One of the best aspects of President Obama’s recently released budget plan is its near-term focus on job creation. In his proposed budget, the president includes a $350 billion jobs package that would have an immediate positive impact on the economy and jobs. About 85 percent ($300 billion) of the package would hit the economy in the next year and a half. Using standard macroeconomic multipliers for the various policy categories, we find that the president’s job creation proposals would create 1.5 million jobs in fiscal year 2012 and 1.3 million jobs in fiscal year 2013.
As shown in the graph below, the job creation proposals would lower the unemployment rate relative to the levels projected by the Congressional Budget Office by 0.5 percentage point in fiscal 2012 and 0.4 percentage point in fiscal 2013. (This assumes the historical relationship between GDP growth and unemployment persists over the next two years.)