After President Barack Obama proposed his new job plan last week, Notre Dame professors said they are optimistic that the American Jobs Act could help improve unemployment and encourage economic growth.
Obama outlined the proposed act in a speech to a joint session of Congress last Thursday. The $447 billion plan would put Americans back to work with tax breaks for citizens and businesses, infrastructure spending and increased unemployment benefits, he said in his speech.
If the plan passes in Congress, finance Professor Jeffrey Bergstrand said it would encourage the nation's financial outlook.
"This is positive — especially in a global economy," Bergstrand said. "We're all interlinked."
Bergstrand said 60 percent of the $447 billion plan is allotted for tax breaks and cuts.
These breaks would last longer and tax less than a tax break implemented in the beginning of the year, and Bergstrand said the plan allows the same breaks for businesses.
John Stiver, an associate professional specialist in the Mendoza School of Business, said these tax breaks would be a critical piece of the plan.
"The tax breaks for businesses are the most direct in terms of promoting hiring," Stiver said. "Further, tax breaks for businesses can be implemented immediately and should have an impact rather quickly. Spending on infrastructure in principle could put people back to work, but typically take too long to start — we need ‘shovel-ready' projects. Tax relief can be implemented quickly and will have an immediate impact on the average American's budget, but it's unclear what ultimate impact these tax cuts will have on employment."
These benefits would not mean much for college graduates looking for jobs, Stiver said.
"I'm not sure that this jobs plan will have a big impact on your typical Notre Dame graduate," Stiver said. "The unemployment for college graduates is around 4.5 percent — this will be a little higher for new college graduates looking for their first job. The problem areas for job creation lie in manufacturing and construction. Further, most, if not all, of these initiatives will probably expire in the next year or two."
Economics Professor Jim Sullivan predicted some Republicans would support Obama's plan.
"Many of the key proposals from Obama's jobs plan have received support from Republicans in the past," Sullivan said. "Temporary reductions in payroll taxes and tax deductions for companies making investments in new plants and equipment, for example, are likely to receive support from some Republicans."
Bergstrand said the political split between the Senate and the House of Representatives could impede the overall act.
"The part that will probably go through unscathed will be the payroll tax cuts," Bergstrand said. "With the other sections, maybe half will be approved of what's been offered."
The biggest challenge with implementing the proposals, Bergstrand said, will be footing the bill.
In his Thursday speech, Obama said the cost would be covered long term by future spending cuts.
However, Bergstrand said that would increase the nation's short-term deficit and debt.
"There's currently a bipartisan committee that has to come up with a plan to cut $2 billion [in spending] by Thanksgiving," Bergstrand said. "We're borrowing on the future, but now is the time to cut unemployment."
Bergstrand called current unemployment numbers "extraordinarily high," and any reduction in those rates would be a start in the right direction, he said.
"[The American Jobs Act could make] a dent, but only a small one in the output gap — meaning we're still operating below our potential," Bergstrand said. "We still face, even if all of this is passed, sluggish economic growth for several years down the road."
