It's been pretty widely reported that Obama is going to announce a $300 billion jobs bill tomorrow night at a Joint Session of Congress. Based on reports, about half of it will be an extension of the payroll tax, with the rest being tax incentives, training for the unemployed, another unemployment benefits extension, infrastructure projects and local government assistance. I'm sorry but that can't really be it. A part of me is wondering if there is some cunning plan taking shape to make people think the plan is a dud and then do something BIG. He can't really be that stupid can he? Pretty much all the measures he is going to announce have been tried before and been utter failures.
The payroll tax reduction was a nice small boost to my paycheck but it's pretty clear it did nothing for additional hiring. It took effect on January 1, 2011 and the unemployment rate is actually marginally higher now. There is also a fundamental argument why it wouldn't stimulate the economy. Workers tend to pocket one time savings like these and only change their consumption patterns on what are viewed as permanent changes. A one year extension just doesn't cut it. The rest of the package looks like a mini stimulus package and we know how that turned out. Based on the latest CBO report on the stimulus, it cost about $350,000 per job. So if you assume that $150 billion will be spent on this mini-stimulus, that means we can expect about 430,000 jobs to be created/saved, which is a pretty paltry sum given the practically 20 million unemployed out there. The worst part is that there is a good chance that we won't even come close to 430,000 jobs created, as this bill will be paid for with tax increases. That will have a recessionary impact on the economy, even if it is out years as people will know the tax increases are coming.
So on the whole, this plan sounds pretty lame and I just have to think "is that really the best he can do?"