Obama jobs plan vs. GOP's: Which ideas will yield most jobs soonest?
Obama is unrelenting about touting various parts of his jobs bill. Wednesday's theme: construction jobs. But Republicans have their own job-creation ideas. If Congress eventually takes bits from both sides, where's the biggest bang for the buck?
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Fans of these ideas say infrastructure spending is effective stimulus and a useful long-term investment. Critics say money may be wasted as the government rushes ahead on projects. Both sides agree that, given the challenge of getting projects to a "shovel ready" state, the $100 billion wouldn't all flow into the economy in 2012. Less optimistic than Moody's, IHS Global Insight estimates that as little as one-fifth of the total would be spent next year.Skip to next paragraph
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Help for the unemployed = job gains of 275,000
Obama seeks to extend unemployment insurance, helping about 6 million job seekers who might otherwise lose benefits. As a parallel step, the president calls for reforms to job-search programs and pilot projects designed to prevent some future layoffs. Cost next year: $40 billion.
Many economists see extended jobless benefits as an efficient way to boost the economy because the unemployed spend virtually all the assistance money. Many also justify the idea on humanitarian grounds, given that the number of job seekers far surpasses the number of new jobs. Gregory Daco at IHS Global Insight says extending jobless benefits is one of the few Obama proposals (along with employee payroll-tax cuts) that is likely to pass the divided Congress.
Still, the move has its critics, including some who argue for a form of tough love toward the long-term jobless. By reducing the length of time they receive benefits, more jobless people would be prodded to find work again – thus reducing the risk that they will become less and less employable as the jobless period drags on.
Aid to states = job gains of 135,000
States deserve support targeted at preventing layoffs of teachers, police, and firefighters during tight budget times, Obama says. Cost next year: $20 billion.
Supporters say teacher layoffs are a problem that's poised to get worse in the coming year, as lean tax revenues squeeze state and local governments. Some opponents of this spending say it's not clear that there's a staffing crisis in public schools or fire departments. Rather, the program targets aid toward occupations relatively unscathed by the recession.
The Republican proposal
Key elements of the proposed Jobs Through Growth Act include reducing US budget deficits (through a balanced budget amendment to the Constitution), revenue-neutral income-tax reform, and regulatory easing – for example, repealing Obama's health-care and banking reforms and paving the way for more fossil-fuel development. As with Obama's proposals, economists have mixed views on the merits of these ideas.
The goals of getting the nation on sounder fiscal footing and streamlining the tax code are widely viewed as friendly to job growth.
"The type of stimulus we need is something that alters expectations. And to alter expectations, we need to have policies that are ... viewed as permanent," says Michael Cosgrove, a forecaster who publishes the Econoclast newsletter in Dallas.
At the same time, large and sudden cuts in federal spending would hurt growth in the near term, he and other economists warn. A move to balance the federal budget in the next year, for example, "would quickly destroy millions of jobs while creating enormous economic and social upheaval," says a recent analysis by Macroeconomic Advisers, a forecasting firm in St. Louis and Washington.
Setting aside that idea as a political nonstarter, the firm sees the GOP plan as relatively neutral for US job creation next year. By contrast, it sees the Obama plan adding 1.3 million jobs, while incurring some $447 billion in new federal costs.
The Macroeconomic Advisers analysis notes, too, that the Obama proposal and the Republican plan are not mutually exclusive. Pursuing elements of both could help.
Still, many economists differ with both parties. In a recent Wall Street Journal survey, 44 percent of forecasters say Obama's jobs plan is too costly, while 20 percent say it's too small. And although economists widely favor the idea of fiscal stabilization for the long term, they are far from united around the Republican recipe for achieving that goal.