The President's Jobs Plan

The plan gets a B+ grade.  Yesterday we heard a 30 minute speech by the President--some of which was political posturing, no doubt about that--so there will be many more details to be released over the next few days. Perhaps the grade will eventually change in one direction or the other.  It depends on the revealed details, as well as the quality and effectiveness of upcoming actions as follow-ups to the articulation of the plan.

Even so, the amount of content packed into the allotted time is impressive.  The White House released a transcript of the speech which forms the basis for this writing.  In the summary below, the terminology is extracted directly from the transcript as much as possible, while omitting the interpolated (applause) and (laughter).  Why do they put those things in there, anyway?  Thankfully, they leave out things like (yawn) and (burp) and (cough).

In case you haven't yet heard, the price tag is quoted as $447 billion, about half of which is attributed to a continued and expanded payroll tax reduction.  Those figures do not show up in the transcript of the speech.  Somebody with an MBA probably took the numbers that were included in the speech and plugged them into a spreadsheet to come up with the total.  Somebody else without an MBA--or maybe in wanting to check the spreadsheet's results, the MBA person did this, too--likely pulled out a calculator and did the mathematics using that tool and came up with the same answer.



As you read and hear more about this plan--and the economy overall--here are some background facts that might help to put perspective on things (data source is a whole lot of spreadsheets that are available as Historical Tables from the Office of Management and Budget) (percentages rounded for clarity):

• Current Federal taxation of the economy is modest by historical standards -- Federal receipts (revenues, taxes, whatever you want to call them) were 15% of GDP for Fiscal Year 2010, and are estimated to be 14% of GDP for FY2011; the last time that Federal receipts were at 14% was in 1950; in other words, these taxes today represent a smaller portion of the nation's economy than at any other time since 1950. 
• Today's Federal debt level, unpleasant though it might be, is not historically high -- Federal debt was 93% of GDP for FY2010, and estimated to be 103% of GDP for FY2011, growing to 106% of GDP in FY2013 before beginning to decline; the record level for this measurement stands at 122% of GDP in FY1946 (and was 97% or higher from 1944 through 1948).
• Spending on Defense and related programs has grown faster than the rest of Federal spending -- the estimate for FY2011 puts Dept. of Defense spending at 19% of the total, and in FY2001 it represented 16% of total Federal outlays; in addition, other related spending for the Departments of Homeland Security and Veterans Affairs plus "Other Defense Civil Programs" have seen their combined outlays increase from 5% of the total in 2001 to an estimated 7% for 2011; during that same period of time, the outlays for the Department of Transportation (just to pick a different Department) have decreased from 3% to 2% of Federal spending. 

It looks like we have gotten ourselves to a point where we have more military, lower taxes, higher debt, and less ability to effectively move people and products around the country.

Here's a relevant observation that came my way just the other day:  knowledge is knowing that a tomato is a fruit; wisdom is knowing that the tomato does not belong in a fruit salad.

In this plan it looks to me like the President and his advisers have come up with a fruit salad that contains a good variety of tasty foods, so that there is something for everybody's picky tastes, and nothing in it looks like an out-of-place tomato; but there might not be enough in the bowl to go around.

The official name is "American Jobs Act."  A more accurate name would probably be "American Payroll Tax Cut/Jobs Incentives/Business Tax Credit/Unemployment Insurance Benefits Extension/Tax Code Reformation Act, with Accompanying But Yet-to-be-Disclosed Deficit Reduction Proposals, plus Business-Friendly Administrative Actions That We Can Do on Our Own Because We Want To and We Don't Have to Wait for You Slow Pokes in Congress to Productively Act on this Act in Order to Do These Additional Things."

Let's stick with American Jobs Act, and hope that brevity will not obscure reality.

The Devil is in the details, of course, all of which will surface over the next several days.  Expert analysis--some of which will hopefully come from informed and thoughtful sources--will surface, too.  My own take on the plan is that it is not big enough and does not include sufficient stimulus for job creation.  And also there's this nagging feeling that more could be done to stabilize the entire ecosystem related to housing, and more could be done to psychologically boost the confidence of American's business leaders. Perhaps these things, or the lack of these things, will be addressed on another day.

Here is a summary of the key elements of the plan, mostly using words extracted from the transcript of the speech (if you trust me, it will save you the trouble of reading it for yourself):

• Small business payroll tax cuts -- reduce payroll taxes by half next year.
• Schools renovation -- provide funding for renovation construction projects in at least 35,000 schools.
• Transportation construction -- set up an independent fund containing private investment money aimed at issuing loans for construction projects, as based on a prior bipartisan Congressional proposal.
• Teacher employment -- funding to hire or rehire teachers.
• Employment of veterans -- tax credits for companies that hire American veterans.
• Incentive to hire long-term unemployed -- a $4000 tax credit to a company for hiring a worker who has been unemployed for six months or longer.
• Unemployment insurance -- extend by another year, and include a temporary work program for those who collect the benefits, based on a temporary work program in use in Georgia.
• Payroll tax cuts for individual wage-earners -- continue the payroll tax reduction that is in place for this year into the next year (amounting to a $1500 tax cut for the typical working family).
• Funding sources -- an updated deficit reduction plan will be released by the Administration on September 19 that will show how to pay for these proposals by adding their price tag to the $1.5 trillion deficit reduction target that Congress is required to complete by Christmas of this year.  It will include additional spending cuts and modest adjustments in health care programs, and tax code reforms targeted on the wealthiest individuals and corporations.  Spending cuts will not happen abruptly so as to avoid an additional drag on the economy.
• Corporate tax code reforms -- eliminate loopholes and deductions and lower the tax rate.
• Small business contractors to Federal government -- speed up payments for completed work.
• Red tape reductions -- for those companies that are growing and intending to raise capital and go public.
• Existing homeowners -- federal housing agencies to provide assistance for refinancing while interest rates are much lower than they had been.
• International trade agreements -- seeking Congressional approval for already-negotiated trade agreements with Panama, Columbia and South Korea.
• Jobs Council -- business leaders organized to work with the Administration so that their companies are providing internships, training, and providing some tuition coverage for workers to learn new skills at community colleges.

The last five items in the list are the things that are apparently wholly within the scope of Administrative actions.   These are the things for which Mr. Obama probably could have, and maybe should have, said in preface "I hereby direct that these things be done right now!"  The only possible exception would be the treaties, because a treaty requires Senate approval.

As the details emerge lots of people will be looking for errors so that the grade can be taken down a notch or two; that's to be expected.  But at this particular moment, it is more important that all participants in government improve their grades by spending time in earning extra credit.  Lots and lots of extra credit.