Barack Obama's emergency back-up stimulator, announced today, is a deft political document. For one thing, the timing is impeccable: it was ostensibly a reaction to this morning's dismaying unemployment report, which showed that the nation lost 51,000 jobs in July, and the unemployment rate rose to 5.7 percent, the highest level in four years. And it came a day after Exxon Mobil reported $11.7 billion in profits for the quarter, a record for a U.S. corporation. (And who was the previous record-holder? Why, Exxon Mobil, silly!)
Of course, the conceit of Obama's "Emergency Economic Plan" is to take some of the "excess profits" from oil companies to bankroll "emergency energy rebate checks" to American workers -- $500 for individuals, $1,000 for couples. Obama's campaign calls it "a down payment on Obama's long-term plan to provide middle-class families with at least $1000 per year in permanent tax relief." The rebates, it says, "would help families offset the cost of filling up their gas tanks and heating their homes this winter."
A windfall tax on Big Oil isn't a new idea from Obama, and its dramatic reappearance -- and rechristening -- today might have something to do with the Republicans' new-found interest in off-shore oil drilling. Not only is John McCain relentlessly attacking Obama for opposing off-shore drilling, but Senator Mitch McConnell (R-KY) has been going after Senate Democrats, too. For Obama, today's initiative is an opportunity to disarm what some Republicans think is their party's best weapon against the Democrats by drawing a direct line between high energy prices and the well-being of working Americans. "Exxon-Mobil made $12 billion last quarter," Obama himself pointed out this afternoon on National Public Radio. "They made $11 billion before that and $11 billion before that. And not all of this is going into research and development, and families need some relief."
It's also meant to turn the tables on McCain. As the Obama campaign notes in the plan, "McCain's corporate tax cut would put an additional $4 billion annually in the pockets of oil companies, including $1.2 billion for Exxon-Mobil alone. McCain's gas tax holiday proposal gives oil companies another tax cut -- and hopes they pass on a small portion of savings to consumers."
Obama's plan had two other components: a $25 billion fund to help states maintain their budgets and a $25 billion fund to replenish the Highway Trust Fund, rebuild road and bridges, and repair schools. This would be deficit spending. "When it comes to a stimulus package, typically you're not looking for offsets," Obama told NPR. "Just by stimulating the economy, the stimulus is paying for itself."
That's not necessarily a bad thing. Though most economists scorn a windfall profits tax (but Obama, like Hillary Clinton and McCain before him, isn't going to throw his lot in with the economists), they often like stimuli. And as I wrote back when Congress was debating the stimulus package that ultimately brought us $600 checks, economist Mark Zandi found that two of the best ways to stimulate the economy are the two that Obama outlined today. Infrastructure funding returns $1.59 in GDP for every dollar spent, while state aid generates $1.36. (Zandi, incidentally, is -- or was -- an economic adviser to the McCain campaign.)
McCain's campaign had this response to Obama's announcement: "The higher taxes that Barack Obama supports are one of the surest ways to kill jobs and exactly the wrong approach to a slowing economy. While American jobs and families suffer from high gas prices, Barack Obama stubbornly opposes additional oil drilling, more nuclear power, and the gas tax relief we need."