Analysis of President Obama’s American Jobs Plan
ANALYSIS OF PRESIDENT OBAMA’S AMERICAN JOBS PLAN
The cost of the Plan is $447 billion with $245 billion for tax cuts, $140 billion for infrastructure and ‘local’ aid, and $62 billion for unemployment.
Tax Cuts ($245 billion):
1. Employee payroll tax cut of $175 billion. This, apparently, will be an extension of the maximum $1,000 temporary cut for 2011, and will be increased to $1,500. Whereas the concept has merit, the implementation appears to be somewhat infantile. The amount is not sufficient (I advocate that the first $40,000 of wages should receive an ‘income tax’ credit equal to 6.2% , which would result in a maximum of $2,480 per year) and it should be made permanent.
2. Employer tax cut of $65 billion. This is to inspire employers to hire additional employees and to raise wages. This is worse than the employee tax cut, since this has no merit, whatsoever. An employer will hire an additional employee when there is need for that incremental employee. Thus, this would be an absolute waste of taxpayers’ funds.
3. Expensing of certain equipment of $5 billion. No comment.
Infrastructure and Local Aid ($140 billion):
1. $50 billion for transportation. It should be determined why these expenditures were not authorized during the ordinary course of proper governmental activities.
2. $35 billion to retain and rehire teachers and first responders. Whereas this appears ‘nice’, it is triage, at best, and only enables the problems to continue. CONCEPT: Layoffs are economic poison. If governmental entities must reduce expenses, salaries and benefits should be cut.
3. $30 billion to modernize public schools. This appears to be rational, if the concept of ‘cost versus benefits’ is utilized.
4. $15 billion to rehabilitate vacant property. This should be left to private enterprise.
5. $10 billion for an infrastructure bank. This appears to be rational, if sufficient controls are established to prevent waste and fraud and that the concept of ‘cost versus benefits’ is utilized.
Unemployment Benefits ($62 billion):
1. $49 billion for the extension of unemployment insurance. No problem.
2. $8 billion for tax credits to stimulate the hiring of the long-term unemployed. This, again, is triage, at best. Efforts should be devoted to the macroeconomics.
3. $5 billion for ‘work opportunities for low-income individuals. More triage.
It appears that whoever designed this American Jobs Plan does not have the wherewithal to have done so or he or she may have been tasked with presenting something that would appear appropriate for political purposes, hoping that our economics would improve, without assistance, over time.
Further, it appears that the Administration does not comprehend the provenance of our economic malaise.
1. Until the Obama Administration understands the provenance of our economics, it will not be able to effectively advocate for the best logistics to resolve.
2. If there is a brush fire, sufficient equipment and personnel must be deployed. Sadly, this Administration admitted that it didn’t realize the fire was as bad as it was. Ignorance should not be a legitimate excuse.
3. It is the responsibility of Congress, not the Administration to legislate the appropriate fiscal changes, which should lead to the immediate hiring of 500,000 and more, each month. The longer Congress hides from its responsibilities, the more problematic will be its efforts.