Instant view: Obama proposes $447 billion plan to boost economy
On Thursday September 8, 2011, 7:44 pm
NEW YORK (Reuters) – President Barack Obama proposed a $447 billion jobs package on Thursday to help boost the U.S. economy, challenging Congress to pass legislation made up largely of tax cuts for workers and businesses.
“The $447 billion total is larger than most had anticipated, but of course, many of these proposals will face stiff resistance from the Republicans in Congress. As expected, the largest single entry is the extension of the payroll tax holiday. However, the President also proposed increasing the size of that tax cut from the current 2 percent to 3.1 percent, for a total cost of $175 billion. Other large programs include a one-year extension of emergency unemployment benefits, and a cut in the employer side of payroll taxes for the first $5 million in wages per firm. The President stated an intention to pay for the program over the next ten years, and will release a deficit reduction plan in the next two weeks.”
CHARLES BLAHOUS, MERCATUS CENTER AT GEORGE MASON UNIVERSITY
“Taking real tax revenue away from Social Security and issuing debt in its place – the policy now in effect – is the worst of all worlds, both for the program and for the budget.” said Blahous.
“If we conclude that economic stimulus is so important that it justifies cutting Social Security’s tax revenue stream, fine. But let’s not issue a second round of debt to paper over that choice, crediting the Trust Fund with phantom revenues.”
ROBERT FRANK, ECONOMICS PROFESSOR AT CORNELL UNIVERSITY
Frank said he believes the jobs package should have been larger, carrying a pricetag of $600 billion and would have liked to see more money going toward infrastructure spending than tax cuts because it would have a more direct effect on the economy.
“There is pretty broad agreement that the best, most effective use of money to stimulate the economy is through grants to the states that help prevent teacher and police layoffs, spending on infrastructure projects. Those kinds of things get you a big multiplier.”
“If you give tax cuts, those dollars get hoarded for the most part.”
“Republicans have a majority in the House and they’ve got enough votes to kill any law in the Senate so the president’s options obviously are limited in terms of what he can hope to get through those chambers.”
MICHAEL YOSHIKAMI, PRESIDENT AND CHIEF INVESTMENT STRATEGIST AT YCMNET ADVISORS IN WALNUT CREEK, CALIFORNIA
“The plan is bigger than what we were looking for, suggesting a real shock and awe strategy. This is almost half a trillion dollars, which isn’t an insignificant step.
“My initial reaction is that what’s needed to move job growth is tax credits, and the extension of the payroll credit makes sense. We’ll have to see how this gets paid for, and how big the whole thing ends up being after negotiations. If the proposal is that this will be paid for through higher taxes on the wealthy, that will have major roadblocks.
“The changes to mortgage issues– which, let’s be clear, will put a greater burden on Freddie Mac– will have a stimulative impact. I think this will be a positive for stocks tomorrow.”
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