Macroadvisers: American Jobs Act: A Significant Boost to GDP and Employment: We estimate that the American Jobs Act (AJA), if enacted, 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….
[T]here may be good reasons to want to implement such programs today, if the government can follow through on the commitment to trim deficits later:
- There remains considerable slack in the economy and nearly all forecasts anticipate only a gradual decline in the unemployment rate over the next couple of years.
- Given the elevated risk of recession the U.S. faces today, additional near-term stimulus reduces that risk.
- Given the deleterious effects of long-term unemployment on an individual’s skills and long-term employment prospects, speeding a return to employment is both individually and socially beneficial.
- With monetary policy’s limited room to lower rates and stimulate demand, there is a role for counter-cyclical fiscal policy.