Commentary Magazine


Sessions: Obama Plan Unlikely to Pass Without Offsets

A victory for Obama tonight is pretty straightforward: he needs a strong, reasonable-sounding proposal with new ideas to perk up the financial markets and give his approval ratings a bump. But the long-term impact his plan has on unemployment, which is supposed to be the real point of the address, depends on whether it can get through Congress – a task that already seems destined for failure.

According to Sen. Jeff Sessions, the top Republican on the Senate Budget Committee, the only way the president will get GOP support is if he can propose cuts that will offset the cost of the stimulus immediately.

“I think it could be in total jeopardy if there are no real offsets and this is added debt,” Sessions said during a phone call with reporters.

The White House has already said the president will introduce a cost-cutting plan equal to the size of the stimulus. But Sessions is concerned this proposal will stretch the reductions out over a 10-year period, while most of the $300 billion stimulus funds will be spent in the next two years. This would mean the U.S. would have to shoulder an additional burden of debt for years to come.

He added that Obama’s speech was a sign of “political panic,” and worried it could actually be “dangerous” for the economy.

“I think it could be dangerous for him and the economy if the American people and the business community see it as not serious,” Sessions said. “He could cause even more disappointment and more concern and hurt the economy instead of helping it. I’m worried they don’t even have a plan that, when it’s fairly evaluated, will do any good.”

There’s definitely the possibility of a negative outcome if Obama fails to deliver. Earlier today, stocks fell after Federal Reserve Chair Ben Bernanke gave a disappointingly vague speech about the government’s efforts to boost the economy:

“The Fed hasn’t come out with more options or tools that the market wants or was expecting,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. “The market was disappointed because this wasn’t a game changer.”

The political difficulty of getting Obama’s new stimulus through Congress, and the prospect the plan will pile on more debt, already has Wall Street downplaying any temporary market bounce:

 “It is unclear exactly what the president can conjure up in the short term that will promote job growth without significantly deepening the current budget shortfall,” writes UBS’s [chief investment strategist] Mike Ryan.

Given that the president’s jobs plan is unlikely to pass Congress — and won’t do much even if it does — “there is considerable room for disappointment this week from Washington,” Ryan says.

That has to be a lot of pressure on the president, and we’ll soon see if he can deliver.