Obama’s American Jobs Act

On Sep. 8, President Obama unveiled his $447 billion American Jobs Act before a joint session of Congress. Obama spoke for more than thirty minutes, discussing his ideas for payroll tax cuts, long-term unemployment benefits, and infrastructure spending.

This week, economists have been analyzing the President’s proposal and how it will ultimately affect the economy.

Theoretically, the plans would put hundreds of thousands back in the workforce by next year, reduce unemployment rates and boost economic growth. One of the main initiatives discussed was a substantial Social Security tax cut aimed at providing an increase in direct income.

An extension of a tax cut implemented this year that reduced Social Security taxes from 6.2 percent to 4.2 percent would be extended to a new version that would drop the rate to 3.1 percent. This savings will theoretically result in more spending, temporarily spurring the economy.

The potential hurdle is that a Social Security cut would expire by the end of 2012, providing only a temporary boost in spending. In addition, there are few guarantees that Americans would use the extra money from their paychecks for goods and services, and even if they did, the US economy is largely dependent on foreign products.

The Buy American provision of Obama’s plan attempts to compensate for the potential consumer spending on foreign goods. The directive states that none of the money created by the American Jobs Act can be used for spending on infrastructure improvements unless all of the goods used in the project were produced in the US.

With at least $80 billion of the American Jobs Act proposed for spending on infrastructure improvements and the modernization of schools, the Buy American provision may keep the money spent on goods within the US. The White House also hopes that the increase in construction employment will further spur the economy.

In resolving the long-term unemployment dilemma (which includes 43 percent of out-of-work Americans), the act calls for a $4,000 tax break for businesses that hire applicants who have been unemployed for six months or more.

Additional provisions of the act include extending emergency unemployment benefits and providing aid to keep state and local governments from laying off teachers.

Political pundits predict that President Obama’s new plan will not likely be met with open arms in Congress. Republicans have criticized the act of basically re-hashing the old ideas that failed with Obama’s $825 billion economic stimulus plan in February of 2009.

Failing to provide substantial economic growth or tame the unemployment rate, that act was mainly successful in keeping the US out of a full-blown depression. Although the previous plan did manage to save or create millions of jobs, it could not compete with the rising unemployment rates across the country.

A common sentiment among those who oppose President Obama’s new ideas is that the top priority of the president is to preserve his own position. With the 2012 elections just 14 months away, holding his position in office may be on the top of Obama’s list, and some believe that his new plan is merely an attempt to gain the support of voters.

As temporary as the American Jobs Act will ultimately be, it’s a stepping stone in the right direction. It proposes ideas that both parties can hopefully agree on, but it still doesn’t address the larger concern: Spending doesn’t save an economy, so what will save America’s?

That question, at least for now, has gone unanswered by most politicians and economists.


“Many economists say Obama jobs plan will help” Associated Press http://www.usatoday.com/money/economy/story/2011-09-09/obama-jobs-plan-economists/50336434/1

“Obama unveils $447B jobs package” USAToday http://www.usatoday.com/money/economy/story/2011-09-08/Obama-unveils-447B-jobs-package/50327464/1

“House Passes $819B Stimulus Package” FOXNEWS.com http://www.foxnews.com/politics/2009/01/28/house-passes-b-stimulus-package/

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