Three analyses of the President's jobs proposal

[ProSense]

American Jobs Act: A Significant Boost to GDP and Employment

We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.

• The various tax cuts aimed at raising workers’ after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:
  
  
• Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
  
  
• Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline.
  
  
• The program works directly to raise employment through tax incentives and support to state & local governments for increasing hiring; it works indirectly through the positive boost to aggregate demand (and hence hiring) stimulated by the direct spending and the increase in household income resulting from lower employee payroll taxes and increased employment.

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Obama’s Plan: Robust and Ambitious

President Obama’s new, robust, and ambitious jobs plan is a well-crafted measure that would provide significantly more job and earnings opportunities for working Americans. Given the economic difficulties facing America’s families, Congress should enact it sooner rather than later.

The President did not estimate how many jobs it would create or save but, at about $450 billion, it’s clearly large enough to cut the unemployment rate over the next year or so. Moody’s Analytics’ Mark Zandi predicts the plan would add 1.9 million jobs in 2012 and cut the jobless rate — which now stands at 9.1 percent — by a percentage point compared to where it would otherwise be.

In fact, as the chart reveals, if Congress fails to pass any of the measures in the American Jobs Act, we should expect the unemployment rate to be slightly higher next year (9.3 percent). But with the AJA job-creation measures at work in the economy, the jobless rate would be 8.3 percent. That’s still too high, but it’s a marked improvement.



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How Would the President’s Jobs Proposal Affect the Economy?

My colleague Jared Bernstein has a good description of the jobs package that President Obama proposed last night. Here’s why measures like these are needed and what they can accomplish.

The economy’s production of goods and services (actual GDP) is roughly a trillion dollars less per year than what it is capable of producing (potential GDP), and demand for goods and services is growing too slowly to close the gap. As the chart (from this chart book) shows, the economy fell into a deep hole in the recession and growth is flagging. The result? Stubbornly high unemployment and a permanent loss of wages and business income from the economy’s failure to operate at full capacity.



Measures like those that the President has proposed increase demand over what it would otherwise be — thereby closing some of the gap between



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[OHdem10]

1. Thanks

[Life Long Dem]

2. But Obama might look good if unemployment is lowered.

[ProSense]

3. You must understand

some people are no longer rooting for job-creation and help for the unemployed. They're cheering the possible failure of the President.