What’s to like, love, and have mixed feelings about in Obama’s jobs plan


Thursday night, President Obama unveiled the American Jobs Act, a plan he says will provide a much needed jolt to our stalled economy.  With a combined $447 billion in stimulating measures ($253 billion in tax cuts; $194 billion in new spending), Obama’s bill will help undo some of the economy-crippling austerity cutspassed in the debt ceiling “compromise” this last August.

When judging the impact of any new form of stimulus, three main factors should be considered: immediacy of effect, size, and likelihood of being spent (rather than saved).  With that in mind, let’s examine what’s to love, like, and have mixed feelings about in Obama’s new jobs plan.

What’s to Love

Immediate surface transportation: The $50 billion dollars marked for new highways, rail, and transit passes all three tests; it will be spent right away, it is a large figure, and as it is a spending proposal, by definition, it will not be saved.  

The Extension of Unemployment Benefits: Extending unemployment benefits is estimated to cost $49 billion dollars.  That money will go directly into the hands of those most in need in our society.  As low-income (or in this case, no-income) people are the most likely to spend any money received rather than saving it, this sum should have a large, instant impact on generating demand for consumer goods.

Money for Teachers, First Responders: The $35 billion set to keep local teachers and first-responders from losing their jobs should be a no-brainer.  It improves education and public safety while immediately boosting the country’s aggregate demand for goods and services.

What’s to Like

Infrastructure Spending: The bill includes $25 billion to modernize public schools, $5 billion to update community colleges, $10 billion in loans to private-sector companies that invest in infrastructure, and $15 billion to fix up vacant buildings.

First off, let me just say that investing in our country’s infrastructure is something we need to do.  And since Republicans seem to oppose every new spending measure put forward, there’s no promising that they would agree to fix our nation’s schools and buildings if we left doing so to a future Congress.  Thus, now may be the best time to invest.

However, while infrastructure investments pass the tests of size and spending, they fail the test of immediacy.  The sheer magnitude of the amount spent ($55 billion total) would stimulate the economy, but much of that won’t come until years in the future.  Some of these projects may not even be finished until we’re already out of the recession.

Still, plenty will be spent today as specific projects are unveiled and undertaken.  Combine that fact with the nature of the projects (we’re rebuilding the core of America) and these investments are definitely something to like.

What’s to Feel Mixed About

Payroll Tax Cuts: In general tax cuts aren’t the best tool fiscal policymakers have to stimulate the economy (expect a post on that later this weekend). In fact, they’re usually pretty lousy.  The trouble is that a lot of the money put back into the hands of the citizenry gets saved rather than spent (thus, the economy is not given the same boost it would be if that money were directed purely toward purchasing new goods and services-expanding our nation’s demand).

Still, with many middle-class American families struggling to make ends meet, a cut in the payroll tax (from what is normally 6.2% to 3.1%) is arguably a moral thing to do.  It will leave blue-collar workers with more money in their pockets next year to spend and save for their and their children’s futures.  Just don’t expect these cuts to boost the economy like direct spending would.


Beyond the content of the jobs plan, what was exciting to watch last night was Obama’s presentation of it.  He looked like a president leading from the forefront, ready to stage a political battle and take his case to the American people (when Republicans inevitably put up their resistance).  While Obama’s economic proposal may not be perfect (what comes out of Washington is?), it’s a major step in the right direction.  It should passed, and it should be passed now.