Obama's jobs plan is decent enough, but it creates false expectations

Treasury Secretary Tim Geithner, who sounded really tired in an interview this morning on NPR, says that the president's proposal could result in "hundreds of thousands" of jobs. That sounds like a lot - but it really isn't. The nation has about 14 million people who are out of a job, including more and a million in California. And that's the basic problem with this well-meaning (and politically astute) jobs package: Even if the entire measure gets through Congress, which it won't, the overall impact will be limited, especially short term. That's not to suggest that it's a bad plan - extending help to the long-term unemployed is a must, and the idea of leveraging the cost of infrastructure projects certainly makes sense. The trouble is the president (and his opponents, for that matter) are creating false expectations for what government can do in dealing with an economic crisis that for most of us is a once-in-a-lifetime event. Washington has the ability to provide incremental help, to be sure, but economic growth ultimately rests on stuff that's beyond its control. Here's how William Galston, senior fellow at the Brookings Institution, puts it in a Financial Times oped:

Mr Obama continues to rely on a diagnosis of America's economic woes that misses the heart of the matter. If financial crises really are different from cyclical downturns - as economists Kenneth Rogoff and Carmen Reinhart have argued - then traditional demand-side policy responses are palliatives rather than cures. (So are the supply-side tax cuts at the heart of contemporary conservative economics.) If the epicenter of the current stagnation is excessive household debt, which more than doubled as a share of household income between 1982 and 2007, then we face a choice: Either we wait for deleveraging to occur on its own - a slow, painful process that will take another five years - or we can work to accelerate it by attacking household debt at its core. That would mean pressing creditors for reductions in principal amounts as well as interest rates mortgage debtors must pay - a step the administration has thus far rejected.

It's another way of saying that most of what's in this package is window dressing. Commendable window dressing, no question, but window dressing all the same. In the current context, a cut in the payroll tax probably won't lead to more spending by households, but to more debt paring (as it has since first being implemented). A tax incentive for employers to hire is of questionable value if employers aren't planning to hire anyway. If they are planning to hire, what's the point? School construction money can sometimes get in the wrong hands at the state and local level. The proposal for an infrastructure bank, reasonable as it might be, involves long-term projects that won't begin to deal with the nation's short-term needs (as L.A. Mayor Antonio Villaraigosa shamelessly suggests). Here's a good takeaway from NYT columnist David Brooks:

The administration is putting forth a package to prevent a double-dip recession that may not come to pass with a series of measures that may not work. Yet it's hard to walk away. The prospect of a double dip is truly horrifying. What happens if next month's job's report comes in negative? Or the one after that? Believe me, Congress will be rushing to do something then. Personally, my bottom line is this: I think the president has earned a second date. He's put together a moderate set of stimulus ideas. His plan may not be enough to jolt prosperity, but it might maintain its current slow growth.

For what it's worth, Wall Street seems highly skeptical. The Dow is down almost 300 points.