In his passionate speech introducing the American Jobs Act, President Obama threw down the gauntlet and challenged members of congress to take action to help the American people and the national economy by passing his proposed plan immediately.
Highlights of the American Jobs Act include:
- Jobs in modernization and repairs for transportation and schools
- Funding to promote employment of teachers, police, and firefighters
- Tax incentives for hiring the long-term unemployed and veterans
- Tax incentives for businesses who give their workers raises
- 50% cut in payroll taxes for all workers
- 50% reduction of business payroll taxes (up to $5 million of company payroll)
- Elimination of business payroll taxes for newly hired workers
- Extension of unemployment insurance benefits
- Refinancing assistance for those with high interest rate mortgages
This is what I have been waiting for. In my view, you cannot refer to a set of proposals as a “jobs plan” unless it first and foremost creates jobs in its initial stages. I see the President’s recommendations as a modernized twist on the WPA of the Roosevelt administration. This will swiftly put Americans back to work in areas that are vital to our safety and education. This is a very important component of the plan as we cannot afford to wait for corporate incentives to possibly “trickle-down” to create jobs. We must act and create jobs now.
Money for working and middle class Americans
The substantial payroll tax cut along with tax incentives for businesses who give their workers raises is an excellent step toward jump starting the economy. As I discussed in my article, The Path to Economic Recovery, consumer spending drives the economy. More money in the pocket of everyday Americans both eases personal financial burdens and gives people the income to increase their spending.
Some people become concerned that unemployment extensions are just “spending”. However, it is important to remember that, because consumer spending drives the economy, paying unemployment insurance benefits also helps to strengthen the economy because recipients spend this money.
Tax incentives that promote hiring
This portion of the plan is quite clever. Unlike the Romney plan discussed in my article, Bait and Switch, the tax incentives and cuts in this plan are specifically geared to reward businesses only if they hire or give raises. Also because of the payroll size limits, small businesses who need assistance the most will receive the greatest benefit. So, instead of a wholesale 10% corporate tax cut and simply hoping that this will “trickle down”, this plan requires businesses to invest in new and current workers in order to receive the benefits. This is right on target. Corporations just sat on their record profits from the second quarter of 2011. Hopefully, the requirement to invest in their workforce in order to reap rewards will motivate corporations to start playing a role in growing our economy.
Paying for the plan
I appreciated the President’s references to eliminating loopholes and exemptions for corporations and the wealthy along with the possibility of a top tax rate increase. I have argued for this in several previous articles.
I am a bit concerned about the reference to Medicare reforms. As we have seen, that can mean vastly different things to various members of congress some of whom would like to dismantle the program.
What about energy?
This was one topic that I wish had been part of the plan. We must move toward developing new energy technology and infrastructure. This would create an enormous number of jobs as well as enhancing our energy independence and national security.
Gazing into the crystal ball
Overall, I think this is a very positive proposal that has the potential to get our economy moving and help everyday Americans immensely. However, it will now be in the hands of a Congress that almost allowed our nation to go into default less than two months ago. I am hoping that the time spent at home with constituents during the recent Congressional recess has given the members of Congress some perspective. We need a majority in both houses who are willing to do something to help the American people. I have a feeling that the recent horrible Congressional approval ratings of 13% will get some elected officials worried enough about their own jobs that a majority will agree to pass some version of this plan. Even though some of them will be doing this for selfish reasons, at least we will get some help for the American people.