The American Jobs Act has not received a very warm welcome on Capitol Hill. Republicans have balked at many of the ideas in the package, and predictably rejected the idea of raising taxes to pay for the $447 billion proposal. In his speech, the President did a great political job of framing the debate as not about whether the plan will work, but whether Republicans will let the plan work. As a result, anyone criticizing the impact and economic effectiveness of the jobs plan appears to be attacking the idea of a return to full employment. That simply is just not true though.
If you look at content of the bill, you find that 67 percent is just a rehashing of programs in the Recovery Act of 2009 or some other bill since then. Another 13 percent of the American Jobs Act is just spending to continue already established programs. While there are new things in the bill, they are very few—and they are certainly not going to turn the unemployment situation or economy around. On Wednesday I gave a more detailed critique of some of the more frustrating parts of the bill, but here is a full breakdown and comparison of American Jobs Act components.
First, there are $300 billion worth of programs that have previously been done to little substantive impact on the economy:
|
American Jobs Act |
Previous Comparative Programs |
|
Cut Employee Payroll Taxes to 3.1% ($175B cost) |
Tax Relief Act of 2010 already cut payroll taxes from 6.2% to 4.2% |
|
$50B for Surface Transportation Projects |
Recovery Act of 2009 spent $48 billion on surface transportation projects |
|
$35B as Aid to States for Teachers, Police, and Firefighters |
Recovery Act of 2009 spent $102 billion has aid to the states for teachers, policy and firefighters |
|
$25B for School Building Improvements |
Recovery Act of 2009 spent $1.3 billion on school improvements |
|
$15B for Rehabilitating Vacant Homes |
Recovery Act of 2009 spent $5 billion weatherizing homes |
|
Develop Rural Community Wireless Internet Project (cost TBD) |
Recovery Act of 2009 established a $4.7 billion rural community broadband Internet development project |
|
Require SEC to Review Securities Laws for Burdens to Small Business (cost TBD) |
January 2011 Executive Order 13563 already requires regulatory agencies to review rules to ensure they “promote economic growth |
|
Develop an Automatic Federal Home Refinance Program (cost TBD) |
TARP Program was used to earmark $50 billion for the failed Home Affordable Modification Program and Refinance Program (HARP and HAMP) |
.
Second, there are the Job Act components that just propose to continue existing programs:
- $49B to Extend Federal Unemployment Benefit Assistance Fund
- $5B to Extend 100% Expensing through 2012
- $3M for Additional Money to the Surety Bond Guarantee Fund
And finally, what is left of the American Jobs Act that could be defined as “new” ideas are these things:
- Cutting payroll taxes in half for business and eliminate payroll taxes for hiring new workers or raising pay up to $50 billion (est. cost: $65 billion)
- Establishing a national infrastructure bank called the American Infrastructure Financing Authority and seeding it with $10 billion
- Using unemployment benefit money to pay employers to keep workers on part-time ($8 billion)
- Creating the Pathways Back to Work Fund that will give states money for programs for long-term unemployed to be trained, given cash to start a business, come up with their own programs (Georgia
- Works, Opportunity NC), a $4,000 tax credit for hiring long-term unemployed, to fund training for low-income youths (est. cost $5 billion)
- Creating a $5,6000 per worker tax credit for hiring veterans who have been unemployed for six months or more, and a tax credit of up to $9,600 if the veteran was wounded in combat (est. cost $n/a)
- Paying federal contractors faster
- Asking Congress to pass patent reform
So the question becomes, what is the point of this bill? As I said last week, the whole package appears designed to be stop gap measure that hopes it provides a little juice to keep unemployment in the 9% to 10% range and avoid a double dip recession. The Jobs Act misses all the big picture, long-term reforms that are needed. And it doesn’t provide many of the short-term things that would be positive fixes without costing a lot of money. There are good reasons to criticize this bill, not from a partisan perspective, but a substantive perspective. Even hardcore leftist Jeffrey Sachs thinks it won’t work.