Somewhat stimulating

12 September 2011 By Martin Hutchinson

Paying for the president’s $447 bln plan could risk crowding out other activity, causing job losses rather than gains. But the proposed cut in employer payroll taxes would cheapen labor and may create jobs. That’s a piece of the puzzle Congress should support and even extend.

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President Barack Obama, in a speech to a joint session of Congress on Sept. 8, proposed a $447 jobs package. It included a reduction for 2012 in employees’ social security contributions to 3.1 percent, costing $175 billion, a reduction for 2012 in employers’ social security contributions to 3.1 percent for the first $5 million of a company’s wage bill and a complete payroll tax holiday for increasing the payroll by $50 million above the prior year, either through wage increases or new hires (the combination of which would cost $65 billion.)

Also included in Obama’s proposal are: a one-year extension of 100 percent capital equipment expensing (costing $5 billion); $85 billion in aid to state and local governments; $50 billion in infrastructure spending; $10 billion in an infrastructure bank; $49 billion to prolong the extension of unemployment benefits to 99 weeks; and $8 billion in tax breaks for the long-term unemployed.

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