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Obama payroll tax cuts: Economists differ on how many jobs they'd create

The proposed payroll tax cuts amount to about half of the Obama jobs plan. Some economists say the cuts could add a million jobs, others call the strategy a waste of money.

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Obama, in his Thursday address to Congress and the nation, sought to sell the tax plan by framing the alternative of doing nothing as a tax hike.

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"If we allow that [employee payroll] tax cut to expire – if we refuse to act – middle-class families will get hit with a tax increase at the worst possible time," Obama said.

Zandi echoes that theme in his own analysis of the job proposals, saying the expiration of the tax cut and extended unemployment insurance will act as a drag on economic growth. (The White House plan also calls for continuing to provide extra weeks of insurance for jobless workers.)

"Not extending the programs will shave 0.9 percentage point off 2012 real GDP growth and cost the economy some 750,000 jobs," Zandi writes.

He sees the employer incentives as likely to be more effective than the tax credits in last year's HIRE Act, another piece of jobs legislation.

Similarly, the liberal Economic Policy Institute says that continuing the current tax breaks would prevent big job losses, and that adding the additional ones would help to "move the dial" on job creation.

But some business groups said that permanent streamlining of the tax code would do more for them than temporary tax cuts. And in an analysis of Obama's plan, Curtis Dubay of the conservative Heritage Foundation said that "businesses only hire new workers when they anticipate those new workers will increase their profitability over the long haul. A credit of a few thousand dollars, a mere fraction of the cost of hiring a worker, does nothing to change that calculation."

One final note on payroll taxes. Typically they're used to fund Social Security. So would the tax break deplete that program's finances? Technically, no.

"As with the payroll tax cut passed in December 2010, the American Jobs Act will specify that Social Security will still receive every dollar it would have gotten otherwise," through a transfer from the government's general fund, the White House says. That does push up the federal deficit, however.

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