Pro:
By Michael Powell
Opinion Editor
President Barack Obama’s American Jobs Act aims to reinvigorate the American economy by fostering employment. A strong economy leads to livable wages for workers, more consumption, and greater tax revenue. This plan, by cutting taxes for small businesses, taxing the rich, and building infrastructure, will promote job creation and economic growth.
Obama’s plan has an estimated cost of $447 billion, but by getting rid of tax loopholes and increasing taxes on millionaires and billionaires, the plan would be budget neutral.
During the Clinton years low taxes on the rich were detrimental because low taxes encouraged the wealthy to speculate in the lucrative “dot-com” stock trade. Economist Robert Reich claims that the cause of the present “Great Recession” was that low taxes encouraged speculation, because capital was more readily available.
The plan aims to grow small businesses by cutting payroll taxes from 6% to 3.1% for the first $5 million in wages. Small “mom and pop” businesses are an economically vital element of the American economy because they check the power of large corporations.
Small businesses give consumers choice and provide markets with competition. Without small businesses, large corporations would have less of an incentive to develop better and newer products. Furthermore, small businesses are the hallmark of many American communities. They give America an economic identity and spirit.
The plan also offers $160 billion in payroll tax cuts, giving workers more money to spend and giving employers more money to expand. Any payroll increase up to $50 million will result in a “payroll tax holiday” which will make the employer payroll tax 0%. This commitment to small businesses further encourages employers to expand and hire more employees.
Also, the increased funding for infrastructure projects is integral to sparking consumer demand. Public works spending, according to investor Warren Buffet, is one of the largest engines of economic growth. Since the time of Henry Clay, it has been a function of the federal government to build basic infrastructure.
The plan additionally calls for expanding internet access, revitalizing infrastructure and refurbishing 35,000 schools, which will drive economic growth and save money in the long run. Infrastructure development will fuel small business growth by providing businesses with the necessary tools to innovate and compete.
Obama also gave workers the necessary leverage, by reaffirming their right to bargain collectively, to receive higher wages and better benefits. By catering to labor and business, Obama is kindling an important partnership between them.
By providing the unemployed and underemployed with work, the middle class will grow and demand for consumer goods will increase.
However, opponents of the American Jobs Act claim that it will not work because tax cuts will not increase demand and that Obama doesn’t have the political leverage to pass this bill intact.
They ignore the fact that any sort of government spending is a form of demand. Infrastructure spurs
demand by giving the workers money to spend and save.
Opponents also ignore that the political debacle about the debt ceiling debate actually helped Obama. The Republicans were shown to be obstructionists, with popular favor encouraging them to cooperate.
The American Jobs Act ensures that small businesses will jump start the economic cycle of hiring, spending and investment, strengthening the middle class. With a balanced approach to spending cuts and revenue increases, America can regain it’s economic strength and stability.
Con:
By Alec Lautanen
Executive Opinion Editor
The current status of the United States’ economy is dismal at best. Many proposals have been offered to combat unemployment and business decline in the midst of today’s unsavory job market, but the American Jobs Act, as introduced by President Obama, will have negligible effects on hiring and joblessness.
Obama’s plan calls for heavy support of small businesses through payroll tax reduction and other tax incentives with a total cost of $447 billion. Now is not the time to invest so heavily in unknown corporations and markets.
The plan includes direct spending on infrastructure development, a quarter of a trillion dollar in payroll tax cuts and over $50 billion in unemployment extensions. While it certainly covers a lot of ground, it is not comprehensive for individual and important fields.
The tax cuts lack incentive for small businesses to hire. A $3,500 payroll tax reduction and $4,000 tax credit are hardly incentive for a company to take on more $50,000 per-year employees.
Instead of providing a wide array of tax cuts to reduce unemployment, a more effective action would be to focus on understaffed markets or ones with high growth rates, such as telecommunications and renewable energy. This would ensure benefits would only go to businesses that are actually in need of more employees.
Some supporters say infrastructure projects are key to employment. However, providing money for these projects only promotes temporary employment at the expense of the federal and state governments. Construction is a major component of economic growth, but only if it has a strong private sector to stand behind. By supporting booming sectors of private industry, more lasting jobs can be created in a more efficient manner.
Modernized unemployment benefits are also a major component of the American Jobs Act. Although appealing in principle, many aspects of this section are unclear or rely too much on the states for implementation and administration.
Obama’s plan also promotes “wage insurance” programs to aid the unemployed who are older or want to start their own businesses. While a noble effort, it is abundantly clear that California and many other states can-not support these major insurance programs.
Currently, 44 states face budget shortfalls, ten of which are over a billion dollars. This makes it hard for them to spare extra funds. In past bear markets, workers have been able to recover losses without relying on state subsidies. The extra insurance promotes a bad habit which could potentially become a vicious behavior, draining state funds.
Another shortfall with the American Jobs Act lies not with its content, but its presentation. By combining so many proposals for combating the job crisis, Obama nearly ensures it will not pass Congress intact. It is unlikely that a majority of Congress will agree on everything in the American Jobs Act and pass it holistically.
The recent debt displays clearly the current partisan climate in Washington and the difficulty of producing any useful legislation. Obama should focus instead on trying to pass more moderate pieces of his jobs proposal individually, as it would be easier for Congress to reach agreements on a large group of smaller issues than one major bill.
Although Obama means well with the American Jobs Act, it needs improvement. The unemployment benefits it offers are unclear and ask too much from the overburdened states. The scope of the plan is too broad and the package too controversial to pass.
Through focus on specific industries to aid as well creating proposals that appeal to both parties, the United States can pull through this economic crisis efficiently and create lasting job security.
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