Barack Obama's Jobs Plan: Overview and Analysis, Part Two

06/13/2012

PoliticOlogy’s Analysis

As part of a weekly series exploring the policy positions of Barack Obama and Mitt Romney, this article examines Obama's American Jobs Act: what it claims, what it promises, and whether it delivers. Make sure to read our thorough analysis of Mitt Romney's jobs plan, and follow PoliticOlogy for weekly analyses of the candidates' positions.

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Given the political circumstances, some are surprised the President is proposing a stimulus package at all, even one as timid as the American Jobs Act. Upon seeing the act in 2011, Paul Krugman wrote that "It's not nearly as bold as the plan I'd want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment." So, although Krugman thinks there should be more infrastructure and state-level spending, the plan is nearly ambitious enough.

The unemployment insurance extension includes a promising prevision incentivizing businesses to start work-sharing. About time! This is a plan that has helped Germany maintain a 4% unemployment rate, almost half of ours, throughout the worst of the recession. Work sharing is simple: instead of laying employees off, an employer reduces their hours and the government subsidizes the difference. It's a smart policy, but one that would’ve been better suited for the early period of the recession, to prevent widespread layoffs.

If better publicized, this is exactly the sort of policy that we should be pursuing. It’s inexpensive, tailored and has a compelling purpose. There's no reason why it should just be a policy of the Democratic party.

A significant portion of the American Jobs Act focuses on infrastructure investment. That's a good thing, particularly given how politically loaded stimulus spending has become. Investing in infrastructure creates jobs. It's a direct investment. And it makes sense, given Obama’s preferences. In a recent New Yorker profile, Ryan Lizza reports that:

Several White House officials said that the issue that Obama seems most passionate about is infrastructure. (One insider Democrat joked that Obama’s passion for infrastructure is matched only by that of the Vice-President, who loves trains.)

The amount of infrastructure investment in the bill may be small, but a small amount of direct government assistance goes a long way.

As far as tax cuts go, the payroll tax cut is a good one. It cuts taxes in half for businesses that pay under $5 million in payroll. That's 98 percent of businesses. And those are the right ones to target. Also, it cuts the payroll tax in half for 160 million workers. That's a lot. Problem is, the payroll tax is not a jobs bill. Tax cuts don't create jobs. Tax cuts create wealth. There's a difference and it isn't trivial. Americans lack wealth right now. But unemployment is more important and the fact that 60% of this bill is made up in tax cuts is a shame.

What about the plan's political viability? Jared Bernstein, formerly Biden's Chief Economist, notes "it's a plan that in normal times would be broadly supported by partisans on both sides of the aisle." Mark Zandi, one of the chief economists for the McCain campaign, agrees, "project[ing] the Obama plan would add 2 percentage points to economic growth in 2012, add nearly 2 million jobs and reduce the unemployment rate by 1 percentage point."

Yet not a single Republican voted for the American Jobs Act. Forbes joked that Obama should have stayed on vacation. The American Jobs Act was designed for Congress. The Obama team went to unprecedented lengths to specifically elaborate where they’d spend money in order to garner Congressional support. Alas, no matter the package, Congress doesn’t love what this administration is selling.

Perhaps the Obama administration should’ve learned its lesson from the stimulus package, which was almost a third tax cuts, yet received no Republican votes. Your jobs plan should be YOUR jobs plan. The other guys aren’t going to compromise no matter what you do.

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