Following a federal Bureau of Labor Statistics report that showed no job growth in August, President Barack Obama is scheduled to present a job creation plan Thursday. But well-placed hints about the upcoming speech have already spurred some economists to comment on how the economy may be affected by the president’s proposed program.
“Unofficial reports suggest it will include a combination of initiatives to increase hiring indirectly by stimulating aggregate demand, while simultaneously encouraging hiring with tax credits and training programs,” according to Macroeconomic Advisers, a St. Louis consulting firm that works with Roseland-based Automatic Data Processing Inc. to prepare a monthly national employment report.
Obama’s initiatives may include an extension of federal funding for emergency unemployment benefits, an extension of the payroll tax “holiday” that reduced employees’ share of Social Security tax withheld — and a possible expansion to the employers’ portion of Social Security taxes — an extension of temporary businesses “expensing” of capital investments, and a new tax credit for businesses that increase the size of their work forces, according to Macroeconomic Advisers.
“To pay for these short-run initiatives, the president may seek more long-term deficit reduction than called for under the recent debt ceiling deal,” the firm added.
But until the details are released, “speculation may be hazardous to our wealth,” said Patrick O’Keefe, director of economic research at the Roseland CPA firm J.H. Cohn LLP.
Despite that caveat, O’Keefe suggested payroll tax holidays and other steps that “reduce the cost of labor” can result in more hiring, but cautioned that administrative burdens associated with plans like this and “windfall subsidies” — like credits for hires that would have otherwise occurred — could impede the net benefits.
“Past efforts have not resolved the dilemma, and it is doubtful that a quickly implemented initiative — which, presumably, the new program would be — could do so,” he said. “On balance, targeted interventions can produce net benefits if properly designed and tightly administered. But their efficacy diminishes with scale.”
O’Keefe was also concerned about the future fiscal effects of increased government spending.
“Government is like the Popeye character Wimpy,” he said. “Always promising to pay next week for a hamburger consumed today.”