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Obama’s Weak “Export Growth” Policy for Job Creation

The President and his economic team are both keenly aware of the jobs crisis, the high unemployment that has ravaged the nation, and yet are not prepared to do anything close to what is necessary to stop it. The Treasury Secretary goes on television and says that government cannot create jobs, after trying to hammer the message for months that the stimulus package saved or created millions of jobs (which it did). Faced with an unemployment problem that can be best counteracted with government spending on job creation, the White House runs an event yesterday to promote exports through more of the same corporate-written trade deals that caused an exodus of jobs in the 1990s.

President Obama, who vowed in his State of the Union address to double American exports over the next five years, said on Wednesday that he would renew efforts to renegotiate long-stalled free-trade agreements with Panama and Colombia and persuade Congress to adopt them.

The two trade pacts, and a third one with South Korea, were negotiated by the administration of President George W. Bush, but all three have languished in Congress because of deep opposition from Democrats. Mr. Obama said in Toronto last month that he intended to make a new push for the South Korean agreement, and on Wednesday he pledged to press ahead with the two Latin American pacts as well.

This speech featured the now-patented Obama “on the one hand, on the other hand” explanation of the trade impasse, positing himself as the man to move beyond the “tired debates” between labor and business. But the real tired debate is one that relies on the same kind of trade deals that sapped America of jobs in decades past to revive the economy in the future. Set aside for a moment the fact that America has never doubled its exports in a five-year span in its history. Obama focuses on exports to the exclusion of imports, neglecting the fact that we have a trade imbalance at a time where only record trade surpluses would create jobs. And he waves around an old trade deal to excite some kind of jobs agenda, a true mish-mash of competing ideas.

The president now presents the bilateral trade accord with South Korea — negotiated during the Bush years — as illustrative of his agenda. The treaty is an archetype of the old order, an imbalanced “free trade” treaty advertised as creating jobs that will do little to affect the oligopolistic structure of Korean markets that systematically disadvantages US exports. The president would have been wise to start over, and use the Korean negotiations as a precursor for how to deal with China. Instead, the president’s endorsement, a dutiful recitation of free trade pieties, is a tribute to the free trade priesthood that has hounded him to return to the faith. Like Galileo prosecuted by the Church, he avows that the sun does revolve around the earth.

We’ve witnessed over and over again the grip of the old economy — and the strength of entrenched interests in frustrating the change Obama called for. The “drill, baby, drill” crowd filibusters the energy and climate bill in the Senate. Financial reform will leave the big banks more concentrated than ever, with financial profits headed back over 30% of all corporate profits. Trade deficits are going back up. China, Germany, Spain and other nations with industrial policies are capturing the lead in the emerging green industries. Inequality in America is growing, even as the middle class is sinking.

But the political team in the White House, and the President himself, have succumbed to that old economy grip as well. They have given themselves over to the rhetoric of deficit reduction, and their job creation strategies, like the one explained above, are woeful and obviously insufficient, just window dressing in the face of legislative paralysis. They seem to be on a course for bad policy and bad politics at the same time. As Brad DeLong says today:

It is remarkable. I had expected that we economists would have to fight Democratic political advisors who would be pushing for policies that were bad in the long run but that gained votes in the short run. I had never expected to be fighting Democratic political advisors who are pushing policies that are:

bad in the long run.
bad in the short run.
lose votes too.

Me neither.

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David Dayen

David Dayen