Courtesy Federal News Service
OBAMA CAMPAIGN CONFERENCE CALL
SUBJECT: THE NEW JULY JOBS NUMBERS AND SENATOR OBAMA'S NEW EMERGENCY ECONOMIC PLAN
BRIEFERS: JASON FURMAN, DIRECTOR OF ECONOMIC POLICY, OBAMA CAMPAIGN; JARED BERNSTEIN, ECONOMIC ADVISER, OBAMA CAMPAIGN
MODERATOR: MOIRA MACK, SPOKESPERSON, OBAMA CAMPAIGN
OPERATOR: Good afternoon and thank you for standing by.
At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. At that time, if you'd like to ask a question, you may press star one.
I'll now turn the call over to your first presenter, Ms. Moira Mack.
Ma'am, you may begin.
MS. MACK: Thank you. And thanks everyone for joining the call today.
We're happy to have on the line Jason Furman, who is the director of Economic Policy for the Obama campaign; and also economic adviser, Jared Bernstein, to discuss Senator Obama's new economic -- emergency economic plan and also the new jobs numbers report that came out today.
So to start off, I'd like to turn it over to Jared Bernstein.
MR. BERNSTEIN: Thank you.
At the meeting of economists that Senator Obama convened earlier this week, there was general agreement that our economy faces serious challenges, and today's jobs numbers just underscore those concerns. We found out this morning that jobs had declined for the seventh month in a row -- down 51,000 in July and 463,000 so far this year.
The unemployment rate jumped from 4.5 percent in June -- I'm sorry -- 5.5 percent in June to 5.7 (percent) in July. That's a full point over its year ago level. We've added 1.6 million people to the jobless roles. Under employment, by the way, which is a more comprehensive measure of the extent to the labor market weakness right now, rose to 10.3 percent -- highest level since 2003.
By the way, that under-employment rate includes 5.7 million people who are working part time, though they'd rather have full-time jobs. So they're under-employed workers.
Now, I've been focusing largely on job losers and the under employed. Obviously, most workers keep their jobs, even in a downturn like this, but that doesn't mean they're not affected by the weakness in the job market. And in fact, the way to just see how much they've been hurt by this is to look at the wage part of the story.
We learned this morning that because of the decline in average hours worked per week, along with slower growing hourly wages, weekly earnings -- that is your weekly paycheck -- weekly earnings are up 2.8 percent before inflation. That is the slowest pace of weekly earnings since September 2005 -- actually, it's the same rate as last month. But together, that's the slowest at which nominal wages have risen in a few years. And what's important to note is that inflation's running at 4 and 5 percent. So the buying power of weekly paychecks is dropping sharply.
Now, most attendees at this meeting -- myself included -- viewed the risks of inaction, the failure to craft an efficient, effective policy to offset these serious problems, are simply too high to ignore. The U.S. economy is just not growing quickly enough to generate the jobs and the incomes people need to keep their living standards from sliding.
Now, the goal of the policy that Senator Obama will introduce today -- and Jason's going to discuss in a moment -- it to relieve the squeeze on families in the short run and to get economic growth percolating again. But the agenda doesn't stop there. The ultimate goal of the broader agenda is to reconnect economic growth with the living standard of working families. That disconnection is at the heart of the economic insecurity that's evolved among middleclass families over the past eight years.
Direct relief to working families is the first step. Helping states to avoid service cuts and tax increases -- moves which would exacerbate the downturn -- is also important. Investments in roads, bridges, schools is another critical piece of the plan -- accomplishing both much needed infrastructure investment, and especially important right now: job creation.
It's my view that this plan has the potential to set the stage for longer term and long awaited reforms in energy policy, health care and the tax code. Taken together, these actions can both reach struggling families and stimulate economic growth in the short term. In the longer term, the plans have the potential to finally reconnect working families to the growing economy, so they too can benefit from the growth they themselves are creating.
Let me turn it over to Jason now.
MS. MACK: Great. Jason Furman, director of Economic Policy for the Obama campaign.
MR. FURMAN: Thanks, Jared.
And the plan Barack Obama is announcing today builds on some of the previous ideas he's outlined for the economy in both the short run and the long run.
There are two halves to this plan. The first half is -- builds on Barack Obama's middleclass tax cut, which he has long called for -- $500 for a worker, $1,000 for a couple. That's something he'd like to do as president and make permanent, but families can't wait. They're struggling now with rising costs of gasoline.
We know that this winter, home heating oil is going to be very expensive, which is why he is calling on Congress to act as quickly as it can to pass a plan that would send these rebate checks out to families immediately, so they could use it for, you know, gasoline, home heating oil, food, other necessities or even to pay down their debt.
This would be a one-time payment as soon as it was administratively possible for the IRS. So checks arriving this fall or this winter.
At the same time, he's mindful -- Barack Obama is mindful of the recent deficit numbers and believes you need to strike the right balance between immediate action and the deficit. So he is proposing to pay for these rebate checks with a windfall profits tax that would apply to some of the excess profits that oil companies have made not because of their investments, not because of their ingenuity and skill, but simply because of the high oil prices that we're facing today.
This is something that the Congressional Research Service, for example, has said could be designed in a way that would, quote, "not raise crude oil prices, would not increase petroleum imports, and would be economically effective."
This is a stark contrast from John McCain who, rather than giving relief directly to families, would instead give oil companies whatever they want -- whether that is more drilling, whether that's a gas tax holiday or whether that is a corporate tax cut that would put $4 billion annually in the pockets of oil companies, including $1.2 billion for Exxon Mobil alone. The McCain plan does not just fail to give money directly to families, but it also would be a large increase in the budget deficit and would do that on a permanent basis.
The second part of the plan that Barack Obama is announcing today or announced today is $50 billion in immediate measures to help prevent more than 1 million Americans from losing their jobs and turn our economy around. And that includes two pieces: Half of that money, 25 billion (dollars), would go into a state growth fund to ensure states can continue to provide health, education and housing assistance without having to raise taxes.
It would also set aside money for funding for home heating oil and weatherization assistance.
And the other half of that, $25 billion, would go into a jobs and growth fund to replenish the highway trust fund, prevent cutbacks in road and bridge maintenance and fund new fast track projects to repair schools. These steps would save more than 1 million jobs, while making a down payment on Senator Obama's growth enhancing long-run infrastructure and energy efficiency proposals.
This $25 billion jobs and growth fund that I just described is a new proposal that Senator Obama is making today, based on the advice he got on Monday, based on the deteriorating situation with the highway trust fund and jobs in our country.
Finally, I just want to say that we've been disappointed by the McCain campaign's reaction to this plan. We recognize that an election is about a debate -- and in this case, a debate between continuing economic policies of President Bush or changing those economic policies. We recognize that John McCain supports corporate tax cuts and Barack Obama supports middleclass families and that issue won't be settled -- won't be settled today or tomorrow. It will be settled by the election and reflected in the plans they submit to Congress next year.
But families can't wait for the election to prevent another six -- another seven months of job losses, which is why Barack Obama would love to see John McCain set aside, you know, partisanship, set aside some of these debates, and come together with him in pushing Congress to immediately move forward on this emergency economic plan.
MS. MACK: Great. Thank you, Jason.
And, with that, I think we'll open it up to questions.
OPERATOR: Thank you. Once again, if you'd like to ask a question, you may press *1. You will be prompted to record your first and last name. Please -- (inaudible) -- your phone and record your name at that time. Once again, if you'd like to ask a question, please press *1.
Our first question comes from Tommy Christopher.
Q Hi, this is Tommy Christopher from AOL News.
I have two quick questions. First of all, during the primary Senator Clinton proposed a windfall tax -- a windfall profits tax to support a gas tax holiday. And as I recall, at that time you opposed it saying that the oil companies would just (build ?) that right back into the price. I want to know what's changed from then to now.
And my other question is about Senator McCain's campaign reaction to this. They said today that increasing taxes would cause more jobs to go overseas. What do you think he's referring to, in terms of the oil industry? There would be oil industry jobs that will go overseas because of this tax?
MR. FURMAN: Let me take the first one. If Jared wants to take the second, he can.
What Barack Obama criticized, and continues to criticize is a gas tax holiday. And a gas tax holiday, the way it works is you give a tax cut to oil companies -- you tell them they don't need to pay taxes on the gasoline anymore. And then you hope that -- you know, they're charging $4 at the pump now, you hope that the oil company says, well, I don't, I don't have to pay as much taxes anymore so I'll cut the price at the pump.
Most economists would agree that that is not what oil companies would do. Instead, what they do is keep the price where it is today. That's -- (inaudible) -- basically happens because they're charging what the market would bear. And so instead of the savings being passed on to consumers, they'd be pocketed as extra profits by the oil companies. That was what he objected to in the plan that you described in the primary.
The windfall profits tax is something that Senator Obama supported in the primary. Today what we're announcing is that he would like to keep it in place for five years and use it to pay for rebate checks. And families will actually get that check in the mail rather than hoping that a little bit of a gas tax holiday gets passed on back to them.
MR. BERNSTEIN: This is Jared. On the second point, this is the kind of comment I hear a lot coming out of the McCain camp, making these really, you know, phony connections between tax changes and jobs.
Let me give you two numbers: 22 million and 5.6 million. Now, the first number is the number of jobs that -- the number of jobs that were created over the, over the 1990s business cycle, over which President Clinton largely provided -- presided. The second number, 5.6 million, is the number of jobs that occurred over the 2000s business cycle, which very likely ended -- certainly in terms of jobs, ended in December of 2007.
Twenty-two million in the '90s, 5.6 million in the 2000s. That, by the way, that 2000s record -- the worst record for job growth in the history of these data going back to 1939. Now, the Obama tax plan returns some -- not all, some of the tax rates, those for folks earning over $250,000 -- back to where they were in the Clinton years. Not all -- some.
It looks to me like the McCain folks, when they were sitting around thinking about jobs and fiscal policy, they looked at this record and somehow came up with the idea that the 2000s is the way to go in terms of job creation. And it simply makes no sense unless you're interested in just continuing to slash the tax liabilities of the wealthiest households.
MS. MACK: Okay, next question.
OPERATOR: Thank you.
Our next question comes from Scott Horsley. You may ask your question.
Q You mentioned the Congressional Research Office, could you just explain how you structure a windfall profits tax that it doesn't either raise the price of oil, or make us more reliant on foreign oil?
MR. FURMAN: Oh, sorry, sorry. My phone is on -- (inaudible) -- on mute. This is Jason Furman.
Yeah, the key is that you don't want to -- and economists would tell you that, you know, the worry, the worry that some economists have is that when you tax choices that people can make, it will affect those choices. If a windfall profits tax falls entirely on a windfall -- it's based entirely on, you know, what's good luck for the oil companies and bad luck for everyone else in our society, then it won't have any economic distortions associated with it because it's not within the control of those companies whether they're going to have, you know, more or less luck.
So the key in the design -- and there were mistakes made in the way this was done in 1980, and those are mistakes that we could learn from in designing it now -- is to make sure that you're not affecting, you know, the marginal production costs. And if you're not affecting the production costs at the margin then, you know, it won't get shifted on to consumers, it won't affect oil imports, and you can do it in a way that's administratively simple and economically effective.
OPERATOR: Thank you.
Our next question comes from Jon-Christopher Bua.
Q Jon-Christopher Bua with Sky News.
Since a large part of the current economic problems stems from problems that started in the housing sector, aside from the current legislation passed by Congress with the support of Senator Obama, what is the Obama program to stabilize the housing sector, and what measures would President Obama implement to restart both the mortgage lending and the secondary mortgage markets?
MR. FURMAN: This is Jason Furman again --
Q Thanks, Jason.
MR. FURMAN: Barack Obama has been at the forefront of this issue, calling for cracking down on predatory lending with a $10 billion foreclosure fund plan, and was an early supporter of the Frank-Dodd plan. A lot of that enacted in the housing bill this -- that became law this week, and part of this plan is revised in light of that.
Let me give you a few things, though, that he would, he would do. One is, of the $25 billion state growth fund I talked about, a portion of that would be used to help fund states and localities that come up with innovative ways to deal with our housing problems and to fund, to fund their plans in that area.
A second thing he would do -- and this is a real difference between him and John McCain, is continue to push for reform of our bankruptcy laws so that bankruptcy judges have the ability to write down the mortgage on your primary home, something that right now they're allowed to do on your vacation home but can't for your main residence.
Third, over the long-run, there's a lot we need to do to prevent these problems from happening again -- cracking down on, you know, unscrupulous lending practices, and finally, making home ownership more affordable with a 10 percent tax credit on the interest through a universal mortgage credit, which is another tax cut for middle class families that John McCain doesn't support.
Q Thank you.
MS. MACK: Okay, if we have one last question, I think that will be it.
OPERATOR: Thank you.
Our final question comes from William March (sp). You may ask your question.
Q Hi. I think this has already been addressed. The Republican Party has put out a response to the proposal for a windfall profits tax citing Congressional Research Service reports to the effect that that tax resulted in a decline in oil production. I just wondered if you could respond.
MR. FURMAN: Yeah. I mean, we can get around to all of you, you know, what the Congressional Research Service actually said, which is that it depends on how it is designed. And if you design it badly it'll work badly. And if you design it well, it'll work well.
And what the Congressional Research Service said is if you design it in the right way -- and they go through some of the details about how to do this, you know, in a way it doesn't affect the marginal production costs, then -- and I'm reading a quote from them, quote, "This would not raise crude oil prices and would not increase petroleum imports in the short run." And they go on to say, quote, "A surtax for oil companies would arguably be an administratively simple and economically effective way to capture estimated oil windfalls in the short run."
MS. MACK: All right, great. Thank you so much everyone, for joining us for this call. If you have further questions for Jason Furman or for Jared Bernstein, you can feel free to contact me, Moira Mack, and my e-mail address is email@example.com. Thank you.
MR. BERNSTEIN: Thank you, everybody. Bye-bye.
MR. FURMAN: Bye.