Yesterday, Senate Republicans released an economic plan called the “Jobs Through Growth Act.” Senator Rand Paul said it would create five million jobs without specifying a time frame. Though the plan repackaged previous GOP ideas we’ve heard before, Republican Senators argued that releasing the ideas as a plan would restore business confidence, leading to investment, growth, and job creation.
The GOP unveiling of the plan was widely treated as major news, and Republicans are challenging Obama to respond to their plan — a challenge that’s also garnering widespread coverage.
But an economist I spoke to just now said there isn’t enough information in the plan to evaluate whether it could even achieve its goals as Republicans themselves have defined them. He said it won’t help the economy in the short term, and could even make matters worse.
“I don’t have enough detail to evaluate how many jobs this would create,” Gus Faucher, the director of macroeconomics at Moody’s Analytics, told me. “I could say, `My plan is to do nothing, and it will create five million jobs.’ And it could work, particularly if I don’t say over what time period.”
Moody’s recently estimated that Obama’s jobs plan, if passed, would add two percentage points to economic growth next year, add 1.9 million jobs, and cut unemployment by a full percentage point. By contrast, the Senate GOP plan isn’t designed to help the economy in the short term, Faucher said.
“Should we look at regulations and make sure they make sense from a cost benefit standpoint? Certainly. Should we reduce the budget deficit over the long run? Certainly,” Faucher said. “But in the short term, demand is weak, businesses aren’t hiring, and consumers aren’t spending. That’s the cause of the current weakness — and Republican Senate proposals aren’t going to address that in the short term.”
“In fact, they could be harmful in the short run, if the focus is on cutting spending,” Faucher continued. “They don’t say explicitly when they would cut spending, but the Republican focus is on cutting spending sooner and later.”
In one sense, this isn’t surprising. After all, Moody’s and another firm recently made similar pronouncements on House GOP proposals for the economy. But Senate Republicans said the release of the new plan — by repackaging previous ideas in one place and pushing them in public — would create certainty and confidence and lead ultimately to five million new jobs.
Faucher said he had no way to evaluate the idea that the release of the plan itself could create confidence and certainty.
“That’s not an economic argument,” he said. “I do think the lack of confidence is a problem, but again, the way to get over that problem is by having strong near term growth, and this proposal isn’t focused on that.”
Faucher also said the Senate GOP plan’s inclusion of a Balanced Budget Amendment could hurt the economy in the near term. “Putting the emphasis on balancing the budget now is likely to push the economy back into recession,” he said. “We’re seeing the impacts of that in Europe, where governments are undertaking fiscal austerity and their economies are struggling.”