Wonkbook: What’s in the president’s jobs plan, and what comes next
[This post was last updated on Sept. 9 at 6:50 a.m.]
“Pass this jobs bill,” said President Obama. Then he said it again. Then he said it again. And again. All in all, he asked Congress to “pass this jobs bill,” or some variant thereof, 12 times during Thursday’s jobs speech.
That got to the essential truth behind the speech: all the president can do is ask Congress to pass his bill. The only direct leverage he has is his ability to make the ideas popular and their refusal unpopular. He can’t make them pass the bill. He can’t pass it himself. He can’t use an executive order. He can propose ideas and use the bully pulpit to force them onto the agenda. After that, it’s up to Congress.
The proposal itself is called “The American Jobs Act” and amounts to about $450 billion worth of ideas that have, at other times, commanded a bipartisan consensus.
- It cuts the payroll tax for workers in half, which amounts to a $175 billion tax break, and cuts it in half for businesses until they reach the $5 million mark on their payrolls, at a cost of $65 billion. The idea there is to target the tax cut to struggling small businesses, rather than the cash-rich large businesses. It also extends the credit allowing businesses to expense 100 percent of their investments through 2012, which the White House predicts will cost $5 billion.
- It offers $35 billion in aid to states and cities to prevent teacher layoffs, and earmarks $25 billion for investments in school infrastructure.
- It sets aside $50 billion for investments in transportation infrastructure, $15 billion for investments in vacant or foreclosed properties, and $10 billion for an infrastructure bank. It also makes mention of a program to “deploy high-speed wireless services to at least 98 percent of Americans,” but it doesn’t offer many details on that program.
- It provides $49 billion to extend expanded unemployment insurance benefits. $8 billion for a new tax credit to encourage businesses to hire the long-term unemployed, and $5 billion for a new program aimed at supporting part-time and summer jobs for youth and job training for the unemployed.
- It also encourages the Federal Housing Finance Authority to make it easier for underwater homeowners to refinance their mortgages.
If all of that could be spent out in 2012 -- a big if, but given the reliance on tax cuts and state and local aid, much of it could certainly hit before the year’s end -- it would be bigger, in annual terms, than the Recovery Act. The White House also promises the entire proposal will be paid for, and the specific offsets will be released next week.
The plan, taken as a whole, attempts to include every single theory of how to address the jobs crisis. If you believe we need more direct spending, you’ve got the infrastructure component. More tax cuts? The plan has $250 billion in tax cuts. More help for the unemployed? Yep. More deficit reduction? Next week, the White House will release a package that offsets this plan and reduces the deficit by more than $1.5 trillion on top of that.
Of course, in much the same way that everyone can find something to like in this plan, everyone can find something to dislike. If you believe tax cuts are ineffective during a demand-driven crisis, the plan spends a lot of money on tax cuts. If you don’t believe in infrastructure spending, there’s plenty of it in here to offend you. If government spending goes against your moral code, well, the government is going to spend money. And next week, when the Obama administration releases its deficit-reduction ideas, liberals are going to be a lot less enthusiastic than they are tonight.
So the question for members of Congress ends up being simple: do you want to focus on the things you do like and compromise on the things you don’t like in order to get some action on jobs and deficit reduction? Or do you want to focus on the things you don’t like and abandon the things you do like in order to kill the legislation? All Obama can do is ask. Now it’s up to Congress to answer.
Five in the morning
1) Congress should pass the American Jobs Act immediately, says President Obama: "Pass this jobs bill, and all small business owners will also see their payroll taxes cut in half next year...It’s not just Democrats who have supported this kind of proposal. Fifty House Republicans have proposed the same payroll tax cut that’s in this plan. You should pass it right away. Pass this jobs bill, and we can put people to work rebuilding America. Everyone here knows that we have badly decaying roads and bridges all over this country. Our highways are clogged with traffic. Our skies are the most congested in the world. This is inexcusable. Building a world-class transportation system is part of what made us an economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America?"
Read the White House factsheet: http://1.usa.gov/o4WHww
2) The plan totals $447 billion, reports Zachary Goldfarb: "President Obama made an impassioned appeal on Thursday night for $447 billion in tax cuts and government spending to boost the nation’s lagging economic recovery, calling on lawmakers to put politics aside and work together to solve the jobs crisis...The program includes the repackaging of some previous Obama proposals and the extension of other initiatives, including temporary payroll tax cuts that were enacted last year. But he also called for several significant new steps, such as enlarging that tax cut to provide $1,500 in savings for the average family and offering another tax cut for businesses that hire new employees...The substantial majority of the jobs program would take effect within a year."
3) The Federal Housing Finance Agency is considering the administration's refinancing proposal, reports Nick Timiraos: "The White House is pushing to revamp an existing federal program to allow more Americans with government-backed loans to refinance, and a federal regulator is weighing changes to accommodate that effort, according to people familiar with the matter. President Barack Obama alluded to the proposed changes in a primetime address on Thursday night, when he said his economic team would work with federal housing agencies 'to help responsible homeowners...refinance their mortgages at interest rates that are now near 4%.' Officials aren't considering a new program but instead are weighing changes to an existing one that the White House rolled out more than two years ago...Potential refinements are also being evaluated by the Federal Housing Finance Agency, which is tasked with conserving the firms' assets and which would have to sign off on any changes."
4) The supercommittee got its first walkout threat at its very first meeting, reports Nathan Hodge: "A Republican senator threatened to walk out on the special deficit-reduction supercommittee if other members push for new cuts in defense spending. The remark by Sen. Jon Kyl (R.,Ariz.), a defense finance expert and frequent budget negotiator, threatened to shatter any hope for compromise or bipartisan cooperation as the deficit panel held its first public meeting Thursday. 'I'm off of the committee, if we're going to talk about further defense spending,' Sen. Kyl said at a luncheon organized by the conservative Foreign Policy Initiative, the American Enterprise Institute and the Heritage Foundation, referring to a conversation he had with panel members. At the panel's meeting earlier in the day, members took pains to set a conciliatory and optimistic tone."
5) Ben Bernanke signaled his willingness to launch more stimulus, report Neil Irwin and Steven Mufson: "And as Federal Reserve Chairman Ben S. Bernanke took to a stage in Minneapolis on Thursday to give his latest thoughts on the nation’s economy, he knew that in just a few hours President Obama would be giving one of his most important speeches on the same topic...Bernanke delivered a typically low-key speech and even sounded an upbeat note or two. But make no mistake: A ferocious amount of political pressure is building on Bernanke, who controls an agency designed to be independent of politics and is the one force in government that can act unilaterally to address some of the current economic woes. He made no new promises Thursday, only emphasizing that the Fed still has tools left in its arsenal should the economy continue to suffer. The central bank’s policy committee is meeting Sept. 20-21, and, he said, is 'prepared to employ these tools as appropriate to promote a stronger economic recovery.'"
Festival interlude: The Vaccines play "Norgaard" at Glastonbury.
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Still to come: Reactions to Obama's speech and jobs plan; Senators want the supercommittee to go big; an appeals court tossed out a health care reform challenge; Congress looks ready to extend FAA funding; the DOE is giving a go-ahead for a rooftop solar project; and a man vacuums up a raging fire.
Obama's plan is more of the same, says Mitch McConnell: "The definition of insanity, as Albert Einstein once famously put it, is to do the same thing over and over again and expect a different result. Frankly, I can’t think of a better description of anyone who thinks the solution to this problem is another Stimulus. The first Stimulus didn’t do it. Why would another one? This is one question that the White House and a number of Democrats clearly don’t want to answer. That’s why some of them are out there coaching people not to use the word Stimulus when describing the President’s plan. Others are accusing anybody who criticizes it of being unpatriotic or playing politics. Well, as I’ve said, there’s a much simpler reason to oppose the President’s economic policies that has nothing whatsoever to do with politics: they don’t work."
But his ideas are worth considering, says John Boehner: "American families and small businesses are hurting, and they are looking for the White House and Congress to seek common ground and work together to help get our economy back on track. Republicans have laid out a blueprint for economic growth and job creation - our Plan for America’s Job Creators - that focuses on one thing: removing government barriers to private-sector job growth. The proposals the President outlined tonight merit consideration. We hope he gives serious consideration to our ideas as well. It’s my hope that we can work together to end the uncertainty facing families and small businesses, and create a better environment for long-term economic growth and private-sector job creation."
Let's split the bill up, says Eric Cantor: "As the President said, people are really hurting out there. It's time for Washington to come together and produce results. It seemed that the President was delivering the message that Congress should take up and pass his jobs bill, all or nothing and if that didn't happen, he would seek to hold us accountable. I don't think that's the right approach. What we should do is go for the things in the package that we both can agree on. I did hear some things, like small business tax relief, reducing red tape, working to try and streamline the infrastructure spending in this country, and looking to reform the unemployment benefits program to get people back to work. These are the kinds of things that can produce results, help clean up the system, and we could do these right away. I'm hoping to peel some of these out of the package, to put them on the floor, to see what we can get done as soon as possible."
The plan shows that Obama gets how dire the jobs situation is, writes Paul Krugman: "I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment...Some of its measures, which are specifically aimed at providing incentives for hiring, might produce relatively a large employment bang for the buck. As I said, it’s much bolder and better than I expected. President Obama’s hair may not be on fire, but it’s definitely smoking; clearly and gratifyingly, he does grasp how desperate the jobs situation is. But his plan isn’t likely to become law, thanks to Republican opposition. And it’s worth noting just how much that opposition has hardened over time, even as the plight of the unemployed has worsened."
There's some question as to whether payroll tax cuts are effective, reports Brad Plumer: "Chad Stone, an economist at the Center on Budget and Policy Priorities, points out that the payroll tax cut does tend to get money in the hands of lower-income workers, who are more likely to spend their savings, which means that the CBO tends to score it as relatively effective economic stimulus....Still, Stone adds, there are other tax credits that are better designed for providing stimulus -- say, a refundable tax credit that more narrowly targets low-income workers...Former Reagan adviser Bruce Bartlett has argued that the measure doesn’t help the unemployed (who are most likely to spend any additional income), that it hits many higher-income Americans who don’t need the relief, and that many workers are more likely to pocket the savings than spend the money...There are two counterarguments here. One, even if workers are saving the money, that may not be so terrible."
Obama's setting up a win-win scenario for himself, writes Mark Schmitt: "Obama’s new approach, though, sets up, in theory, a different hypothetical win-win than the one we’ve been operating under for almost three years. One possibility is that Republicans have some qualms about a wholly obstructionist agenda, Congress passes some or most of the American Jobs Act, the economy improves (likely with some help from the Federal Reserve, international circumstances, and good fortune), and actual conditions get Obama out of the box he’s in. Failing that, if the White House and Democrats can keep their focus on the American Jobs Act (and if the left can avoid getting distracted by Obama’s wise concessions to reality, such as long-term reductions in Medicare spending), then Republican obstruction takes a new form. It’s not just blocking Obama, or his agenda--it’s blocking economic recovery, systematically, including ideas that Republicans have embraced in the past and will embrace again."
The package is the right size, writes Jonathan Cohn: "The numbers I got from economists varied, but the rough consensus was that an investment in the neighborhood of $400 to $500 billion (including renewal of the existing payroll tax cut and unemployment insurance extension) would reduce unemployment by roughly a percentage point over the next year, relative to what it might otherwise be. If the current projections are right -- always a big if -- that'd still leave unemployment at close to 8 percent, which would be too high. But it'd be a whole lot better than 9 percent, which is where it's stuck now. Would the American Jobs Act accomplish that?...Add it up and you get close to $450 billion, very much in the ballpark of what those economists had recommended."
It's too tax cut heavy, writes Jeff Madrick: "I do have some reservations about what the president said. One is the large majority of this plan is about tax cuts and tax credits, not real spending. We get much more bang for the buck with spending on infrastructure--with spending on unemployment insurance and sending more money to state and local government than we do for tax cuts for business. For the most part, we’ve had those and it hasn’t worked. But these tax cuts for business and workers will not have the pop per dollar that direct spending would have had--direct spending on infrastructure, on education and so on. For every dollar of direct spending, you get more GDP than you do for every dollar of tax cuts. So that was disappointing--that was the same old stuff. The other thing that was disappointing to me was that he mentioned that if we didn’t reform Social Security, it wouldn’t be here--that is totally not true."
The plan is fine, but more of the same, writes Megan McArdle: "The targeted employment stuff is basically a decent plan--we should be aggressively looking for ways to keep the long term unemployed from turning into the permanently unemployed. At worst, we put a little extra money into the pockets of taxpayers. The biggest worry is that the stimulus from the accelerated depreciation won't actually make much difference in America--Austan Goolsbee's work suggests that these sorts of tax cuts mostly end up in the pockets of people who produce investment goods, and many of those people are not in America. The infrastructure stuff will be fine, if we choose good projects--America needs roads and airports and so forth. But as we discovered with the previous round, the better the project, the worse the stimulus. There are no terrific infrastructure projects sitting around, waiting to break ground next week."
It won't work, writes Douglas Holtz-Eakin: "The president has ducked entitlement reform and believes that government spending is growth, so there was no chance of spending offsets. That means that to provide the offsets would mean he had to come clean with the fact that this is just another tax and spend effort. So we got another speech with more promises and fundamentally mediocre substance. Indeed, even by late August 'Macroeconomic Advisers' was warning that a similar package would generate under 40,000 new jobs per month between now and the end of 2012. This package is 'bigger' and would like get scored differently, but the bottom line would be the same. Details aside, one knew in advance that the president wanted to spend nearly another half trillion dollars and not move the dial on unemployment. We didn’t know that it would be spend and promise to tax, but the shock value is small."
It might not work, but it's worth a try, writes David Brooks: "Recent stimulus packages have not exactly lived up to the hype. Temporary tax cuts generally don’t lead to much job creation. Given the long lead times involved, infrastructure spending is an odd way to combat a double dip that might be starting right now. Job subsidies often go to companies that would have hired the people anyway. One recent study showed that a plurality of the people hired under the last stimulus package already had jobs; they were just switching from one to another. In short, the administration is putting forth a package to prevent a double-dip recession that may not come to pass with a series of measures that may not work. Yet it’s hard to walk away. The prospect of a double dip is truly horrifying...Personally, my bottom line is this: I think the president has earned a second date. He’s put together a moderate set of stimulus ideas. His plan may not be enough to jolt prosperity, but it might maintain its current slow growth."
A bipartisan group of Senators want $3 trillion in supercommittee savings, reports Peter Wallsten: "More than two dozen senators from both parties met privately this week to revive hopes of a grand debt-cutting bargain -- exploring how to push the newly formed debt 'supercommittee' to find far more than its assigned goal of $1.5 trillion in deficit reductions. The senators want at least $3 trillion slashed from the deficit over the next decade. In addition, they plan to press the committee to pass a major tax overhaul to lower rates and close special-interest loopholes, as well as changes to entitlement programs such as Medicare, according to several participants. The effort comes as the 12-member supercommittee begins what is expected to be a grueling process to map out its plans before a November deadline -- and it threatens to undercut the chances for President Obama to win passage for portions of a jobs plan expected to cost hundreds of billions of dollars in the short term."
The Senate has passed the patent reform bill, reports Jia Lynn Yang: "After six years of squabbling over how to fix the country’s patent system, the Senate passed a bill Thursday touted by lawmakers as important for creating jobs and encouraging innovation. But a wide range of patent experts said that the bill had been so watered down after years of debate and lobbying that it will do little to repair the country’s dysfunctional patent system -- and is unlikely to spur much job growth...The patent system was designed to protect and encourage companies that develop novel ideas. But critics, including many technology firms, say the system is now ridden with low-quality patents that are so vaguely defined that companies have become vulnerable to frivolous lawsuits alleging patent infringement."
The European Central Bank will keep rates low, reports David McHugh: "European Central Bank head Jean-Claude Trichet warned Thursday that there are increasing risks for the euro zone’s waning economic recovery and less chance of inflation -- clear signals that the bank is done raising interest rates for some time. At a news conference, Trichet offered new, gloomier economic projections after the bank’s 23-member governing council left the benchmark refinancing rate unchanged at 1.5 percent. Pressure had risen on the bank to freeze its rate-hike campaign after a turbulent summer in which worries grew that the 17-nation shared-currency bloc’s debt crisis was hurting consumers and businesses and global growth was stalling. Trichet said the euro zone economy was expected 'to grow moderately,' but the assessment was 'subject to particularly high uncertainty and intensified downside risk.'"
Congress quietly raised the debt ceiling, reports Corey Boles: "The U.S. Senate, in an unusual procedure, cleared the way Thursday for the U.S. to lift its borrowing authority by $500 billion to $15.19 trillion, enough to keep the support federal government borrowing through late January or early February. The action came under an unusual legislative procedure spelled out under the August agreement to raise the U.S. debt ceiling and avoid a U.S. credit default. In a 52-45 vote, the Senate blocked an attempt by Republicans to slow down the process that will result in the $500 billion debt-ceiling increase. The increase stems from a deal between Congress and the White House, finalized last month, that spells out how the borrowing limit would be increased by $500 billion. Under the process, lawmakers in both the House and Senate must vote on a resolution of disapproval against the increase in the borrowing limit."
Spending now saves money, writes Robert Frank: "One example comes from the Nevada Department of Transportation, which describes a 10-mile stretch of Interstate 80 badly in need of repair. If the job were done today, they report, it could be accomplished for $6 million. But if it’s delayed for just two years, weather and traffic will eat more deeply into the roadbed, boosting the job’s cost to $30 million. That huge difference ignores the fact that many workers capable of doing the work are currently unemployed. If we wait, we'll need to bid many of them away from other productive tasks. Much of the equipment required for the job is also sitting idle. The required materials are now extremely cheap on world markets. And the interest rates to finance the work are at record lows. Even apart from the need to stimulate employment, the case for doing the work right away is a complete no-brainer."
More inflation won't fix the economy, writes Raghuram Rajan: "It is an attractive solution at first glance, but a closer look suggests cause for serious concern. Start with the question of whether central banks that have spent decades establishing and maintaining anti-inflation credibility can generate faster price growth in an environment of low interest rates. Japan tried - and failed: banks were too willing to hold the reserves that the central bank released as it bought back bonds...Consider, next, whether the inflationary cure would work as advertised...Even for distressed households that have borrowed long term, the effects of higher inflation are uncertain...Of course, any windfall to borrowers has to come from someone else’s wealth. Inflation would clearly make creditors worse off. Who are they? Some are rich people, but they also include pensioners who moved into bonds as the stock market scared them away."
Adorable animals getting incepted interlude: A cat watches a video of a cat watching an animation of a cat.
An appeals court threw out a health care reform lawsuit, reports Sarah Kliff: "In a surprise move, a three-judge panel of a federal appeals court based in Virginia has tossed out one of the most prominent challenges to the health reform law. This is the first appeals court to throw out a case for lack of standing after a lower court had ruled on the merits. It leaves the Affordable Care Act with an even scorecard in the courts, with one appeals court ruling in favor of the health-care law’s constitutionality and one against it...With two conflicting rulings on the issue, it’s widely expected that the Supreme Court will take up the case. It will likely issue a decision by next summer. Most observers had expected the Virginia panel -- all Democratic appointees, two of President Obama’s -- to rule in favor of the law, supporting the mandated purchase of insurance. Instead, the Fourth Circuit Court of Appeals said it did not have authority to rule on the case at all."
Hospitals want a higher Medicare retirement age, reports Susan Jaffe: "The American Hospital Association has a strategy for heading off any more Medicare payment cuts: Tell Congress to get the money from Medicare beneficiaries instead. The association is urging its nearly 5,000 members to lobby Congress to raise the Medicare eligibility age from 65 to 67, in addition to other money-saving alternatives, according to spokeswoman Marie Watteau. That’s one of the ideas that could get a new look as the deficit committee tries to find ways to reduce Medicare spending. If it can’t find at least $1.2 trillion in savings, hospitals and other health care providers will get hit with automatic cuts in Medicare payments. But if the association gets what it hopes for, recent studies suggest that hospitals could hurt themselves in a different way -- because more patients would show up at emergency rooms without insurance to pay their hospital bills."
Congress is finally set to approve an FAA funding extension, reports Andy Pasztor: "House and Senate leaders appear set to extend Federal Aviation Administration funding for at least several months, without resolving disputes over aviation-union rules and other broader labor issues that previously blocked passage of a long-term agency spending bill. Democrats and Republicans alike are seemingly eager to avoid a repeat of the partisan fight that temporarily sidelined scores of airport construction projects and furloughed some 4,000 FAA employees for nearly two weeks this summer. The lawmakers are focused on a stopgap reauthorization measure that could fund the agency for a period of several months or up to a year...Final details need to be worked out, these officials said, and unexpected last-minute disagreements still could prevent passage of the new legislation before the current stopgap funding expires at the end of next week."
Mitt Romney is seizing on Rick Perry's criticisms of Social Security, reports Philip Rucker: "Perry is betting that the nation’s economy is so battered and its debt so deep that voters will reward him for taking on a program that is as financially unsustainable as it is politically sacrosanct. And Perry isn’t just proposing changes to Social Security; he’s labeling it a failure, saying the program is 'a monstrous lie to our kids.'...Romney is betting just the opposite. He is arguing that Perry’s views make him unelectable and would badly damage the Republican Party, as happened after President George W. Bush proposed privatizing Social Security in 2005...'I want to save Social Security,' Romney said Thursday on Sean Hannity’s radio show. 'It is an essential safety net for the American people. And number two, it is terrible politics. If we nominate someone who the Democrats could correctly characterize as being against Social Security, we will be obliterated as a party.'"
Eric Cantor isn't keen on an infrastructure bank, reports Brian Beutler: "House Majority Leader Eric Cantor (R-VA) is striking a gentler tone ahead of President Obama's Thursday jobs speech, and highlighting the areas he says Republicans can work with the administration to grow the economy -- unemployment insurance, payroll taxes, and infrastructure. But the devil is in the details, and there are still significant differences between the parties' approaches. 'I'm wary of the suggestion of an infrastructure bank,' House Majority Leader Eric Cantor (R-VA) told reporters at a roundtable lunch hosted by the Christian Science Monitor. 'I am one who agrees with the notion that an infrastructure bank is almost like creating a Fanny and Freddie for roads and bridges.'"
Congress needs to rediscover bipartisanship, writes John Dingell: "We in Congress are tearing our country apart and weakening the foundation established by great leaders before us. Is anyone in Congress truly proud that we have not produced a budget? That we caused the downgrading of U.S. government securities, as well as appalling disorder and confusion in financial markets? Or that this situation caused the lack of job creation and economic growth that has contributed to the hopelessness and misfortune of millions of Americans? Wrangling by all parties, from the top down, cripples our work, and media that encourage confrontation instead of negotiation fuel the fire. Being locked into this system of starting from the far left or the far right and then doing just enough for passage may get a single bill done, but it’s not a system that produces the best law that does the most good for all Americans."
There has to be an easier way to do this interlude: A man vacuums up a raging fire.
The Energy Department is giving a loan guarantee to a rooftop solar project, reports Steven Mufson: "Energy Secretary Steven Chu announced a conditional guarantee to cover 80 percent of a $344 million loan for the biggest residential solar rooftop project ever in the United States. A company called SolarCity plans to install, own and operate up to 160,000 rooftop installations on as many as 124 military housing developments in 33 states over the next five years. That would equal the current number of residential rooftop installations in the United States. It would provide 371 megawatts of generation capacity. The Energy Department loan guarantee will significantly lower capital costs for the project, said one of the backers of the project."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.