In the wake of a grim August jobs report showing zero job creation, and tied in knots by the obstructionist Republicans, Barack Obama is said to have no good choices, no way out.
Big-spending programs are ruled out by the establishment’s obsession with deficits. The president’s bipartisan entreaties are met with scorn by the GOP. Even some Obama supporters think his presidency is failing. His focus on the jobs crisis—the subject of the major address he’s poised to make as we go to press—was widely dismissed as too little, too late, even before he stepped up to the podium.
Notwithstanding the skepticism and the real political obstacles he faces, President Obama is not powerless to act. In fact, there are many ways he could brighten the darkening circumstances and reshape national destiny. A president has discretionary authority, especially in an emergency, to make seismic changes in fundamental policies—without receiving Congress’s approval or even consulting it in advance. Indeed, the Obama White House could point to the historical precedent set by Richard Nixon and Ronald Reagan. In far less dire circumstances, both Republican presidents imposed unilateral policy shifts—wage and price controls or emergency tariffs or arbitrary limits on imports—to halt economic deterioration and protect American jobs.
What could Barack Obama do that doesn’t require curtsying before right-wingers? Retired South Carolina Senator Fritz Hollings offered a provocative answer: “He can start by enforcing the laws already on the books.” Hollings meant unenforced trade laws intended to protect US jobs against violations by foreign industries. His point applies just as well to the administration’s failure to prosecute financial fraud and threaten bankers with prison.
Here are four big strokes Obama could take to stimulate job creation and improve prospects for recovery:
Write down mortgage debt for the millions of “underwater” homeowners facing foreclosure. Debt forgiveness would be highly stimulative as well as just. Reducing the capital owed by families would enable them to keep their homes, rebuild savings and begin to act like consumers again. Banks would take a hit on their balance sheets, but those loans could never be repaid anyway. The New Bottom Line, a national campaign of labor/liberal groups and grassroots networks like National People’s Action, estimates that writing down underwater mortgages to market value would pump $71 billion a year into the economy and create 1 million jobs. Because a huge portion of the failed mortgage securities known as “toxic assets” are now federally owned—purchased by housing agencies like Fannie Mae or the Federal Reserve—the White House can use its clout to engineer terms for a general write-down. Bank regulators can lean on bankers to comply.