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FD
09-09-2011, 12:53 PM
The WSJ presents a variety of views from economists on the jobs bill:

–The president’s plan would provide a meaningful boost to the economy and job market in 2012. Compared with current fiscal policy, the plan adds 2 percentage points to real GDP growth, adds 1.9 million payroll jobs, and reduces unemployment by a percentage point. Federal fiscal policy would go from being a powerful headwind next year to a modest tailwind. Of the 1.9 million jobs added in 2012 under the president’s plan, the largest contributor would be the extended payroll tax holiday for employees, which adds approximately 750,000 jobs. The payroll tax holiday for employers is responsible for adding 300,000 jobs, although this may be understated; quantifying the impact of this proposal is difficult. Infrastructure spending adds 400,000 jobs — 275,000 jobs are due to additional unemployment insurance funding and 135,000 jobs result from more aid to state and local governments. One potential pitfall of the president’s plan is that the boost to growth and jobs fades quickly in 2013. –Mark Zandi, Moody’s Analytics

– The various tax cuts aimed at raising workers’ after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would: Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013; and Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline… Because these initiatives are planned to expire by the end of 2012 — except for the infrastructure spending, which has a longer tail — the GDP and employment effects are expected to be temporary –Macroeconomic Advisers

–At long last, President Obama did enough this evening to upgrade the quality of the nation’s economic debate. He presented a credible program that is focused on the right structural areas. Now he must strengthen it and complement it with a sensible fiscal component; and Congress must discuss it in a cooperative and constructive manner. –Mohamed El-Erian, Pimco

– We’ll be the first to admit our hearts skipped a beat following last night’s BBG headline that “Obama proposes cutting payroll taxes in half” as we contemplated what one might do with such a windfall — only to recall that it’s just half of the 6.2% Social Security/Medicare tax, not the entire income tax liability. Moreover, this amount has already been reduced to 4.2% in 2011 — so shaving it another 1.1% in 2012 might cost the government $240 billion when combined with the employers tax-cuts, but it’s by no means a ‘shocking’ amount of money flowing back to the consumer and ultimately into the broader economy. In fact, if the recent trend of consumer behavior holds, we’d actually expect the marginal tax savings to continue being used to reduce household debt and clean up balance sheets. –Ian Lyngen, CRT Capital Group

– The American Jobs Act includes several measures that are likely to receive bi-partisan support, but we should not consider it a jobs “stimulus” package worth $447 billion. Although the proposal will cost $447 billion, any new “stimulus” would come only from those measures that are not currently in place. Most of the bill’s costs will be of a form that averts a spending reduction rather than creating new spending. We estimate that the 2% social security tax cut for employees, the extension of the EUI program, and the bonus depreciation program, which are all currently enacted in law, will cost roughly $230 billion. Thus, an unspecified subset of the AJA implies a cost of about $220 billion in new stimulus. –David Resler, Nomura Global Economics

—According to our calculations the “American Jobs Act” would add up to 2 percentage points to growth in the coming year. One reason why we are currently not fully convinced that the proposal will eventually pass Congress is that the President plans to pay for the stimulus in the coming years – among other things – through higher taxes for the more affluent part of the population (a detailed plan about the financing of the bill and further deficit reduction will be release in the coming days). That is likely to face resistance from conservative Republicans and could, therefore, prevent the stimulus measure. –Harm Bandholz, Unicredit

–The Fed has no bullets left, and Congress sits in a pile of a million bullets with no gun — that is the policy conundrum of our times… President Obama’s “Stimulus v2” proposal is an attempt to get Congress to pick up that gun, by appealing to both sides of the aisle with infrastructure spending projects (which, recall, had mixed success as part of the 2008 stimulus) and payroll tax cuts. These measures should provide a form of economic relief in 2012, but we’re skeptical that the measures will (a) pass Congress as-is and (b) serve to jump start hiring as they’re intended. Instead, we see Stimulus v2 as further government support of GDP growth without the hoped-for private sector involvement. –Guy LeBas, Janney Montgomery Scott

–In sum, the actual economic impact from what Obama outlined last night is likely fairly modest… [Part] of the plan is targeted to transportation (~$50 billion, spread out over a couple of years) and an infrastructure bank (~$10 billion). The problem with these programs and what became evident from the gargantuan $900b stimulus package back from 2009 is that the red tape and politics involved in allocating these funds makes the implementation a long and drawn-out process. Even the administration has admitted that “shovel ready” was practically a pipedream. Bottom line: not a lot of bang for the buck here. –Tom Porcelli, RBC Capital Markets

–Economic models suggest the jobs plan could lift employment by 2 million jobs over 2 years, but the crisis broke many relationships models use… The most “effective” aspects of President’s jobs plan are already drawing political fire, such as transfers to states. –Diane Swonk, Mesirow Financial

–All told, it’s a very real plan and very specific… But let’s not expect miracles. Without the plan, GDP growth was expected to be so anemic that unemployment was expected to rise through 2012 — partly due to the drag of reduced government spending in coming years. Obama’s plan eliminates this fiscal drag, but the economy has still gotta get it’s mojo back. So perhaps the long malaise turns in to the tepid recovery. –Justin Wolfers, The Wharton School

–Extending and expanding the worker payroll tax cut will continue to put cash in people’s pockets– as it did this year. At the very least, continuing the tax break won’t shrink consumer demand, which might happen if the payroll tax break is allowed to expire at year’s end. It isn’t likely to create many new jobs, however. With much of the recent job loss caused by state and local government layoffs, renewed aid to states will help some. More infrastructure spending is necessary but, as we learned over the past few years, a lot fewer of these projects are “shovel-ready” than Obama once hoped. It may take a while for those bucks to work their way through the economy. The tax breaks for companies that hire vets and the like probably won’t increase hiring at all. It will encourage firms to employ targeted workers, but at the expense of those who are not on the preferred list. The payroll tax cut for employers may also help some, but not much. And many profitable firms will enjoy a windfall for hiring workers they would have hired anyway. –Howard Gleckman, Tax Policy Center

–The President laid out a bunch of retread policy ideas that two years after they were first tried managed to create an arithmetic novelty – exactly zero job growth in August. In total, the President is calling for more new spending on proven policies that are proven failures, and he says these will all be paid for with budget reductions elsewhere. But he refused to give his proposals for offsetting the cost of his proposals. Desserts only, no spinach? –J.D. Foster, The Heritage Foundation

–Adding another percent to the payroll tax holiday on the employee’s side, taking it up from 2% to 3%, which means the tax break for most working people would increase by half. So if you earned $50K, your tax break would increase from $1,000 to $1,500. For weeks on these pages I’ve talked about how renewing the payroll cut would just keep the macroeconomic foot on the accelerator, not push it down further. Well, this renewal/increase presses the pedal down further. –Jared Bernstein, Center on Budget and Policy Priorities
http://blogs.wsj.com/economics/2011/09/09/more-economists-react-gauging-impact-of-obama-jobs-proposal/

BucEyedPea
09-09-2011, 12:55 PM
I don't need to appeal to any of these authorities. Infrastructure jobs provide a temporary increase that drops when the project is over with. Not a long-term solution.

banyon
09-10-2011, 08:35 AM
Obama’s Jobs Bill: A Reasonable Plan

Freakonomics

Justin Wolfers
09/09/2011 | 10:20 am

Here are some quick thoughts on President Obama’s jobs plan:

- It’s reasonably big, at about 3% of GDP.

- It’s reasonably front-loaded. Goldman Sachs says it will raise 2012 GDP by about 1.5%–before any multiplier effects. Moody’s chief economist Mark Zandi thinks the effect on 2012 GDP will be about 2%. Expect more estimates in the 1-3% range for 2012; smaller for 2013.

- It’s reasonably well targeted. Unemployment insurance extensions will get spent. Infrastructure money gets spent and also builds stuff. As for the payroll tax: Who knows if it gets spent, but the point is to stimulate hiring, rather than spending.

- It’s reasonably well designed. The biggest problem with a payroll tax is that firms get it even for employees already on the books. But this time, the biggest payroll tax cut is only for firms raising their payrolls. This will yield a much bigger bang-for-each-buck. Early analyses have yet to realize how important this is.

- It’s reasonably timely. The usual argument against fiscal policy is that the spending only occurs by the time the economy is booming again. There’s no chance of that occurring. Perhaps this provides the confidence boost we need to counter double-dip concerns.

- It’s reasonably well focused. Tax credits for hiring the long-term unemployed will be very helpful in preventing the current recession doing long-term harm.

- It’s reasonably clever, removing the incentive to fire people, rather than reduce hours. (aka “Job sharing”)

- It’s reasonably evidence-based. Having the unemployed talk to a jobs counselor before extending benefits can have huge effects at minimal cost.

All told, it’s a very real plan and very specific. None of this is magic: Government gets more active when the market fails, and we pay it back when the market booms. This is all standard economics. There’s no gold-buggery, voodoo austerity or laughable Laffer-y. Obama’s not making up economics, he’s using simple tools to solve the obvious problems. And with long-term real interest rates close to zero, there’s no risk of this crowding out private investment

But let’s not expect miracles. Without the plan, GDP growth was expected to be so anemic that unemployment was expected to rise through 2012–partly due to the drag of reduced government spending in coming years. Obama’s plan eliminates this fiscal drag, but the economy has still gotta get its mojo back. So perhaps the long malaise turns in to the tepid recovery. But perhaps the Fed can help, too.

The biggest risk is that this plan provides another opportunity for Congress to prove itself incapable of addressing real macroeconomic concerns. If it does, watch for confidence to plummet just as it did following the debt-ceiling madness.

As for the politics: Ask a political scientist. But I wouldn’t want to have to explain a vote against this to my constituents, who are mad as hell about unemployment.

http://www.freakonomics.com/2011/09/09/obamas-jobs-bill-a-reasonable-plan/

banyon
09-10-2011, 08:39 AM
Am I wrong, or is this the first time this president has actually led on anything?

With "Obamacare" and the stimulus, Obama actually had little role in shaping the policy, instead allowing Pelosi and her minions to cobble it together and carve it up as they saw fit.

This is the first time I remember him drawing up the plan and then handing it off for congress to consider. And now he's promoting its passage.

Where has this guy been for the last 3 years? If he had governed like this from the start, he would probably still have some support. At this late stage in the game, however, he lacks the established credibility to pull it off because of how he has done business in the past.

RINGLEADER
09-10-2011, 11:04 AM
I don't need to appeal to any of these authorities. Infrastructure jobs provide a temporary increase that drops when the project is over with. Not a long-term solution.

Agreed. It's an expensive band-aid and doesn't remove the uncertainty hanging over the economy's long-term fortunes at all.

RINGLEADER
09-10-2011, 11:05 AM
Am I wrong, or is this the first time this president has actually led on anything?

With "Obamacare" and the stimulus, Obama actually had little role in shaping the policy, instead allowing Pelosi and her minions to cobble it together and carve it up as they saw fit.

This is the first time I remember him drawing up the plan and then handing it off for congress to consider. And now he's promoting its passage.

Where has this guy been for the last 3 years? If he had governed like this from the start, he would probably still have some support. At this late stage in the game, however, he lacks the established credibility to pull it off because of how he has done business in the past.

Personally, I think he has a real fear of failure.

banyon
09-10-2011, 11:07 AM
Agreed. It's an expensive band-aid and doesn't remove the uncertainty hanging over the economy's long-term fortunes at all.

What is the GOP proposal? Because this one is mostly tax cuts and extension of UI benefits.

BucEyedPea
09-10-2011, 11:08 AM
Agreed. It's an expensive band-aid and doesn't remove the uncertainty hanging over the economy's long-term fortunes at all.

It's also something that should be funded when the country's economy is prosperous or doing better, except in areas of vital and immediate concern such as unsafe bridges et al.