Obama would extend payroll-tax cuts for workers for another year and enlarge the scale of the cuts. Giving con-sumers more money to spend – an estimated $1,500 for a household earning $50,000, the White House says – would help spur private-sector job creation. The cost to the government in lost revenue next year, according to Moody's: $175 billion, with job gains as high as 750,000.
Obama would also cut for 2012 the payroll tax that employers pay, including a year-long total payroll-tax holiday for firms that expand their payrolls by hiring or boosting wages. The president also proposes a one-year extension of "100 percent expensing," an incentive for businesses to invest in new equipment now to get a full tax deduction upfront. Cost next year: $70 billion, with job gains as high as 300,000.
Proponents say the business tax cuts offer a new and direct incentive for firms to invest and hire. On the tax cut for employees, former White House economist Jared Bernstein says Congress should extend the current cut for at least another year. The alternative is to see US workers get a tax hike. "That would actively harm the economy," Mr. Bernstein says.
That argument carries enough weight that many policy analysts expect this provision to be extended.
Critics argue that broad tax cuts for consumers are one of the less efficient forms of fiscal stimulus because some of the money goes toward household savings, not immediate spending. On the business side, skeptics say employers don't typically hire because of tax breaks. At best, the tax incentive can spur firms to hire workers a little sooner than they otherwise might have.
The Obama plan would invest in traditional transportation infrastructure: repairing highways, airports, and transit systems. Another aim is to set up a National Infrastructure Bank, which would use federal loans alongside state or private-sector funds. And the White House would help pay for public school modernization across the nation. Total cost: more than $100 billion, with as much as half of that spending in 2012.