The Corner

‘We Expect These Effects to Be Negligible’

That’s what an analysis from Macroeconomic Advisers — the economic consulting firm founded by former (Clinton-nominated) Federal Reserve governor Larry Meyer — has to say about the jobs plan President Obama is expected to unveil in a speech next week. The analysis examines the potential impact of the various policies that, according to unofficial reports, the president is likely to recommend. These include:

  • An extension of federal funding for emergency unemployment benefits

  • An extension of the payroll tax holiday, possibly expanded to include the employers’ portion of Social Security taxes

  • An extension of temporary business “expensing” of capital investments

  • A new tax credit for businesses that increase the size of their workforce

  • Infrastructure spending, perhaps including renovation of public schools

  • A job-training program targeting the long-term unemployed, possibly modeled after a program in Georgia

The report essentially concludes that while all of these measures might have be of some, albeit minimal, economic benefit in the short term, they will do practically nothing to fundamentally address the unemployment problem. That hardly comes as a surprise, given that these “new ideas” are simply a rehash of the same policies Obama has pushed since taking office. 

A look at how the analysis breaks down, by individual policy proposal, after the jump.

Extension of payroll tax holiday, unemployment benefits, and business expensing:

We estimate that extending through 2012 the employee payroll tax holiday, emergency unemployment benefits, and business expensing provisions would boost employment roughly 600,000* by the end of next year, with the effect quickly dissipating over the following two years.

*If so, this would amount to just enough to keep pace with natural workforce growth.

Employer payroll tax cut:

A temporary reduction in the employer payroll tax in 2012 may pull some employment forward from later years, as might a temporary tax credit for hiring, but we expect these effects to be negligible in such a weak economy.

Infrastructure spending:

Infrastructure spending can make good economic sense in both the short-run and long-term, particularly at today’s low interests rates, but takes time to ramp up and will be limited in scope by current political realities.

Training programs:

Training programs could results in the faster re-employment of some workers, reducing structural unemployment. However, because none of these ideas address the main impediment to hiring — persistently insufficient final demand — our expectations for the success of a jobs bill are, well, not so great. [emphasis added]

Andrew StilesAndrew Stiles is a political reporter for National Review Online. He previously worked at the Washington Free Beacon, and was an intern at The Hill newspaper. Stiles is a 2009 ...

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