Here are key elements of President Obama’s $447Billion American Jobs Act:
EMPLOYEE PAYROLL TAX HOLIDAY
Obama is proposing a $175 billion one-year extension and expansion of the employee payroll tax holiday that would halve the tax rate to 3.1 percent in 2012. While this will put further burden on the long term solvency of the Social Security Trust Fund, this short term spending versus long term deficit reduction is exactly the type of trade off we need to do. That being said, will this tax cut really be stimulative or will the extra money in pockets go to paying down consumer debt.
EMPLOYER PAYROLL TAX HOLIDAY
Obama is seeking $65 billion to encourage small businesses to hire more workers. This includes halving employer payroll taxes to 3.1 percent for the first $5 million of a company's wage bill in 2012, which the administration says will reach 98 percent of small businesses. He also wants a complete payroll tax holiday for increasing the size of the payroll by up to $50 million above the prior year, either by hiring new workers or raising the salaries of the existing labor force. I don’t believe this sort of incentive will drive a business to hire. The supply siders will tell you that businesses are job creators. As a demand side proponent, I say businesses are job providers and consumers are the job creators. This comes across as an attempt by Obama to claim he is pro-business and to create a compromise position with Congressional Republicans.
Obama wants to broaden homeowner access to mortgage refinancing and help the battered housing market by allowing households to take advantage of ultra-low borrowing costs that would help them put their finances on a sounder footing. This is critical to get homeowners who are underwater back on their feet and mobile. Mobility along with flexibility and versatility are cornerstones of the U.S. labor market, the greatest labor market in the world. The return of mobility will enable job seekers who are tied to their homes to break those bonds and move to where the jobs are available (even if it is Texas). The risk here is whether the owners of mortgage backed securities, collaterized debt obligations, and credit default swaps will have merits for a law suit if the mortgage refinancing leads to a change in the creditworthiness of the mortgages in question.
EXTENDING 100 PERCENT COMPANY EXPENSING INTO 2012
At a cost of $5 billion, Obama wants to extend a 100 percent expensing tax break for companies, allowing them to immediately take a tax deduction for investment in new plant and equipment. Another bone for business and Republicans
$85 BLN IN AID FOR STATE AND LOCAL GOVERNMENTS
n $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.
n $30 billion to modernize schools and community colleges.
n $15 billion to rehabilitate and refurbish vacant and foreclosed homes.
n $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.
Pure government spending to help out state and local governments who are cash strapped. This jobs works sort of program is very controversial as it clearly separates liberal thinking from conservative ideology. This will help raise GDP, but unless the economy gains traction by the end of 2012 we could be back where we are right now. Conclusion, I support getting young people to work as they represent the demographic group with the highest unemployment. I do have a concern that it will embolden some bad Union practices that keep unworthy teachers on the payroll.
ROAD, RAIL AND AVIATION INFRASTRUCTURE SPENDING
Obama seeks $50 billion to invest in highways, transit, rail and aviation, including upgrading U.S. airports and supporting Nextgen Air Traffic modernization. Hell yeah. We have fallen out of the top 15 in infrastructure, an embarrassment considering the public works projects that marked our 20th century ascent to greatness. Today, our roads are on par with Malaysia.
Obama wants $10 billion to capitalize an infrastructure bank to leverage private and public infrastructure investment. Another great idea to get infrastructure investment off the ground. Based on John Kerry’s Kay Bailey Hutchinson’s bill that proposed the bank would be capitalized with the $10Billion seed money and that loans and guarantees would be secured by toll revenues, user fees, or other dedicated revenue sources. Eligible projects would include transportation, water, and energy facilities, and would need to cost at least $100 million, or $25 million in rural areas. Because it will take some time to get this off the ground, it may actually provide a boost after the other cuts and spending are exhausted.
EXTENDING UNEMPLOYMENT INSURANCE, BRIDGE TO WORK
n $49 billion for a one-year extension of long-term unemployment benefits that would otherwise expire, which the White House says prevents 6 million jobless Americans from losing benefits. It includes reforms to the jobless aid system and a "bridge to work" program to help get unemployed people back to work.
n $8 billion for tax credits for long-term unemployed.
Absolutely support extending unemployment benefits. Contrary to Republican lies, unemployment benefits are significantly more stimulative than corporate tax cuts, or tax cuts for the rich.