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IGPA Economists React to President Obama's American Jobs Act
Sept. 9, 2011 _ The president’s primetime address to a joint session of Congress on Thursday provided an overview of a $447 billion jobs package intended to provide a “jolt” to the national economy. With unemployment above 9 percent, a massive structural deficit, and states facing more layoffs (Illinois is no exception), Obama urged Congress to put aside politics and pass the American Jobs Act as soon as possible.
“The president used a highly visible forum primarily to speak to the American people and put Congress on notice as to how serious he is about the need to act now,” IGPA Director Robert F. Rich said. “He reiterated more than 15 times: pass this bill now. He also said that he planned to take his message to all corners of the United States.”
Despite a forceful message, Obama’s plan has received mixed reviews. As pundits debate the possible impact of several measures included within the plan, questions have arisen about the ability of the plan to not only pass, but to work.
“For President Obama's proposal to work, the reduction in the payroll tax will have to be significant enough to induce firms to starting hiring workers,” said Dr. Dan McMillen. “The problem now is uncertainty about the future. The situation in Europe is causing a lot of concern, and businesses have become very conservative again out of fears of another recession. Given this concern about the future, it's unlikely that a reduction in the payroll tax will have a significant effect on unemployment.”
Although uncertainty is a persistent obstacle, investment in infrastructure shows more promising results. “This is an ideal time for the government to increase infrastructure investment because the relative cost of finance and building is low. There is wide agreement that roads, bridges, airports, and other important parts of our infrastructure need repairs,” said Dr. Darren Lubotsky. “Historically low interest rates make the cost of financing these repairs less expensive than it would otherwise be. In addition, this form of government spending makes up for some of the decline in consumer spending and, therefore, raises aggregate demand.”
While one might disagree with the overall size or design of the programs, they represent standard policy responses that most economists would recommend during a recession. However, the debate’s ultimate impact may be more political than economic.
“This was as much a political speech as it was a catalog of a set of economic approaches,” Rich said. “The speech should be seen in the context of unprecedented negative ratings of the President’s performance and even lower ratings of the performance of Congress.”
For more, read Five Things to Know About the National Economy and Illinois
Photo from White House, Chuck Kennedy, Sept. 8, 2011