In very round numbers, the package comes to $250 billion of temporary payroll tax cuts of one kind or another, with another $200 billion in new spending on infrastructure, unemployment benefits, and direct aid to state and local governments. But didn’t we learn from Obama Stimulus One that more government spending doesn’t grow the economy or reduce unemployment?
And while more than half of the president’s new package is called “tax cuts,” the reality is that these are temporary tax cuts. Even though tax rates are reduced for both employers and employees, it’s just for one year.
That blunts the true incentive impact of the tax cuts. Businesses like to look ahead at least three to five years for their employment planning. And they’re already worried about the tax and regulatory mandate costs of Obamacare, which has become a great deterrent to job creation. But nobody makes clear business decisions based on temporary one-year tax cuts. That’s not the way business works.
What we really need is a long-term program that gets government out of the way and lowers spending, tax and regulatory barriers wherever they exist. But at bottom, the president’s plan is a big-government plan. It’s not a private-sector plan.