"I am sending this Congress a plan that you should pass right away," President Barack Obama said while presenting the American Jobs Act in a Sept. 8 address to Congress. The ambitious $447 billion jobs plan he proposed aims to “put more people back to work and put more money in the pockets of working Americans.” Let us do a section-by-section analysis of how it aims to accomplish this and what are the chances of its success.
This act, if passed, will provide for a temporary payroll tax cut for employers, employees and the self-employed with incomes up to $5 million. This cut also applies to public institutions of higher education.
Further, to provide additional relief to businesses, the amount of surety bond would be increased to $5 million, thereby providing a greater hedge against failures, especially for the new start-up businesses. This clause is sure to receive a big thumbs up from small and medium-sized business owners who provide employment to a sizable section of the working class.
The next clause of the act, titled Putting America Back To Work, provides for 40 percent tax credits to employers who hire veterans. It will provide a much needed direct benefit to the veterans and war heroes returning from Afghanistan and Iraq, specifically keeping in mind the massive pullout of troops being planned.
Another very important clause is the Teacher and First Responder Stabilization clause, under which a total sum of $35 billion has been laid out to pay for the salaries of teachers and first responders who have been laid off. This clause will not just benefit the target group, but the society as a whole, which will now be able to utilize their precious services.
Along the same line, there are a couple of other clauses, namely the School Modernization clause and Infrastructure Investment clause. While the former demarcates a fund of $25 billion and $5 billion for renovation and modernization, respectively, of schools at all levels and community colleges, the latter clause lays out $2 billion to upgrade airport infrastructure, $27 billion to repair dilapidated highways and $4 billion to to build high-speed rail corridors.
This is a welcome move at a time when east Asian powers like China, Japan and Singapore are taking ever bigger strides to equip themselves with the 21st century infrastructure. This clause reinforces Obama's principle of "Buy American." All the construction materials and equipment bought using funds provided under this act must be 100-percent American made. It is bound to provide an impetus to the manufacturing industry. However, it also opens up a loophole by stating that if the quality and/or cost of similar imported goods is economically favorable, an exception to the above-stated clause could be made.
A unique feature of the proposed act is that it intends to provide a direct benefit to the unemployed workforce. This $4 billion aid will come in the form of job counseling, skills review and wage insurance. It also proposes short-term compensating programs under which the employers can reduce the working hours of a certain percentage of the workforce in lieu of laying off the rest of the work force. The employees so affected by the hours cut will be compensated by funds amounting to $5 billion. It also proposes to invest a significant amount in industrial apprenticeships and sector specific training for the low-income group families.
To sum up, this act has all the salient features to put America's economy on the path to complete recovery in the long-run, with a special focus on equitable redistribution of wealth. But, despite all the generous provisions provided under this act, it is quite surprising to note that it is valid for only one year. It is common wisdom that an economy suffering from recession for almost half a decade now cannot be rebuilt in one year, no matter how strong the steroid is. We all know that 2012 is the election year, and this act is the perfect gesture to woo the 99 percent. It is a typical case of good politics but not so good economics.
Such a large amount of public spending in such a short span of time is quite likely to add to the increasing burden of the fiscal deficit that the U.S. already faces. The act says that this welfare prerogative will be paid for by raising $4.8 billion during the next decade through licensing and selling permits of the D-Block (700MHz) spectrum to non-Federal commercial agencies, repealing the enhanced oil recovery credits and cutting down on the Federal expenditure by $1.5 trillion. However, it still leaves room for ambiguity and might actually end up not functioning well. But with all its shortcomings, the bill is a step in the right direction and should be given a go ahead – with some rectifications here and there.
Published in Washington State University's newspaper, The Daily Evergreen on October/26/2011 .
http://dailyevergreen.wsu.edu/read/opinion-american-jobs-act
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