Will the American Jobs Act Create Jobs?


President Obama holds up a copy of the American Jobs Act with Vice President Joseph Biden surrounded by teachers, police officers, construction workers and small business owners in the Rose Garden of the White House on Monday, Sept. 12, 2011. Photo by Andrew Harrer/Bloomberg via Getty Images.

“I’m sending this bill to Congress today, and they ought to pass it immediately.”

That’s how President Obama announced his next push for his new jobs bill in the White House Rose Garden Monday morning. He then went on to press the point, citing Republican opposition in a somewhat less conciliatory way than has been his habit.

The President: There are some in Washington who’d rather settle our differences through politics and the elections than try to resolve them now. In fact, Joe [Vice President Biden] and I, as we were walking out here, we were looking at one of the Washington newspapers and it was quoting a Republican aide saying, ‘I don’t know why we’d want to cooperate with Obama right now. It’s not good for our politics.’ That was very explicit.

The Vice President: It was.

The President: I mean, that’s the attitude in this town – ‘yeah, we’ve been through these things before, but I don’t know why we’d be for them right now.’ The fact of the matter is the next election is 14 months away. And the American people don’t have the luxury of waiting 14 months for Congress to take action.”

Okay, what’s our take? Emailers and Twitter followers have been asking over the past few days: Will the American Jobs Act create jobs? The short answer is: Sure. The government will spend money to create them. A half a trillion dollars or so will be circulated into the U.S. economy. Yes, it’s theoretically possible that Americans will, upon passage of the Act, suddenly stash away more than half a trillion, thereby defeating the purpose of the bill — more spending, more hiring. But that seems unlikely to the point of preposterous.

Making Sense

So: more jobs than would otherwise have been the case, to address a problem that Making Sen$e has been covering in painful detail all year. Our own monthly reckoning of unemployment, U-7, calculates that some 29 million Americans — roughly 18 percent of working age adults — are either un- or underemployed. Hard to see how that comports with a sustainable American democracy.

Next question: How many jobs? The loftiest estimates top out at one million. Responses from the Naysayers: Drop in the bucket, unaffordable, unattainable. Here’s conservative Ed Yardeni this morning (before the White House address):

“The President’s bill would have a $447 billion ten-year cost, which the President says would be fully paid for in the proposal he will give to the Super Committee a week from Monday, recommending that the committee exceed its $1.5 trillion mandate. That would virtually guarantee that the committee will fail to agree on a deficit reduction plan.

The AJA, designed to stimulate economic activity and spur job creation, includes a mix of tax cuts — including various payroll tax holidays and hiring incentives — and spending increases, such as new infrastructure spending and an extension of unemployment insurance. The proposal also includes job-retraining proposals through reform of unemployment insurance. There were no surprises in the plan, which I’ve dubbed ‘ARRA-Lite’ because it is almost a carbon copy of the $880 billion American Recovery and Reinvestment Act of 2009.”

And as Yardeni warned us long before the ARRA became law, “shovel-ready” projects often aren’t, and government spending means government waste, plus union rules that make jobs more expensive than they should be.

The response from the Yaysayers? It’s no drop in the bucket if you’re one of the million. And hey, don’t we have to do something? Didn’t President Roosevelt’s Works Progress Administration, during the Great Depression, employ more than 16 million Americans, adjusting for population? Today’s equivalent of some six million or more in 1938 alone?

To which the Naysayers would presumably counter: Unions and other regulations would make most of those jobs impossible today.

Of course the economic argument these days is even more basic: over whether government is capable of doing anything useful to help the economy. Some even argue that government is the cause of our problems. If only we could downsize it and market forces allowed to prevail, all would eventually be well.

And that’s where we are as of this afternoon. For those intent on trying to figure out how President Obama’s remarks “played” with the public, here are a few scraps of data: immediately after the president spoke, the U.S. stock market was down less than it was before. And on the InTrade online prediction market, the president’s “chance” of reelection rose .2 percent, to 49.9 percent.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._