In his address to Congress last night, President Obama unveiled the American Jobs Act, legislation designed to create jobs and spur economic growth. The bill contains a pretty wide variety of policies, so first let’s break it down:
Tax cuts make up the largest chunk of this bill, accounting for $240 billion of the $447 billion total cost. But progressives shouldn’t fret. These are sensible tax cuts. Tax cuts that will give money to people who are actually going to spend it—working and middle class people. Cuts in payroll taxes, a highly regressive tax, were passed earlier this year, and the American Jobs Act will extend those tax cuts, saving the average working family $1500 next year.
Small businesses will also receive tax breaks, as well as a number of other goodies. A company’s contributions to payroll taxes will be cut in half, which is pretty huge; if a company has 50 employees, they’ll save about $80,000 a year. Tax breaks will also be given to businesses that hire new workers or raise wages, including a special $4000 tax credit for any company that hires someone who has been unemployed for over six months.
For those who don’t get hired, the bill will extend unemployment benefits for another year.
Infrastructure spending, long championed by economists as a route to growth, is also a big part of the bill. That’s right, “infrastructure spending” might cease to be just a hollow buzz phrase. $100 billion will be allocated to repair crumbling schools and build new transportation networks—infrastructure improvements we desperately need, completed by people who desperately need jobs.
Those are the bills major components, though you can find a more comprehensive list here. So will all this stuff work? Will unemployment come down and GDP rise? I don’t think so, at least not substantially.
Most of the American Jobs Act simply extends current policies. While letting them expire would likely hurt the economy, their extension simply maintains the status quo, which won’t have much of an effect on unemployment or growth.
Parts of the bill that could have a real positive impact on the economy—mainly the infrastructure spending and hiring incentives, both of which should be much bolder—aren’t likely to pass the GOP controlled house. In fact, it’s unclear if any part of the American Jobs Act will pass; if they find it to be politically feasible, the GOP will probably vote the whole thing down.
So Obama didn’t deliver as much as he should have, but he probably delivered as much as he politically could have, and that is a shame for our economy, and especially a shame for the American worker.
(Photo by printthetruth under a Creative Commons license)