Tuesday, September 13, 2011

Macroadvisors is Bullish on Jobs Bill

Not that the bill will ever become law, not with the know-nothing, do-nothing GOP Tea Party in control of Congress, but the highly respected macroeconomic advisory firm Macroadvisors is quite impressed with President Obama's plan for jobs and growth:
We estimate that if enacted promptly and assuming no monetary offset, the plan will:
  • Boost GDP growth roughly 11⁄4 percentage points in 2012 by pulling growth forward, mostly from 2013.
  • Raise payroll employment 1.3 million by the end 2012, 0.8 million by the end of 2013, and progressively smaller amounts thereafter.
  • These estimates do not reflect jobs that might be created in response to tax incentives for hiring included in the plan. While an argument can be made for such effects, we believe them to be modest (more below).
  • Our simulation does not include the effects of an initiative, under consideration by the Administration, to direct federal housing agencies to facilitate mortgage refinancing. We will publish a piece on this shortly.
  • The President will recommend offsetting the cost of AJA 2011 over the coming decade. The “pay-fors” imply fiscal drag not included in the simulation, but this will be modest and most likely occur after 2013 when the economy is stronger and the Federal Reserve is better positioned to accommodate it.
  • Our published forecast already assumes a one-year extension of the current employee payroll tax holiday. Hence, if the President’s plan was enacted in its entirety, we would revise up our forecast for GDP growth in 2012 by about a percentage point, not the full amount shown in this analysis.
The package is intended to deliver stimulus that is timely, temporary, and targeted to areas of immediate need, while promising to pay for stimulus when the economy is stronger and the FOMC better poised to offset any drag associated with the payback. On these grounds the plan seems reasonable to us. It is not, however, a panacea that will put the unemployment rate on a notably steeper descent towards full employment. Rather, it shifts growth from the future, when we hope the economy will be stronger, to today when we know it remains mired in a sub-par expansion.
Impressive.  Certainly more impressive than I had originally given it credit for.

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