Yesterday evening, President Obama addressed a Joint Session of Congress to propose his newest economic recovery measure -- The American Jobs Act. The President's bill would have a $447 billion ten-year cost, which the President says would be fully paid for in the proposal he will give to the Super Committee a week from Monday recommending the Committee exceed its $1.5 trillion mandate.
The AJA, designed to stimulate economic activity and spur job creation, includes a mix of tax cuts--including various payroll tax holidays and hiring incentives--and spending increases, such as new infrastructure spending and an extension of unemployment insurance. The proposal also includes job-retraining proposals through reform to unemployment insurance.
|Proposal||10-Year Cost (Billion)|
|Cut Employer Payroll Taxes from 6.2% to 3.1% and Create Bonus Payroll Tax Cut for New Jobs/Increased Wages||$65|
|Extend 100% Expensing for 2012||$5|
|Teacher Rehiring and First Responders||$35|
|Create an Infrastructure Bank||$10|
|Rehabilitate and Repurpose Vacant Property||$15|
|National Wireless Initiative (Paid For Through Spectrum Auction)||$0|
|Veteran's Hiring Initiative||N/A|
|Extend and Reform Unemployment Insurance||$49|
|Tax Credit for Hiring Long-Term Unemployed||$8|
|Create Fund for Low-Income Youth and Adults For Training and Year Round/Summer Jobs for Youth||$5|
|Cut Employee Side of Payroll Tax from 6.2% to 3.1% for 2012||$175|
It should be noted that the yearly spend out rate for the AJA might be similar, if not higher, than any one year that the 2009 ARRA ever had. According to CBO's analysis in January (Box 1-2), the maximum that the ARRA ever spent in a single year was $395 billion. We have yet to see if the plan is politically viable, and we are still waiting to see Obama's deficit reduction plan which would pay for it (we will release a paper later today with some ideas on why and how the President's jobs bill could be paid for).
As we suggested in a recent paper, one of the benefits if the Super Committee were to go big on deficit reduction and exceed its mandate would be fiscal space for near and long-term growth policies.