Senate compromise falls woefully short of a jobs plan
The Senate appears poised to pass two components of President Obama’s American Jobs Act, having found the first area of bipartisan agreement. These two components, however, fall woefully short of what is needed to address the jobs crisis.
The first provision would provide tax credits for hiring veterans, with bigger credits for hiring veterans who have been out of work for more than six months and those with service-related disabilities. It would also expand education and training opportunities for up to 100,000 older veterans. Helping veterans find employment or vocational training is a laudable goal. The problem is that this hiring credit is a rounding error in terms of national economic activity and will not visibly budge the dial on the national unemployment rate.
As Larry Mishel recently pointed out, scale is critical to evaluating any jobs plan. The president proposed a $447 billion jobs bill that would boost employment by 1.9 million jobs and reduce the unemployment rate a percentage point, according to Mark Zandi. The $1.6 billion cost of the Senate’s bill for veterans, on the other hand, represents only one-hundredth of one percent of GDP.
Worse, a second provision would repeal a requirement that, starting in 2013, will withhold 3 percent of payments to government contractors, in the form of a credit against contractors’ tax liability they already owe. Essentially, the cost of helping veterans is simultaneously helping government contractors avoid taxes. Of course, the increased tax avoidance would cost money – but the Senate provided a “pay-for” in the form of decreasing eligibility for Medicaid and subsidies for those seeking to buy health insurance under the Affordable Care Act (i.e., the health reform bill passed at the beginning of 2010).
So, to recap, the big “jobs-plan” coming out of the Senate today would help veterans (good), but would not move the dial on overall joblessness (bad), would facilitate tax avoidance by government contractors (bad), and would pay for this loss in tax revenue by eroding some of the benefits of health reform (bad). Will this pass? Probably—so much for the alleged benefits of bipartisanship. The likely success of this legislation owes first and foremost to the fact that it would not be paid for with a millionaires’ surtax. Over the last month, Senate Republicans have filibustered all of the following measures, which would have been paid for with varying surtaxes on incomes of more than $1 million:
- $447 billion for the entire American Jobs Act (10/11/2011)
- $35 billion to put teachers and first responders back to work (10/20/2011)
- $56 billion to build roads, repair bridges, and create an infrastructure bank (11/3/2011)
Helping some of the 240,000 unemployed veterans of the wars in Iraq and Afghanistan is merited, but so is helping the broader pool of 25 million un- and underemployed Americans. As we have pointed out over and over again, boosting GDP growth in a $15.2 trillion economy and seriously tackling persistent underemployment requires hundreds of billions of dollars in additional fiscal support. Republicans in the 112th Congress, however, have filibustered (or blocked through other procedural means) all job creation proposals that would provide any meaningful help ameliorating the jobs crisis.