The recovery from the Great Recession has been slow and unsteady. Two years after unemployment peaked at 10.1%, it still remains over 9%, in contrast to the under 5% in 2007. GDP has grown very slowly during the past year, and is now more than 10% below its potential level. President Obama is rightly concerned about the large number of Americans who are unemployed, especially the longer term unemployed-those who have been without jobs for over six months. How successful will his proposed American Jobs Act be in getting the economy moving forward at a much faster clip?
Boiled down to its essentials, the proposed Jobs Act is a second stimulus package since most of the spending is supposed to take place soon (before the end of 2012), while it will be financed over the next ten years in ways that are unclear. At an estimated approximately $450 billion, this package is much smaller than the first stimulus package in 2009 that cost about $800 billion. The proposed structure is better than the first one since it relies more on tax cuts and direct subsidies to households: about 2/3 of the proposed spending comes from a temporary cut in (payroll) taxes and increases in benefits to the long term unemployed.
I am less negative on the extension of unemployment benefits than is Posner. I agree it will encourage some of the longer term unemployed to stop searching for jobs since they could then receive these extended benefits. On the other hand, an extension helps insure workers against long-term unemployment, which is the most difficult form of unemployment to finance out of own savings and borrowing. In an economy with a very slow recovery, extending unemployment benefits tailored to long-term unemployment may be sensible, although it is not an easy call.
The cut in payroll taxes is supposed to have two positive effects on the economy. It would temporarily reduce the cost of labor to companies and thereby encourage them to hire more workers, and it would increase the spending of workers through increasing their take home pay. Such temporary cuts in wage costs to employers will increase employment only a little, and it will be mainly for low skilled low wage jobs that can be easily eliminated after the cuts expire. Since spending by households responds much more to their long term income prospects than to short run changes in their incomes, households would tend to save rather than spend most of their higher incomes due to a temporary cut in social security taxes. Therefore, the employment bang for the buck will be small per dollar of tax cut.
Further lowering, and possibly reversing the sign, of any positive stimulus to the economy from a temporary tax cut and extension of unemployment benefits is that they must eventually be paid for: either through future higher taxes, lower government spending, or greater inflation (the inflation “tax” in the language of economists). These effects may not be fully anticipated, but surely businessmen and households who are making long-term investments will pay attention to future taxes and future government spending as well as to their present levels.
Most of the remainder of the president’s jobs plan is the $90 billion that will help finance infrastructure projects. While many infrastructure projects in the US might well have high benefit/cost ratios, it is doubtful whether these will be the projects selected by the political process. The president was well aware of this in his speech when he said he wanted “no more bridges to nowhere”, but I see no reason why this time will be different than much of America’s recent history on federal-supported infrastructure projects.
This recovery has been so slow in good part because small and large businesses are reluctant to hire workers for the long term and to invest in durable physical capital since they are concerned over the uncertainty and level of the long-term taxing, regulatory, and fiscal situation of the United States. The president partly addressed these concerns by calling for passage of the stalled free trade acts with Panama, Colombia, and South Korea, supporting patent reform, and advocating lower taxes on corporations. At the same time, however, he also raised concerns about the future economic environment by his proposed sizable increase in federal spending that would further weaken the fiscal position of the federal government.
The net effect on the short and long term health of the economy will depend on whether Congress supports those aspects that will improve the environment faced by households and businesses rather than the more prominent proposals that are likely to further weaken the economy.
vous fashion.thank pour le partage
Posted by: lee jeans homme | 11/09/2011 at 09:27 PM
So nice your post, I certainly love this website, come on.
Posted by: barbour jacket quilted | 11/24/2011 at 06:35 PM
Having higher numbers of occupants per existing structure doesn't bode well for selling off the homes having fallen or about to fall into the laps of bankers.All of the sci-fi stories pointed to a shorter work week, more leisure time and industries developing around increased leisure time coupled with the income to enjoy it. We have nothing like that in place or even in mind. Instead those desperate for any kind of job are to work longer hours for less pay and be appreciative for their opportunity.
Posted by: Cheap Moncler Sale | 11/28/2011 at 08:54 PM
We have nothing like that in place or even in mind. Instead those desperate for any kind of job are to work longer hours for less pay and be appreciative for their opportunity.
Posted by: Air Force One | 11/28/2011 at 09:00 PM
The bitter truth is that the employment prospects for a recent college grad are far more grim, especially full-time employment in their field of study.
Posted by: Christian Louboutin UK | 11/28/2011 at 09:03 PM
The Occupy Movement and everyone else worried about earnings inequality should be emphasizing the need to find ways to encourage more high school dropouts and high school graduates to get the required background and study habits so that they can, and want to, continue on for a college education.
Posted by: Air Max 2011 | 11/28/2011 at 09:08 PM
例えば、プロ結婚式ドレス
のテーラーから裾は非常に基本的な裾のための$ 55の複数の層のための$ 200までの範囲かもしれないが、ウエディングドレス縫製の部屋の周りに自分の道を知っている人にとっては困難な雑用ではないかもしれません。それはすべてのガウンの構造に依存する。裾は非常に単純であるが、あなたのカラードレス 格安
は、裾でのレースがある場合、それはより広範な作業を必要とするかもしれないことに注意することができます。<
Posted by: wedding520 | 11/30/2011 at 01:45 AM
The Occupy Movement and everyone else worried about earnings inequality should be emphasizing the need to find ways to encourage more high school dropouts and high school graduates to get the required background and study habits so that they can, and want to, continue on for a college education.
Posted by: Air Max 2011 | 11/30/2011 at 02:24 AM
There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.
Posted by: Monster Beats Dre | 11/30/2011 at 02:30 AM
As compared to the post-World War II era, Americans with high school diplomas today are much less likely to find manufacturing jobs, because there are 2-3 billion people in emerging economies with similar skills who are willing to work more cheaply in order to have a shot at attaining a middle class standard of living.
Posted by: Monster Beats Studio | 11/30/2011 at 02:34 AM
It is said that in the year of 300 AD, there was a kind old man and his name was Saint Nicholas. He was always ready to help the poor and often gave presents to them.
Posted by: Buy UGG Boots | 11/30/2011 at 05:28 AM
Nice hosting! It’s my first time to read like this article.
http://www.designer-handbags-jewelry.com
http://www.replicaknockoffhandbags.com
http://www.cheapknockoffhandbags.com
..yherty
Posted by: knockoff handbags | 12/02/2011 at 03:08 AM
There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.
Posted by: Monster Beats Dre | 12/02/2011 at 09:33 PM
There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.
Posted by: Monster Beats Dre | 12/02/2011 at 09:33 PM
As compared to the post-World War II era, Americans with high school diplomas today are much less likely to find manufacturing jobs, because there are 2-3 billion people in emerging economies with similar skills who are willing to work more cheaply in order to have a shot at attaining a middle class standard of living.
Posted by: Monster Beats Studio | 12/02/2011 at 09:37 PM
Global demographics instruct that manufacturing job growth in nations with emerging economies will continue to outpace manufacturing job growth in America.
Posted by: Cheap Scarf Online | 12/02/2011 at 09:39 PM
As compared to the post-World War II era, Americans with high school diplomas today are much less likely to find manufacturing jobs, because there are 2-3 billion people in emerging economies with similar skills who are willing to work more cheaply in order to have a shot at attaining a middle class standard of living.
Posted by: Monster Beats Studio | 12/02/2011 at 09:40 PM
So cute! I already like you on FB and also get your posts on Google Reader. :)
Posted by: Belstaff Outlet Store | 12/06/2011 at 04:05 PM
Thank you for such an informative website and post on the EU debt crisis. German tax-payer will react to the prospect of higher taxes oer many years to bail out weaker EU member nations. This is particularly the case when there seems to be constant and volatile opposition in these weaker EU nations to austerity measures.
Posted by: Air Maxs 95 | 12/08/2011 at 09:10 PM
I hope all is good and you will be blogging very soon! Sending all my positive thought to you!
Posted by: Air Force Nike | 12/08/2011 at 09:11 PM
All of the sci-fi stories pointed to a shorter work week, more leisure time and industries developing around increased leisure time coupled with the income to enjoy it.
Posted by: Christian Louboutin UK | 12/08/2011 at 09:13 PM
There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.
Posted by: Burberry Scarves Sale | 12/08/2011 at 09:14 PM
Global demographics instruct that manufacturing job growth in nations with emerging economies will continue to outpace manufacturing job growth in America.
Posted by: Monster Beats Spiderman | 12/08/2011 at 09:16 PM
I think it's hilarious, albeit tragic and appalling, that those who think like pathological narcissists or sociopaths - content not to think beyond the cramped confines of their own comfortable little plutocratic niche.
Posted by: Cheap Air Max 90 | 12/08/2011 at 09:18 PM
Thanks Mr Becker for sharing the information.
Posted by: Classic Ugg Boots | 12/08/2011 at 09:22 PM