In making his pitch for a comprehensive jobs package Monday, President Barack Obama has been assuring lawmakers and voters that the plan “won’t add a dime to the deficit.”
At best, it’s a promise he can’t make. At worst, the numbers just don’t add up.
In a White House Rose Garden speech Monday, Obama renewed his pledge to unveil details next week of how he would pay for the plan.
“It’s a plan that lives by the same rules that families do: We’ve got to cut out things that we can’t afford to do in order to afford the things that we really need,” Obama told reporters.
It’s fairly clear what the plan would cost. Though the price tag has not yet been officially tabulated by the Congressional Budget Office, private economists have come up with back-of-the-envelope estimates of about $450 billion.
The biggest single piece of the plan would extend an existing payroll tax cut and expand it to give a "typical working family" another $1,500 in spending money. The fatter paychecks would boost demand for everything from new cars to restaurant dinners, generating added consumer spending that could help create the equivalent of as many as 750,000 new jobs, according to Moody’s Analytics chief economist Mark Zandi. In some cases, the proposals would add extra hours to existing jobs, but the impact on the economy would be the same, he said.
“The plan would go a long way toward stabilizing confidence, forestalling another recession, and jump-starting a self-sustaining economic expansion,” Zandi wrote in a detailed analysis of the president's plan.
Obama is also proposing a $65 billion payroll tax break for employers who hire new workers, which Zandi figures would add at least 300,000 jobs. Another $105 billion in proposed spending on new infrastructure, from roads and bridges to schools, would create an estimated 400,000 jobs.
Spending roughly $50 billion to renewing the federal government’s extended unemployment insurance, which is set to expire at the end of the year, would add another 275,000 jobs. Zandi figures another 135,000 jobs would be saved or created by spending $35 billion on federal aid to cash-strapped states. Many states are laying off tens of thousands of teachers, police offers and firefighters to try to close their own budget gaps.
But while the cost of the proposal is not in dispute, it’s hard to assess the eventual impact on the federal budget deficit.
Obama hinted Monday that at least part of the cost would be offset by increasing taxes and closing loopholes for corporations and upper income households.
“It’s a plan that says everybody — including the wealthiest Americans and biggest corporations — have to pay their fair share,” Obama said.
White House budget chief Jack Lew said the plan would raise $400 billion over 10 years by limiting deductions for individuals making more than $200,000 a year and families earning more than $250,000. The rest of the cost would be paid for by raising a number of other taxes, including those on corporate jet owners, and cutting subsidies for the oil and gas industry.
Those proposals aren’t new. After failing to win support for increased taxes in this summer's bruising standoff over raising the debt ceiling, the odds that Congress would now reverse course on the issue appear to be slim to none.
Republicans already have attacked Obama's proposals as another effort to stimulate the economy with increased federal spending. Opponents of the idea argue that government is not very efficient at creating jobs.
If Zandi’s estimates are correct, for example, the program would cost roughly $235,000 per worker to create jobs that would likely pay a quarter of that or less annually.
In any case, any proposal to raise taxes or cut spending would have to go to the bipartisan “supercommittee” of 12 members of Congress as part of last month’s agreement to raise the debt ceiling.
Under terms of the Budget Control Act of 2011, the panel has until late November to come up with a plan to cut $1.5 trillion from the federal deficit over the next 10 years. Congress then has until Dec. 23, 2011 to approve the plan. If it fails to do so, some $1.2 trillion in “automatic” cuts would take effect in 2013.
In his speech to Congress last week laying out his plan, Obama called on the committee to raise its deficit-cutting target to $1.9 trillion to cover the cost of his jobs package. But the committee is under no legal obligation to do so.