Jobs, jobs, jobs. That’s what opinion polls say Americans want most – and what they most want their representatives in Washington to address. Yet in the seven weeks since President Obama put forward his American Jobs Act – which some independent analysts say would create more than 1 million jobs next year – Congress has not approved one piece of it.
Nor have lawmakers been able to advance any part of the Republican Jobs Through Growth Act counterproposal.
Expectations now are that Congress will pick and choose pieces of both plans that can win bipartisan appeal. Mr. Obama notes that many ideas in his plan have had such support in the past. But Congress has shown little appetite for compromise.
Mr. Obama, however, keeps pitching his job-creation ideas – though he’s talking now as much to American voters, as he looks ahead to a reelection bid, as to Congress. He stood Wednesday in front of Washington, D.C.’s Key Bridge to tout the transportation piece of his jobs bill, saying it would make an immediate investment of $50 billion in national transportation infrastructure and a $10 billion investment for a bipartisan National Infrastructure Bank.
“Construction workers have been among the Americans hit hardest over the past few years. And that makes no sense when there’s so much of America that needs rebuilding,” Obama said. His plan would put hundreds of thousands of construction workers back to work rebuilding roads, bridges, airports, and transit systems, he said.
Nonpartisan economists, however, lack a clear consensus on whether so-called fiscal stimulus programs like Obama’s can make a meaningful impact.
So, if Congress were actually to do something to try to help the 14 million Americans who are out of work – a number that goes higher if you count people too discouraged to seek a job – what parts of the various jobs bills should it undertake first?
Here’s an analysis of the job-creation potential of Obama’s plan, according to the generally pro-stimulus Moody’s Analytics, and of a counterproposal from Republicans.
Temporary tax cuts = total job gains of 1.05 million
Obama would extend payroll-tax cuts for workers for another year and enlarge the scale of the cuts. Giving con-sumers more money to spend – an estimated $1,500 for a household earning $50,000, the White House says – would help spur private-sector job creation. The cost to the government in lost revenue next year, according to Moody’s: $175 billion, with job gains as high as 750,000.
Obama would also cut for 2012 the payroll tax that employers pay, including a year-long total payroll-tax holiday for firms that expand their payrolls by hiring or boosting wages. The president also proposes a one-year extension of “100 percent expensing,” an incentive for businesses to invest in new equipment now to get a full tax deduction upfront. Cost next year: $70 billion, with job gains as high as 300,000.
Proponents say the business tax cuts offer a new and direct incentive for firms to invest and hire. On the tax cut for employees, former White House economist Jared Bernstein says Congress should extend the current cut for at least another year. The alternative is to see US workers get a tax hike. “That would actively harm the economy,” Mr. Bernstein says.
That argument carries enough weight that many policy analysts expect this provision to be extended.
Critics argue that broad tax cuts for consumers are one of the less efficient forms of fiscal stimulus because some of the money goes toward household savings, not immediate spending. On the business side, skeptics say employers don’t typically hire because of tax breaks. At best, the tax incentive can spur firms to hire workers a little sooner than they otherwise might have.
Infrastructure spending = job gains of 400,000
The Obama plan would invest in traditional transportation infrastructure: repairing highways, airports, and transit systems. Another aim is to set up a National Infrastructure Bank, which would use federal loans alongside state or private-sector funds. And the White House would help pay for public school modernization across the nation. Total cost: more than $100 billion, with as much as half of that spending in 2012.
Fans of these ideas say infrastructure spending is effective stimulus and a useful long-term investment. Critics say money may be wasted as the government rushes ahead on projects. Both sides agree that, given the challenge of getting projects to a “shovel ready” state, the $100 billion wouldn’t all flow into the economy in 2012. Less optimistic than Moody’s, IHS Global Insight estimates that as little as one-fifth of the total would be spent next year.
Help for the unemployed = job gains of 275,000
Obama seeks to extend unemployment insurance, helping about 6 million job seekers who might otherwise lose benefits. As a parallel step, the president calls for reforms to job-search programs and pilot projects designed to prevent some future layoffs. Cost next year: $40 billion.
Many economists see extended jobless benefits as an efficient way to boost the economy because the unemployed spend virtually all the assistance money. Many also justify the idea on humanitarian grounds, given that the number of job seekers far surpasses the number of new jobs. Gregory Daco at IHS Global Insight says extending jobless benefits is one of the few Obama proposals (along with employee payroll-tax cuts) that is likely to pass the divided Congress.
Still, the move has its critics, including some who argue for a form of tough love toward the long-term jobless. By reducing the length of time they receive benefits, more jobless people would be prodded to find work again – thus reducing the risk that they will become less and less employable as the jobless period drags on.
Aid to states = job gains of 135,000
States deserve support targeted at preventing layoffs of teachers, police, and firefighters during tight budget times, Obama says. Cost next year: $20 billion.
Supporters say teacher layoffs are a problem that’s poised to get worse in the coming year, as lean tax revenues squeeze state and local governments. Some opponents of this spending say it’s not clear that there’s a staffing crisis in public schools or fire departments. Rather, the program targets aid toward occupations relatively unscathed by the recession.
The Republican proposal
Key elements of the proposed Jobs Through Growth Act include reducing US budget deficits (through a balanced budget amendment to the Constitution), revenue-neutral income-tax reform, and regulatory easing – for example, repealing Obama’s health-care and banking reforms and paving the way for more fossil-fuel development. As with Obama’s proposals, economists have mixed views on the merits of these ideas.
The goals of getting the nation on sounder fiscal footing and streamlining the tax code are widely viewed as friendly to job growth.
“The type of stimulus we need is something that alters expectations. And to alter expectations, we need to have policies that are … viewed as permanent,” says Michael Cosgrove, a forecaster who publishes the Econoclast newsletter in Dallas.
At the same time, large and sudden cuts in federal spending would hurt growth in the near term, he and other economists warn. A move to balance the federal budget in the next year, for example, “would quickly destroy millions of jobs while creating enormous economic and social upheaval,” says a recent analysis by Macroeconomic Advisers, a forecasting firm in St. Louis and Washington.
Setting aside that idea as a political nonstarter, the firm sees the GOP plan as relatively neutral for US job creation next year. By contrast, it sees the Obama plan adding 1.3 million jobs, while incurring some $447 billion in new federal costs.
The Macroeconomic Advisers analysis notes, too, that the Obama proposal and the Republican plan are not mutually exclusive. Pursuing elements of both could help.
Still, many economists differ with both parties. In a recent Wall Street Journal survey, 44 percent of forecasters say Obama’s jobs plan is too costly, while 20 percent say it’s too small. And although economists widely favor the idea of fiscal stabilization for the long term, they are far from united around the Republican recipe for achieving that goal.