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Friday, September 9, 2011

What's in the American Jobs Act?

Here's a quick summary of key elements of President Obama's American Jobs Act based on documents from the White House and Reuters.
Overall, the bill would deliver roughly $450 billion in job creation measures, a majority of which would come in the form of tax breaks. Because the bill is mostly focused on 2012, it is similar in scale to the 2009 recovery act.

The employee payroll tax holiday would expand the current payroll tax holiday, cutting the 6.2% payroll tax to 3.1%. The White House says this would mean a temporary $1,500 tax break for average families. It would pump $175 billion into the economy, a 50% increase over the 2011 payroll tax holiday.
The remaining $70 billion in tax cuts would be targeted to businesses. $65 billion would go to a payroll tax holiday for small businesses, cutting the payroll tax by half on the first $5 million in payroll. In addition, any net increase in payroll, up a total of $50 million, would receive a complete payroll tax holiday. $5 billion would also be used to allow businesses to accelerate depreciation of assets, a program designed to encourage businesses to accelerate equipment purchases.
One important point is that while the cost of the payroll tax holiday would be borne by the general fund. The Social Security trust fund would continue to increase as if there had never been a payroll tax holiday, so from an accounting perspective, it would have no impact on Social Security.
The remaining provisions in the proposal would consist of spending. $85 billion would be targeted to state and local governments, the bulk of which would be targeted to keeping teachers on the job and modernizing schools. Reuters breaks it down:

• $35 billion to keep teachers, firefighters and police officers in their jobs, of which $30 billion would go to schools and $5 billion to police and firefighters.
• $30 billion to modernize schools and community colleges.
• $15 billion to rehabilitate and refurbish vacant and foreclosed homes.
• $5 billion to help low-income youths and adult workers, supporting summer and year-round jobs for young people and support subsidized work for unemployed low-income workers
The package calls for another $50 billion in direct infrastructure investments and $10 billion to help establish an infrastructure bank to fund infrastructure projects, so between the $60 billion for infrastructure and $30 billion for modernizing schools, it would provide roughly $90 billion for construction-related projects.
The bill also provide $57 billion for extended unemployment benefits to assist the long-term unemployed during the economic recovery.
The White House, which opposes any additional short-term spending cuts, says the proposal would be paid for by long-term deficit reduction measures coming from the debt deal super committee.


  1. Long term deficit reduction to pay for something now = never paying

  2. Beth Richardson comments
    Amen to that, anonymous. That is a big part of why we are in the mess we are.

  3. Normally, I might want to pick on parts of this a bit. But, I don't see any better/other ideas out there. Recessions are 90% perception. The perception of putting bunches of people back to work and fixing our crumbling infrastructure along with it, sounds pretty good.

    I don't agree with President Obama on much but his comment about the next 14 months made me do an about face on this. This may be a bad plan. It may never be paid for. It may be inflationary. It may increase the deficit. It will put people back to work and will help small business at least in the short run. Anyone got a better idea that can happen in the next 14 months.

  4. When a person is drowning, do you debate whether you can afford to buy a rope?

    Do you negotiate terms of repayment with the drowning person?

    We had a budget surplus in 2001. Then came 9/11. Then came two major ground wars, the "Global War on Terrorism," countless brush fire wars, billions in internal security spending and so on.

    Did we do what House Majority Leader Cantor wants to do with disaster aid - find offsets to pay for desperately needed aid? Where were today's deficit hawks when we committed to spending our national treasury on the "GWOT?"

    They were campaigning for tax cuts for the wealthy - and of course, they got them.

    NOW they get deficit reduction religion while our economy is drowning.

  5. Beth Richardson comments
    Yes, we had a budget surplus in 2001, etc. and now we are deep in a deficit hole. The question is are we throwing the drowning guy a rope or a block of wood (i.e. something not at all useful in his situation)? Japan in the 1990's had huge amounts of deficit spending to try to correct its tanking economy and all they got to show for it was more debt. To use another analogy: if you are standing on a cliff taking a step in the wrong direction can be much worse than holding still. Better yet to step away from the cliff.


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