David Zeiler: Even if passed intact, U.S. President Barack Obama’s jobs plan, though ambitious, would at most nudge down unemployment by a single percentage point over the next year.
Furthermore, the Republican-controlled House of Representatives will surely object to several provisions in the American Jobs Act – particularly the total $447 billion price tag – further diluting its impact.
President Obama’s jobs plan includes:
- Tax breaks for both individuals and businesses.
- Financial aid to states aimed at repairing schools and retaining public sector jobs such as policemen and teachers.
- An extension of unemployment insurance.
- And money to repair and upgrade transportation infrastructure, such as highways, railroads, and airports.
Wall Street, already worried about events unfolding in Europe, seemed less than impressed by the proposals. Stocks started down Friday, the morning after President Obama’s jobs speech, and meandered lower throughout the session. The Dow Jones Industrial Average (NYSE:DIA) slipped 2.69%, while the Standard & Poor’s 500 Index (NYSE:SPY) dropped 2.67%.
“There was nothing in the president’s speech that would inspire the stock market one iota forward, and I think we can see that reflected already this morning,” Money Morning Capital Waves strategist Shah Gilani said on the Fox Business Network program “Varney & Company.”
Pressure to Act
Congress will feel pressure to at least pass a watered-down version of Obama’s jobs plan if only because both parties are wary of the public anger over the gridlock and bickering that took place during the summer’s debt ceiling debate.
In fact, some Republican lawmakers did sound more conciliatory than usual.
“I heard plenty in the president’s speech last night where I think that there is a lot of room for commonality and we can get something done quickly,” said House Majority Leader Rep. Eric Cantor, R-VA, in an interview on CNN’s “American Morning.”
Cantor suggested the two parties “set aside” some of the issues on which they strongly disagree, such as the proposed “infrastructure bank,” and concentrate on the few areas of mutual agreement, such as tax breaks for small businesses and infrastructure spending.
The cooperative tone was not universal, however. Senate Minority Leader Mitch McConnell, R-KY, knocked President Obama’s speech Thursday morning – hours before it was delivered.
“This isn’t a jobs plan; it’s a re-election plan,” McConnell said on the Senate floor.
Analysts predicted Congressional Republicans would try to cherry-pick the parts of the American Jobs Act that fit their governing philosophy while rejecting the rest.
“These payroll tax reductions are the proposals that have the greatest chance of getting passed by Congress because it will be harder for Republicans to vote against proposed tax cuts,” Paul Ashworth, chief U.S. economist for Capital Economics, told Reuters.
Republicans are almost certain to reject proposals such as the aid to state and local governments and extending unemployment insurance. Back in June of 2010 Senate Republicans blocked an extension of unemployment benefits, saying it would add to the federal deficit.
And that was before the election of dozens of fiscally conservative Tea-Party Republicans, who tend to object to new spending of any kind for any reason.
Paid For … Or Not?
Obama said in his speech that his proposals would be paid for, although he later explained that would mean adding another $500 billion to the $1.5 trillion in savings that the Congressional “super committee” is charged with trimming from the federal budget. Those recommendations are due Nov. 23.
The president said he would submit a new deficit-reduction plan on Sept. 19 that would include spending cuts, adjustments to Medicare and Medicaid, and closing tax loopholes for corporations as well as wealthy individuals.
Making the jobs creation bill part of the contentious deficit reduction battle may come back to haunt President Obama, who might need to sacrifice many of his proposals just to get anything passed.
For all its good intentions, not enough of Obama’s jobs plan will survive to make much of a difference.
“Nothing that’s likely to get done is going to have a meaningful impact in terms of lowering the unemployment rate and creating jobs,” Neil Dutta, an economist with Bank of America Merrill Lynch (NYSE:BAC) told Reuters.
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