President Barack Obama spoke before a joint session of Congress on Thursday night to unveil his American Jobs Act. The headline facts: It’s a $447 billion effort that focuses on job creation and tax cuts and will be 100% paid for by yet-to-be-named reductions in spending.
Of course, the devil is in the detail. So here’s my analysis of the key points — and my effort to separate fact from fiction, and realistic expectations from political posturing.
Payroll Tax Cuts: Likely to happen, minimal impact. President Barack Obama pitched a redoubled payroll tax cut that would focus on both workers and businesses alike. The current payroll-tax reduction is set to expire in December, and had reduced Social Security taxes from 6.2% to 4.2%. Obama wants the cut not just sustained, but to go deeper in 2012, pushing the rate down to 3.1%. Employers who were paying the full 6.2% rate would also get a cut this time around, too. House Republican leader Eric Cantor reportedly was won over by cuts for businesses, so the GOP can get behind this part of the bill. Of course, passage and impact are two different questions. The previous payroll cut hasn’t exactly caused an economic boom, so it’s unlikely these tax reductions alone can move the needle or spur hiring. Consider that workers making $50,000 a year would see their take-home pay boosted by $1,550. A small comfort, but not much. Read