Last night, President Obama addressed the US Congress, and proposed a new jobs-focused economic stimulus that would broaden the current Social Security tax cut for workers, and extend similar payroll tax cuts to small businesses. It would cut Social Security taxes by more than half for individuals (from 6.65 to 3.1 percent) and by about half for small businesses with payrolls of $5M or less (which means 98% of American businesses).
Another aspect to the President’s plan: a tax break of $4,000 for companies that hire individuals who have been unemployed for more than 6 months (according to the latest Employment Situation Summary from the US Bureau of Labor Statistics, this means 43 percent of the unemployed population, which currently tops 15 million people). Other spending would extend existing unemployment benefits, boost support for public works, and provide aid to state and local governments to head off teacher layoffs. Total costs for all these suggested outlays: $447 B.
Economists are reacting positively to this plan with predictions for resulting new job creation ranging from one to two million new jobs as a result of the tax break. But predictably, Republicans are averse to any plans that involve additional spending without also providing offsetting sources of revenue. Given the current political climate, I give this plan a snowball’s chance in hell of being enacted as legislation. And even if the predictions prove true, reducing unemployment by 8-16% (from 9.1 to 8.4 or 7.7 percent) doesn’t strike me as a bold enough stroke.
If the President wants to dream big — and I think he should — I’d like to see more ambitious public works projects, more money (and work) for the chronic unemployed and underemployed minority populations in major metro areas, and some kind of “Newer Deal” for American citizens. If the Republicans are going to shoot it all down anyway, why not go for something really ambitious and meaningful instead of what economist Menzie Chin (University of Wisconsin) calls something that “merely makes up for the expiration of the president’s earlier $862 billion economic stimulus plan” (Chicago Sun Times, 9/8/2011).