Stanford Progressive

Primer: The American Jobs Act

By Shadi Bushra, published October, 2011


The jobs report below shows the sluggish rate of the nation’s economic recovery. This September, President Obama released a $450 billion plan to address the unemployment that is the defining feature of this recession. The Progressive offers a brief primer on the details of the plan.

The Content: Tax cuts are at the heart of this plan. It proposes cutting payroll taxes in half for 160 million workers and for the first $5 million in wages for employers, while suspending payroll taxes on new workers and raises. However, economists warn that cutting employer taxes may not have as large an effect on employment if businesses save the cash rather than invest in new labor.

To further encourage investment, the AJA will allow businesses to continue deducting investments on new capital through 2012. The plan also offers tweaks to get capital flowing, such as faster government payment to contractors and a review of regulations that affect small businesses’ hiring.

Businesses will also get a tax credit (up to $5600) for hiring unemployed veterans, and another (up to $9600) for hiring those with service-related injuries. The plan also earmarks $30 billion for preventing teacher layoffs and $5 billion for hiring and retaining cops and firefighters. There is another $25 billion for school renovations.

The AJA targets transportation infra- strucure to the tune of $50 billion, in addition to a $10 billion investment in a proposed National Infrastructure Bank. There are also measures to refurbish abandoned and foreclosed buildings. The aim is to both renovate our decay- ing infrastructure and put millions of construction workers back to work. Some bemoan this as temporary work. But, for many, temporary work is exactly what is needed right now.

See the full plan at AmericanJobsAct.com

The Cost: The tax cuts and credits, plus the investments in infrastructure, public safety, and education will cost $447 billion. The president insists it will all be paid for as part of his long-term deficit reduction plan, which you can see in three bullet points here.

The Impact: Mark Zandi, chief econo- mist at Moody’s Analytics, says the plan “would add 2 percentage points to GDP growth next year, add 1.9 mil- lion jobs, and cut the unemployment rate by a percentage point.” Forecasting firm Macroeconomic Advisers es- timates it will add 1.3 million jobs in 2012 and another 0.8 million in 2013.

The Politics: Despite it’s job creation potential, Obama will have trouble getting the AJA passed. First is the fact that while he’s cutting taxes on workers and employers, his deficit plan increases taxes on the super-rich, a deal-breaker for some. Also, his 39% approval rating makes him look beatable in 2012. This will complicate the issue, as the GOP argument in the coming election will center on what they allege is Obama’s poor handling of the economy. As one senior House Republican aide told Politico, “Obama is on the ropes; why do we appear ready to hand him a win?”

Given these political games that are being played with American jobs, The Progressive urges readers to contact their representatives or Speaker Boehner at (202) 225-6205 to voice their support for this bill, or suggestions for improvement. It may be imperfect, but it is a step in the right direction.


1 Comment »

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