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Republicans' two-point plan to create jobs: Can it work?

Don't like what Democrats have offered so far to cure unemployment? Here's a look at the Republican plan to create jobs – and what economists think of it.

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Right or wrong, that idea doesn't appear to have much political backing now. Obama has rolled out some additional proposals designed to buoy the economy via tax breaks for business, but with relatively small price tags.

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The case for freezing current tax rates

Boehner's proposal for a two-year freeze on tax rates would maintain all the Bush tax cuts. By contrast, Obama wants to keep the tax cuts in place only for households with incomes below $250,000. Based on this difference, the Boehner plan would cost the federal government about $34 billion in revenue during 2011.

The tax freeze, like the Republican proposal to repeal Obama's health-care reform, would serve as a kind of "time­out" from big changes, so the economic recovery can gather momentum.

"America's employers are afraid to invest in an economy stalled by 'stimulus' spending and hamstrung by uncertainty," Boehner said in a recent speech in his native Ohio. "The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands."

Although many economists don't share Boehner's view of Obama's 2009 stimulus effort, his view on "uncertainty" resonates. Amid employer worries that the Obama administration isn't creating a positive climate for business, holding tax rates steady could be a first step toward rebuilding private-sector confidence.

Snaith, the Florida economist, supported the general scope of the initial Obama stimulus in 2009 but now says the GOP proposals would help achieve a faster reduction in unemployment.

A majority of private-sector economists favor keeping all the Bush tax cuts in place at least for a time, according to one recent survey by the National Association for Business Economics.

The case against a tax-rate freeze

The opposing view is that allowing the Bush tax cuts to expire for the top-earning 3 percent of Americans won't affect their spending and investing enough to drag down the economy.

Obama, also in Ohio recently, argued that middle-class Americans need a tax break more than the wealthy do. "These families are the ones who saw their wages and incomes flat-line over the last decade. You deserve a break," he said.

Obama maintained that job creation worked fine under President Clinton, with the same top tax rates that the White House wants to return to.

Some opponents of a tax-rate freeze also reason this way: If a core problem for business leaders is uncertainty about future policy, a two-year hiatus from tax changes is at best a partial fix. CEOs making long-term decisions would still be unsure about taxes for Year 3 and beyond.

Ms. Rogers argues that the best confidence boost on the tax front will come from deeper tax-code reforms, rather than a wholesale embrace of the tax cuts. "The Bush tax cuts are far from the best kind of stimulus," she says. "How does that instill confidence for [Obama] to turn around and say, 'That's my tax policy too?' "

Over the course of this decade, allowing the Bush tax cuts to expire for high-income Americans would help reduce federal debt – saving nearly $700 billion by White House estimates.

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