President Obama's latest re-election gambit, cloaked in the language of serious policy, has been met with predictable hurrahs from certain economic experts. These are many of the same experts who thought the 2009 stimulus would be -- and has been! -- a great triumph, and who are regularly caught off guard by "unexpected" economic news. Never mind all that, this is gonna be awesome:
A tentative thumbs-up. That's the assessment from economists, who have offered mainly positive reviews of President Barack Obama's $447 billion plan to stimulate job creation. Some predict it would put hundreds of thousands of people back to work next year, mainly because a Social Security tax cut for workers would be deepened and extended to small businesses.
"Payroll tax cuts are very powerful," says Allen Sinai, chief economist of Decision Economics. "They provide a boost to direct income and, in turn, spending, which is important to growth." Mark Zandi, chief economist at Moody's Analytics, estimates that the president's plan would boost economic growth by 2 percentage points, add 2 million jobs and reduce unemployment by a full percentage point next year compared with existing law.
The dismal state of the economy is the main reason many companies are reluctant to hire workers, and few executives are saying that President Obama’s jobs plan — while welcomed — will change their minds any time soon. That sentiment was echoed across numerous industries by executives in companies big and small on Friday, underscoring the challenge for the Obama administration as it tries to encourage hiring and perk up the moribund economy.
The plan failed to generate any optimism on Wall Street as the Standard & Poor’s 500-stock index and the Dow Jones industrial average each fell about 2.7 percent. As President Obama faced an uphill battle in Congress to win support even for portions of the plan, many employers dismissed the notion that any particular tax break or incentive would be persuasive. Instead, they said they tended to hire more workers or expand when the economy improved.
For more on this debate, I'd direct you to this thoughtful op-ed by Reihan Salam, who makes a compelling case that the president's plan is destined to fail. Another must-read is this eye-opening WSJ editorial, which examines a new study that sets aside the practice of using economic modeling and multipliers to measure the effects of the 2009 Recovery Act, in favor of a methodology that audits the actual hiring and business practicies of companies that received stimulus dollars. (Spoiler: the stimulus failed).