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Originally posted on PoliticOlogy





Today, Obama will go and reiterate his campaign message. More fiscal stimulus, particularly in the form of the American Jobs Act. The Obama administration has been put in a corner concerning jobs. Vacillating between what’s politically feasible and economically essential, the White House seems to have moved into campaign mode, pushing for an idealistic vision that has little chance of making it through Congress. The Obama team manifested that vision in the American Jobs Act (AJA), initially proposed in September of 2011. Obama made a big political event out of the announcement of the American Jobs Act, convening a joint session of Congress:





Since then, the Act’s gone nowhere. The Obama administration never thought it would. However, the AJA shows what the Obama administration’s ideal legislation would accomplish and is a good place to start to understand what Obama would do in his second term to create jobs.

  • Payroll tax cut: Much like the stimulus package, the American Jobs Act includes a tax cut. So, even in their ideal world with their politically untenable legislation, Democrats are compromising. And compromising a lot. Over 60% of the plan is made up of tax cuts.

  • Local aid package and infrastructure investment: The most important part of the bill, and the one that has the greatest chance of succeeding. Obama's been in trouble recently for remarking that "the private sector is doing fine," when really he meant that the public sector is doing terribly. This portion of the jobs bill attempts to halt government job losses. 

  • Unemployment Benefits: Republicans have been fighting to cut unemployment benefits at every opportunity, as Congress needs to reauthorize benefits every couple of months. Unemployment benefits inject cash directly into the economy, to the people who need it most and the people most disadvantaged by the recession. The American Jobs Act proposes to extend unemployment benefits with a few interesting revisions.

Given the political circumstances, well-paid and employed pundits are surprised the President is proposing a stimulus package at all, even one as timid as the American Jobs Act. Upon seeing the act in 2011, Paul Krugman wrote that "It's not nearly as bold as the plan I'd want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment." So, although Krugman thinks there should be more infrastructure and state-level spending, the plan is nearly ambitious enough.

The unemployment insurance extension includes a promising prevision incentivizing businesses to start work-sharing. About time! This is a plan that has helped Germany maintain a 4% unemployment rate, almost half of ours, throughout the worst of the recession. Work sharing is simple: instead of laying employees off, an employer reduces their hours and the government subsidizes the difference. It's a smart policy, but one that would’ve been better suited for the early period of the recession, to prevent widespread layoffs.

If better publicized, this is exactly the sort of policy that we should be pursuing. It’s inexpensive, tailored and has a compelling purpose. There's no reason why it should just be a policy of the Democratic party.

A significant portion of the American Jobs Act focuses on infrastructure investment. That's a good thing, particularly given how politically loaded stimulus spending has become. Investing in infrastructure creates jobs. It's a direct investment. And it makes sense, given Obama’s preferences. In a recent New Yorker profile, Ryan Lizza reports that:
Several White House officials said that the issue that Obama seems most passionate about is infrastructure. (One insider Democrat joked that Obama’s passion for infrastructure is matched only by that of the Vice-President, who loves trains.)
The amount of infrastructure investment in the bill may be small, but a small amount of direct government assistance goes a long way.

As far as tax cuts go, the payroll tax cut is a good one. It cuts taxes in half for businesses that pay under $5 million in payroll. That's 98 percent of businesses. And those are the right ones to target. Also, it cuts the payroll tax in half for 160 million workers. That's a lot. Problem is, the payroll tax is not a jobs bill. Tax cuts don't create jobs. Tax cuts create wealth. There's a difference and it isn't trivial. Americans lack wealth right now. But unemployment is more important and the fact that the majoirty bill is made up in tax cuts is a shame. That perpetuates the false ideology that cutting government produces jobs. Compromise is well and good, but it should result from actual negotiation, which the House of Representatives has consciously avoided since 2010.

Is the plan even politically viable? Jared Bernstein, formerly Biden's Chief Economist, notes "it's a plan that in normal times would be broadly supported by partisans on both sides of the aisle." Mark Zandi, one of the chief economists for the McCain campaign, agrees, "project[ing] the Obama plan would add 2 percentage points to economic growth in 2012, add nearly 2 million jobs and reduce the unemployment rate by 1 percentage point."

Yet not a single Republican voted for the American Jobs Act. Forbes joked that Obama should have stayed on vacation. The American Jobs Act was designed for Congress. The Obama team went to unprecedented lengths to specifically elaborate where they’d spend money in order to garner Congressional support. Alas, no matter the package, Congress doesn’t love what this administration is selling. Perhaps the Obama administration should’ve learned its lesson from the stimulus package, which was almost a third tax cuts, yet received no Republican votes. Your jobs plan should be YOUR jobs plan. The other guys aren’t going to compromise no matter what you do.


Although the American Jobs Act has been defined by a lack of any Republican support, it is still modest. Polling data from 2011 suggested that a plurality of voters supported the American Jobs Act. That’s a start, particularly since a plurality of voters disapprove of the stimulus package. Even the Obama team’s imagination of what is possible has been limited by the polarized attitude in Congress. Obama's current jobs plan may be a step in the right direction, but it’s just that. It isn’t a plan and it isn’t big enough to ensure results. Economically and politically, it falls into the same traps as the initial stimulus package. If Republicans will not pass the act, why prematurely compromise and give away tax cuts?


Work sharing should get bipartisan support. It’s cheap and it supports businesses. It also reduces unemployment. Germany’s the heart of the worldwide movement for austerity; if they can do it, there's no reason we can't.

Alas, the response to the American Jobs Act has been emblematic of everything that’s wrong with politics today. The mix of tax cuts with spending increases gives liberals and conservatives alike something to bitch and moan about—in Ezra Klein's words, the plan has something for everyone to hate. That this small of a stimulus bill has received such outsized loathing is depressing. But Obama should aim higher; after all, there’s nowhere left to aim.

Originally posted to Cup of Joe on Thu Jun 14, 2012 at 10:27 AM PDT.

Also republished by Community Spotlight.

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