Jobs Act: spending but not paying

Contending with a hostile Congress, low approval ratings, and a falling economy, President Obama addressed a joint session of Congress and presented a plan to put Americans back to work. The plan is being called the, American Jobs Act. 

WASHINGTON, D.C. (Catholic Online) - The President was blunt. "You should pass this jobs plan right away," he told lawmakers. Obama added that most of the provisions in his plan had prior bipartisan support. 

Obama preempted negative Republican reaction by saying, "The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy."

The plan costs considerably more than what analysts expected, outlining $447 billion in new stimulus. Previous estimates were between $300 and $400 billion. If the plan is passed, the money should begin flowing into the economy almost immediately, with the bulk of it being spent in 2012. 

The spending

Most of the spending will be in the form of tax cuts. A popular payroll tax extension is also an expansion, cutting the taxes paid by employers by a full one-half. The typical American household should see an average tax reduction of $1,500. The bill for this is expected to be approximately $240 billion. Obama touted this as a large-scale middle-class tax cut.

There would also be tax credits for employers who hire people who've been unemployed for more than six months. Higher cuts would be available to employers that hire veterans and still higher cuts for those hiring disabled veterans. 

The plan also intends to immediately spend on schools and infrastructure, such as rail lines, roads and bridges. As many as 1 in three schools could be renovated and upgraded.
The plan also extends unemployment benefits for up to one year.

Who's paying

The rich, and large corporations. 

Obama repeated his oft-used line that the rich and corporations should, "pay their fair share."Analysts say this is a clear signal that the Bush-era tax cuts for the wealthiest people and large corporations will not be extended.

Obama pitched his proposal as a zero-sum game, "Should we keep tax loopholes for oil companies?  Or should we use that money to give small business owners a tax credit when they hire new workers?  Because we can't afford to do both.  Should we keep tax breaks for millionaires and billionaires?  Or should we put teachers back to work so our kids can graduate ready for college and good jobs?  Right now, we can't afford to do both."

Despite the cost of the plan, Obama insisted that it would all be paid for by spending cuts. He did not deal what those cuts would be, rather he promised to announce a proposal next week and punted much of the problem to the congressional committee that is supposed to hammer out bipartisan legislation as part of last month's debt ceiling deal. He stated that some of the money would come from minor cuts in Medicare and Medicaid, something likely to upset seniors and hard-core Democrats who do not wish to see any change to either program. 

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Most in Washington like what Obama said, but since the plan is still short on detail, specifically how it will be paid for, it could just be pie -in-the-sky.  Many economists argue the plan will do little to help the economic recovery. Critics say the plan will only create short-term employment and part-time jobs. And the plan does not take into account the continued effect of global markets on the U.S. economy. 

Congress is expected to take up the bill immediately. It is not expected to pass in its entirety  although some provisions will likely be adopted.

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