repupblicans’ hand. People aren’t going to be interested in class warfare games now – but they will be receptive to the message that you don’t raise taxes while the economy is faltering.
Obama has no ammunition left for his campaign to blame the lagging economy on someone else. He’s been in power long enough that nobody is going to believe that this is not his economy. All the garbage about Republicans sipping Slurpees on the sidelines while he and Pelosi tried to right the economy is over. He’s been the president for more than 22 months, he has had a Democratic House and an overwhelmingly Democratic Senate, and the unemployment rate is going up, not down.
The numbers are actually worse than they appear at first glance. Remember, adding 39,000 jobs is effectively losing jobs, because it takes the creation of about 100,000 to 125,000 jobs just to keep pace with new entrants into the workforce. And many of last month’s new jobs were temporary. Retail outfits shed jobs, and so did manufacturers.
Businesses are not hiring. And businesses, which presumably have some idea why they are not hiring, want the Bush tax cuts to stay right where they are.
The Tax Relief Coalition, which includes major Washington players like the Chamber of Commerce, the Business Roundtable of corporate CEOs, the National Association of Manufacturers, the small business lobby, the National Association of Wholesaler-Distributors, Americans for Tax Reform’s Grover Norquist – perhaps the leading conservative economic activist – as well as over 1,000 other Biz groups and companies, sent a letter to all members of Congress this week in an apparent effort to stiffen the spines of GOP leaders as they enter Bush tax cut negotiations with Congress.
We are writing today to urge you to act promptly to extend all of the tax rate reductions enacted in 2001 and 2003 which will expire on December 31st. Specifically, we believe that the lowered rates on all levels of individual income, as well as on capital gains and dividends, should be made permanent. Further, we believe that this decision should be made by a straight up-or-down vote of ALL members of both the Senate and the House of Representatives.
At a time of severe economic distress, raising taxes on businesses, investors and individuals is counter-intuitive. Tax increases will discourage Americans from further investing in the economy.
Obama has to throw out the playbook he’s been using and change his direction. It will piss off Nancy Pelosi, but, ironically for Republicans, it may save his presidency.