Greg Ip

Articles by The Economist’s U.S. Economics Editor

The jobs plan: From deficits to jobs, and back

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Republicans and the deficit stand in the way of a new stimulus package

Sep 17th 2011 | WASHINGTON, DC | from the print edition

[Greg Ip] AMERICA’S political priorities have undergone a breathtaking about-turn. In early August Barack Obama and Congress were consumed by fears about deficits, eventually making a deal to cut more than $2 trillion dollars from the budget over the coming decade.

By the time Mr Obama spoke to Congress on September 8th, though, the deficit had taken a back seat to job creation.

 Mr Obama’s plan would neutralise that hit (see table). He would extend an employee payroll-tax cut due to expire in December and expand it to 3.1% of wages from 2%. He would also cut the employer’s share of the payroll tax, with larger cuts for those who boost net payrolls or raise wages. He would let the unemployed continue to collect benefits for up to 99 weeks, and wisely funnel some unemployment-insurance money into retraining and subsidies for hiring the long-term unemployed. He would also plough some $140 billion into aid to keep teachers, police officers and firefighters employed, to rehabilitate schools, and to build infrastructure. Macroeconomic Advisers, a consultancy, reckons that the plan, if fully implemented, would boost GDP by 1.25% next year and employment by 1.3m.
Read the entire article here.
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Written by gregip

September 15, 2011 at 4:44 pm

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