Economists Support Obama Jobs Plan, Say It Will Put 1-2 Million Unemployed Back To Work Next Year [View All]

[ClarkUSA]

That was the assessment Thursday night from economists, who offered mainly positive reviews of President Barack Obama's $447 billion plan to stimulate job creation... mainly because a Social Security tax cut for workers would be deepened and extended to small businesses.

"Payroll tax cuts are very powerful," said 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, estimated 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 heart of Obama's plan is an expansion of the Social Security tax cut, which took effect this year and is scheduled to expire by year's end. The tax cut now applies only to workers; it reduces their Social Security tax from 6.2 percent to 4.2 percent. Employers still pay the 6.2 percent rate... Under his bigger tax cut, an extra $1,550 would go to taxpayers earning $50,000 a year. The Social Security tax is imposed on the first $106,800 of taxable income. That means the maximum savings would be about $3,300 for an individual and $6,600 for a couple.... Zandi calls this a "creative" way to help small companies, which have struggled more than larger ones to recover from the Great Recession of 2007-2009. During recoveries, small businesses normally drive job creation... Susan Wachter, a finance professor at the University of Pennsylvania's Wharton School, figures that the Social Security tax cuts alone would add 1 percentage point to economic growth and create 1 million jobs next year.

The president's plan also takes a shot at long-term unemployment: Companies would get a $4,000 tax break for hiring people who have been unemployed for more than six months. As of August, the government says, 43 percent of unemployed Americans have been out of work for six months or more. The plan would also extend emergency unemployment benefits; ramp up spending on public works projects; and provide aid to keep state and local governments from laying off teachers.

Consumer spending accounts for about 70 percent of the economy.

http://finance.yahoo.com/news/Economists-show-support-for-apf-2760144223.html?x=0