Recent Proposals for Job Growth
Leading up to President Obama’s job speech tomorrow evening, there has been much speculation as to the measures the president will propose. The current expectations are that he will suggest a $200 - 300 billion jobs plan, including extensions of the payroll tax holiday, unemployment insurance, and certain business incentives. Also in the mix could be new infrastructure spending, possibly for repairing public schools, and a new tax cut for businesses that hire unemployed workers, perhaps similar to the HIRE Act that was in effect for most of last year.
Details of job creation plans from presidential candidates Mitt Romney and Jon Huntsman have also attracted attention in the lead-up to Thursday’s speech. Both plans call for job creation through permanent tax cuts, regultory reform, trade agreements, and various other measures that would not increase overall federal spending. With regards to tax policy, the Huntsman plan calls for comprehensive tax reform modeled on the Fiscal Commission’s pure zero-plan, wiping out tax expenditures to reduce marginal tax rates to 8 percent, 14 percent, and 23 percent—but uses the additional revenues this would raise to eliminate taxes on capital gains and dividends as opposed to reducing the deficit. The Romney plan also envisions comprehensive tax reform, but for now calls for extending current rates, eliminating the estate tax, and eliminating taxes on capital gains and dividends for people making under $200,000 per year. Both plans also call for reducing the corporate tax rates to 25 percent and moving to a territorial tax system to spur economic growth (although the Huntsman plan offsets the cost of doing so through base broadening.
As members of both parties discuss ways to promote growth and create jobs, they must be mindful of the fiscal implications of those policies. Any new spending or tax cuts should be offset with future cuts and/or revenue increases. As CRFB president Maya MacGuineas recently stated,
"...markets aren't going to react too kindly to legislation that makes the debt situation even worse than it already is. That's why we should pay for job measures today with gradual spending cuts or revenue increases... A sustained economic recovery is going to require that we stop adding to our debt burden."