The first problem I had with the piece, particularly in reference to my argument was that are we considering the NY Times "conservative media" now? Last I heard the NY Times was a left leaning outlet that occasionally carries water for government interests. In any case I'll skip over the FOX news reference because, well, it's FOX and continue on to the meat of Media Matters argument:
Zandi: American Jobs Act Would Add Nearly 2 Million Jobs. UPI reported:
President Barack Obama's $447 billion job-creation plan would likely add 1.9 million payroll jobs and grow the U.S. economy 2 percent, a leading economist said.
The plan, which Obama outlined before a joint session of Congress Thursday, would likely cut the unemployment rate by a percentage point, Moody's Analytics Chief Economist Mark Zandi said as Obama prepared to tout the plan at Virginia's University of Richmond. [United Press International, 9/9/11]
Well it must be so if Zandi says so. Seriously though I will re-iterate that my objection is to the payroll tax break not the entire proposal. So that there will be "millions" of jobs created does not negate that objection.
Some other nice looking quotes:
We estimate that the American Jobs Act (AJA), if enacted, would give a significant boost to GDP and employment over the near-term.
The various tax cuts aimed at raising workers' after-tax income and encouraging hiring and investing, combined with the spending increases aimed at maintaining state & local employment and funding infrastructure modernization, would:
Boost the level of GDP by 1.3% by the end of 2012, and by 0.2% by the end of 2013.
Raise nonfarm establishment employment by 1.3 million by the end of 2012 and 0.8 million by the end of 2013, relative to the baseline.
The program works directly to raise employment through tax incentives and support to state & local governments for increasing hiring; it works indirectly through the positive boost to aggregate demand (and hence hiring) stimulated by the direct spending and the increase in household income resulting from lower employee payroll taxes and increased employment. [Macroeconomic Advisers LLC, 9/8/11]
Notice the opening line about "combined with". This is the crux here. No one. Not one of them has stated that the payroll tax decrease will make millions of jobs in and of itself. It is the spending increases to fund infrastructure, etc. that are going to create jobs (or keep jobs from being lost). This is in total support of my argument that it is the spending and not the tax breaks that is going to do the heavy lifting.
But lets forget my particular position for a second. All these economists, who I'm sure know far more about economics than I do, have had to revise projections and jobs reports. Here's one from June 2011:
After ADP Employer Services reported projections showing that employment increased by just 38,000 jobs in May (down from 177,000 in April), a number of economists have tempered their own expectations for the Labor Department's report.
Fox Business reports that High Frequency Economics decreased its projections from 175,000 to 75,000, while Goldman Sachs lowered its prediction from 150,000 to 100,000.
"As far as we can tell, employers have hugely overreacted to the surge in oil prices, which has slowed but not killed consumption; we expect better in the third quarter," Ian Shepherdson of High Frequency Economics told the news source.
The ADP statistics, which are seen by many economists as a bellwether for the monthly Labor Department jobs report - which comes out June 3 - are particularly surprising because the firm had anticipated an increase of approximately 175,000 jobs.
175,000k to 38,000? Whoops!
How about this one from the Huffington Post:
The major U.S. stock indices fell at the open Friday morning and continued falling, on the heels of a employment report that showed the jobless rate tick up to 9.2 percent in June as non-farm payrolls gained only 18,000 jobs. The Labor Department's numbers fell far below economists' predictions of about 100,000 new jobs and made the previous month's disappointing report seem less like a fluke and more like a developing trend, delivering a sobering portrait of the nation's economic health and dashing hopes for future strength.
100,000 to 18,000? Oh WHOOOPS!
Lets take it back to 2010 shall we? Here's the Center for Economic and Policy Research:
For the second consecutive month, the economy created virtually no jobs, net of temporary Census jobs. The Labor Department reported that the economy lost 131,000 jobs in July, 12,000 less than the 143,000 drop in the number of temporary Census workers. The June numbers were revised down by 100,000 to show a gain of only 4,000 non-Census jobs.
Revised down by 100,000 jobs? Oh. My Bad.
Since three data points reveal a pattern I think it is safe to say that we should take economists wild predictions of "millions of jobs" with the appropriate grains of salt. Again, that's not saying that there won't be jobs created but, well, check the quotes again.
Then we have to get to the other problem with the job creation thing. Common economic models have it that the US economy must create between 100k and 250k jobs every month to simply keep pace with population growth. So every time you see a jobs report that falls below that number you do the math to see what's going on. Here's Paul Craig Roberts on that:
This Labor Day week-end’s job report, announced by the Bureau of Labor Statistics (BLS) on Friday, September 2, says zero net new jobs were created in August, a number 250,000 less than the amount of monthly job creation necessary to make progress in reducing America’s high rate of unemployment.
So lets look at these predictions when we see what is needed simply to tread water. If these economists are correct and 1.3 non-farm jobs will be created by the end of 2012 and assuming hiring begins January 1 2012 that's 108,333 jobs each month, well below what is needed to maintain employment levels. This means that barring any other change unemployment must rise by the end of 2012.
Going back to my objection to the payroll tax break let's examine a piece by Gwendolin Mink who discusses the dire consequences for Social Security:
he proposed to extend and increase the ill-considered FICA tax cut he embraced last December — a tax cut that directly undermines the financial integrity of Social Security.According to the White House Fact Sheet on “The American Jobs Act” the FICA tax holiday for workers will be increased to a 50% reduction, lowering it to 3.1%. Under the 2010 tax deal, the payroll tax for workers was reduced from 6.2% to 4.2%. In addition to expanding the tax cut for workers, the President proposes to extend the FICA tax holiday to employers by cutting in half the employer’s share of the payroll tax through the first $5 million in payroll...The FICA/payroll tax goes into the Social Security Trust Fund. This is a dedicated fund currently worth $2.6 trillion, which has been built up over time through employee and employer contributions, along with accrued interest. Current and future Social Security beneficiaries receive benefits from this fund. No general revenues are involved, except for administrative and clerical costs.
Under the payroll tax cut initiated in the 2010 lame duck tax deal, the revenue loss to the Trust Fund from the payroll tax holiday is made up through compensatory payments into the Trust Fund from general revenues. The President proposes to continue this scheme — deepening a relationship between Social Security and general revenues (read deficit) that did not exist until the December 2010 tax deal. This will make Social Security increasingly vulnerable to demands for “reform.”
Ahh now we see why Social Security was even mentioned in this jobs speech. Can we say "set up"? Yes, yes we can.
Overall the Media Matters piece is simply reactionary publishing by what I consider a Democratic front group seeking to do battle with Republicans by playing the opposite game instead of doing actual research and analysis. I suppose that's why I don't bother with them too much anymore.
