If the United States Congress heeds Barack Obama’s demands to enact his jobs and tax plan in its entirety, the US unemployment rate probably still would hover in nosebleed territory for at least three more years.
Why? Because the 1.9 million new jobs the White House says the bill would produce in 2012 falls short of what’s needed to put the US economy back on track to return to pre-recession jobless levels of under 6%, from today’s rate of 9.1%.
That’s how deep the jobs hole is. The persistent weakness of the US economy has left 14 million people unemployed and more than 25 million unable to find full-time work.
Economists of all stripes pretty much agree that it will be a long, hard road no matter what Congress does. Right now, the Republicans who run the House and the Democrats who lead the Senate aren’t finding much common ground.
Obama estimates his American Jobs Act would lower unemployment by just a single percentage point by next year, to just over 8%, heading into the 2012 presidential election.
Obama has said he would pay for his $447 billion package with permanent income tax increases of about $150 billion a year, mostly on wealthy individuals and corporations, in addition to spending cuts. That’s drawn criticism from Republicans, who say any tax increases could further stall the fragile recovery.
Job creation has ground to a virtual standstill. The economy produced a scant 20,000 net new jobs in June, 85,000 in July and none in August. Economic output, as measured by the GDP, has been growing this year at an anemic annual rate below 1%.
The global economy is showing no signs of strengthening. A divided Federal Reserve is nearly out of ammunition for additional stimulus. And the US is once again facing the possibility of a government shutdown at the end of next week.
Obama promoted his package anew in his Saturday radio and internet address, saying the mix of tax cuts and direct spending would put tens of thousands of teachers back to work and modernize at least 35,000 schools. He again called on lawmakers to pass the bill “right now.”
The target of 1.9 million new jobs next year, or 158,000 a month, is somewhat higher than private analyses that suggest the plan would create 100,000 to 150,000 jobs a month.
Obama is quick to acknowledge a rocky road ahead.
“For a decade now, incomes and wages have flat-lined for the American people — for ordinary Americans, for working families,” he says. “They are working harder, making less, with higher expenses. And that’s been going on for a long, long time”.