Economists doubt payroll tax cut will create jobs
Economists are generally skeptical about the biggest and most bipartisan part of President Obama’s $477 billion plan to help put 14 million people back to work: a large payroll tax cut for workers and businesses.
While they were more positive about Obama’s plan to spend as much as $140 billion on roads, schools and other infrastructure, many economists do not expect the plan to jump-start an economy teetering on the edge of a double-dip recession.
UC Berkeley economist and former Clinton administration Labor Secretary Robert Reich wrote on his blog that the plan correctly identifies the problem as growth and jobs, not deficits, but “isn’t nearly large enough or bold enough to make a major dent in unemployment or to restart the economy.”
Michael Boskin, a top economist in the George H.W. Bush administration now at the conservative Hoover Institution at Stanford University, said that while the plan as a whole “might generate a small amount of job creation, the costs would be several hundred thousand dollars per job.”
Although he favored a payroll tax cut in late 2008 when companies were laying off millions of workers, Boskin said it would be less effective now to draw the jobless back to work.
“It would be much better to have permanent, predictable policy,” Boskin said. “There’s so much uncertainty, so much fear of more taxes and more regulations in the future, that fixing that would be much better than temporary Band-Aids.”