Learning a lesson from 2009, the President did not make any claim on how many jobs his American Jobs Act would create, or what the unemployment rate will be when he addressed Congress Thursday night. In 2009, the White House put out a prediction that the stimulus would create 2 million jobs and keep the unemployment rate from exceeding 8%. It was 7.2% the day he took office.
However, something bad happened. The economy was worse than thought, and despite creating between 1.3 and 2 million jobs (depending on who is counting), unemployment still rose to 9.2% to the absolute delight of Republicans.
This time, there were no predictions from the President. He left it up to the economists to predict. They are beginning to come in and overall, they believe the bill, if fully implemented, will create jobs and reduce the unemployment rate.
Independent economists have analyzed the bill and like it
Macroeconomic Advisers, a private firm used by the Federal Reserve, told CNBC on Friday “We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.”
They predicted that the provisions in the bill would: a)“Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013; and, b) 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. They also said that “studies show tax credits for hiring do incent increased hiring.”
Mark Zandi, an economist with Moody’s Analytics was even more bullish, projecting that the plan would add two (2) percentage points to economic growth in 2012, add 1.9 million jobs, and cut the nation’s unemployment rate by a full percentage point.
Zandi feels that the cut in employer tax is a creative way to help small businesses and middle class taxpayers. He said this will help 98% of the businesses who have been hurt the most by the Recession. “Many of the president’s proposals are unlikely to pass Congress,” Mr. Zandi said, “but the most important have a chance of winning bipartisan support.”
John Irons of the Economic Policy Institute said that overall the package would increase employment by about 4.3 million jobs over the next couple of years. The new initiatives would boost employment by about 2.6 million jobs, while the continuation of the two temporary provisions (EUI and the payroll tax holiday) would prevent a backslide of over 1.6 million jobs.
Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, figures that the Social Security tax cuts alone would add 1 percentage point to economic growth and create 1 million jobs next year.
Jason Grumet, President of The Bipartisan Policy Center released a statement about the plan: “In particular, we recommended a full, year-long payroll tax holiday for both employers and employees. We continue to believe that the payroll tax holiday is the most efficient way to spur much needed economic growth and job creation in the short term, and we are pleased to see that the plan laid out by the president this evening included a similar proposal.
He went on to say that more is needed: “Still, a bipartisan, long-term solution that will reduce our debt and ensure America’s future prosperity is urgently needed. We look forward to seeing the president’s specific recommendations for deficit reduction in the coming days, and we continue to hold out hope that the Joint Select Committee on Deficit Reduction will go beyond its narrow mandate and enact a broad reform plan that includes significant entitlement and tax reform and stabilizes America’s debt.”
The opinions of economists are important, but at the end of the day, the only opinions that matter are those with a vote in Congress. Self-appointed economists in Congress, mainly Republicans have said the plan would not create jobs. Real economists are positive about what the provisions can do, but not so optimistic that the do-nothing Congress will enact them. That is why the President is taking his case to the people.
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