Goldman's Take On Obama's Jobs Proposal: "Larger Than Expected"

Tyler Durden's picture

BOTTOM LINE: The President’s proposal is larger than expected, with spending proposals and tax cuts both somewhat greater than expected. This proposal does not imply a significant shift in the fiscal restraint in 2012, but it is consistent with our expectation that the payroll tax cut will be extended, and the fact that some of the new proposals involve additional tax cuts increases the probability that Congress will enact them.

1. The total cost of the plan has risen from the previously reported $300bn (2% of GDP) to $447bn (3% of GDP).  At first glance it appears that, if enacted, around 75% (or roughly $335bn) of the fiscal effects of the proposal would show up in calendar 2012.  We estimate that fiscal restraint under current law would total $270bn, or $160bn net of the extension of the payroll tax cut (to 4.2%) we already assume in our forecast. Thus, if enacted in its entirety, this proposal could shift the fiscal impulse in 2012 from -1.1% of GDP to +0.4% of GDP.  However, it is not yet clear how congressional Republicans will respond to the proposal, and we are not changing any of our estimates at this time.

2. The President proposes $253bn in tax cuts, mostly through reduced payroll taxes. This includes four components: (1) A greater payroll tax reduction for employees for 2012 than is effective for 2011, the current rate is 4.2% of employees’ wages up to $106,800 per year; this rate reverts to the standard 6.2% for 2012 if Congress takes no action. The President proposes to cut the employee-side payroll tax to 3.1% for 2012, at a cost of $175bn per year (rather than the $110bn cost of extending the existing cut to 4.2%). (2) A new payroll tax cut for small businesses, which would cut the employer-side payroll tax cut for small businesses on the first $5 million of payroll to 3.1% (from 6.2% currently) and eliminate the employer-side tax for new hires, at a cost of $65bn. This should primarily benefit firms with less than 500 employees, which account for roughly 45% of total payrolls. (3) A $4,000 per employee tax credit for employers that hire workers who have been unemployed for greater than 6 months, at a cost of $8bn. (4) As expected, the President proposed to extend the current 100% expensing for corporate investment through 2012. .

3. A number of spending items are also included in the President’s proposal, but these seem less likely to be approved by Congress. As expected, the President also proposed extension of emergency unemployment compensation (EUC), which expires at year end, at a cost of $49bn. He also proposes fiscal aid to state and local governments ($35bn) and infrastructure ($95bn) and housing ($15bn). While there is a chance that Congress could extend EUC, we believe the likelihood is below 50% and we do not assume extension in our forecast. The other spending proposals appear likely to meet opposition in Congress and seem less likely to be enacted into law.

4. Labor-market focused reforms. The proposal includes a number of programs to discourage long term unemployment, including wage insurance, “bridge to work” programs, and work sharing arrangements. Many of these would be implemented in conjunction with states. We expect Congress to support many of these, in part because their cost appears to be low.

5. The mortgage refinancing proposal was mentioned, but not in detail.  The President indicated his economic team will continue to work with the GSEs and their regulator, FHFA, on ways to increase the number of borrower who can refinance at low mortgage rates. We previously estimated that if all borrowers with 30-year fixed rate loans were able to refinance, borrowers’ interest expense would be reduced by $20bn. Given the apparent technical challenges and borrower eligibility issues, the actual savings would presumably be lower. Despite its inclusion in tonight's address, it isn't yet clear whether a refinancing program will come to fruition.

6. No final decisions are likely until November. If they are to be enacted, these proposals would most likely become law as part of the legislation produced by the Joint Committee on Deficit Reduction that was created in the recently enacted Budget Control Act to increase the statutory debt limit, because the President has pledged to offset the cost of his proposal, and this is only likely to occur as part of that process.  As expected, the President indicated that he plans to submit a detailed proposal to Congress next week specifying deficit reduction plans. The committee faces a November 23 deadline to agree on finalized legislation, and Congress faces a December 23 deadline to pass it. 

From Jan Hatzius

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navy62802's picture

How can anyone take Obama seriously? He is opposed by both political parties at this point. He has no chance of getting any proposal through the US government. His ideas are dead on arrival. A plan to create jobs? DEAD. A plan to increase taxes? DEAD. A plan to cut taxes? DEAD. The man has no influence on the direction of the USA. He is a non-entity at this point, which is a sad reflection of the office of the President.

DormRoom's picture

And why are his ideas, and plans DEAD?  Because a Republican controlled house of Representative would rather protect, and promote its party, instead of the UNION.  The union is in disarray!  Obama doesn't have a cure-all.  He never said he did.  He has a plan that will help.  But it's up to the UNION to come together, and continue tackling the problem.


The Republicans aren't representating the best interest of the people, but the party.  It's a Statist hubris, and has reflections of Stalinism.

Seasmoke's picture

which one the public unions are you talking about ?

TwelfthVulture's picture

Obama doesn't have a cure-all.  He never said he did.


Oh yes he did Skippy. And why did the worthless piece of shit wait 3 years to unveil his grand plan?  I'm sorry, have we had no unemployment these past 3 years? 

Blindweb's picture

-6 Wars.  Defied his own lawyers when they said Libya is illegal.

-Less transparent than Nixon

-Sold his own base out to the pharmaceutical companies

-Drug war continues.  Laughs at the millions imprisoned for minor drug offenses.

-Claims the right to assassinate US citizens

-Wallstreet dog.

-civil liberties continue to errode.



This is off the top of my head.  I'm amazed that someone would have the courage admit to being an Obama supporter at this point.    


Judge Holden's picture

Wow, thanks for saving me the trouble of typing all that out.

FreedomGuy's picture

So what did Obama do when he had the Dem majority in the house and Senate? The Republicans have 1/3 of the 3 legislative parts.

You have the wrong party for Stalinism. you have to look left, not right.

Chuck Walla's picture

No, its a sad reflection on Obama, nothing more. He can still sic EPA on people, send guns to Mexico at will against the law and provide friends and pals millions of tax dollars with "green jobs" bullshit.

TooBearish's picture

The public unions that will benefit and recieve 90% of the proceeds are taking Tzar Bam Bam seriously you idiot

anynonmous's picture

3) A $4,000 per employee tax credit for employers that hire workers who have been unemployed for greater than 6 months



operation twist  sell the short duration and buy the long 

Chuck Walla's picture

This shows the utter lack of intellect and education of the man and his staff. They still do not get that employers only hire when they have a job that needs to get done. Not for tax breaks.  Its a pity such a simple concept even has to be explained to them.

FreedomGuy's picture

Plus, whats with the 6 months criteria? Thats a stupid criterion. If you're unemployed 5 months the employer might make you wait in order to get the credit. You're also at a disadvantage with the longer term unemployed. This screws the underemployed who took lower pay in the interim while they keep looking to get back to a full time position or higher pay. These people are freaking total idiots. They just need to reduce the overall cost of doing business and they keep writing new complex rules.

They also do not seem to understand that an employer has to have an actual demand for goods and services to hire someone. Absent demand there is no hiring at any price! Morons! Lefties are such economic idiots.

Taku's picture

300 to 447 billion in how long?

1.3 trillion by the time they implement.

navy62802's picture

Bullish for gold. This will only torpedo the USD.

knukles's picture

And a GS analysis somewhat larger than expected since neither the speech nor the analysis contain any new information whatsofuckingever given nothings gonna happen.
Hypocracy; speaking of something followed by naught.

Yamaha's picture

Obama - just say Santa Claus.........It is part of the Elf shop.......

Pool Shark's picture

$447,000,000,000.00 !!!!!

That's nearly $1,500.00 for every man, woman and child in the USA (even the ones that don't pay taxes).

How can Obama possibly say it's "paid for"?

"American Jobs Act"?

More like the "Save Obama's Job Act"...

navy62802's picture

How can Obama possibly say it's "paid for"?

Because there are enough people out there who actually believe him.

kahunabear's picture

He is a lying s.o.b. like 99.999999% of all politicians.

JuicedGamma's picture

Is that .000001% Ron Paul or somebody else?

Libertarian777's picture

it's paid for through debasement of the dollar.

don't worry it will create or save jobs... right.. hahaha

i always love how politicians use voodoo economics. 'economic multiplier'

If the multiplier was a true phenomenon, then when i spend $1 and it turns into $2 of GDP, then by the same token when they TAX the first guy to get that $1, GDP goes down -$2.

zero sum game.

It's only a positive sum if you actually create something of value, which we all agree government does NOT do.

TwelfthVulture's picture

I've never heard that explanation for the multiplier effect before.  Not once did I question why it works in one direction only.  Best analysis ever.

supersunken's picture

Paid for you and by everyone else way after he's gone out of the office. 

nmewn's picture

So, when do we get an actual yearly budget request from him Jan?

I know, a trifling thing...but still...

knukles's picture

Jan;  Oh, Hi Nmewm.
nmewn:  Hi Jan.  I'd asked...
J:  Oh yeah, well, it really doesn't matter as there's no need for a budget until the Fed's done with all the QE's, Operation Twists, raised the rates we can keep money on deposit at the Fed above the rate we borrow it at the Discount Window and maintain our virtual regulatory anonymity from the SEC, CFTC, Fed, CoC, and who ever else wants to stick their dick under the bedsheet so to speak, and we don't expect that to change anytime soon.
n:  Uh, Jan... are you telling me...Wait...  What's all this shit have to do with a budget?
J:  Well see, n, without a budget there's nothing to track what the gubamint does with anything, anybody, anywhere, so no need for one, right?
n:  No.  I don't...
J:  Listen, as soon as we're done SkullFucking the country, we'll give the green light to His Majesty that he can propose a budget.
n:  But Jan...
J:  Go away kid, you're botherin' me.  Got money hours to go before I sleep.  Get it, money hours?  LOL


nmewn's picture


J:  Listen, as soon as we're done SkullFucking the country, we'll give the green light to His Majesty that he can propose a budget.

Thanks for the clarification!

Yamaha's picture

It was only $500,000 spent per job on the last go round.............

kito's picture

spend more money AND cut more revenue,.......seems like a logical way to reduce the, why did i pull money out of the banking system, purchase many pms, stock up on months worth of food and supplies, lose countless nights concerned about the direction of this country, when obama made it all so simple to fix!!!!

Yes_Questions's picture

The President proposes to cut the employee-side payroll tax to 3.1% for 2012

1.1% cut in FICA?

Fuckers.  The Bill should require Employer side of the cut to go directly to staff!!

Otherwise, straight to profits/alimony payments to Biz ownwer's ex/hookers/coke.....

That'll boost demand!

kahunabear's picture

"Paid for" b.s. really pisses me off. Liar.

Anarchyteez's picture

Accepting the premis a President
can create jobs is absurd and brings to mind
brass and a Titanic.

FreedomGuy's picture

He can probably turn lead into gold, too.

Founders Keeper's picture

Nothing personal Tyler, I don't give a GD what GS says.  Ever.


Caviar Emptor's picture

I told ya so....I told ya so....I told ya so...

JMT's picture

so it looks to me like bad behavior gets rewarded. If you decided to stay unemployed & collect benefits for two years then employers now will have an advantage to hire you rather than someone employed (due to not having to pay payroll taxes on a long term unemployed person), extended benefits (yet again!!) for those who can't find work (supposedly). Anyone is now eligible for an automatic mortgage refinance to 4% even with a credit score of say 450...

JMT's picture

{{A $4,000 per employee tax credit for employers that hire workers who have been unemployed for greater than 6 months}}}

What if they have 'Bad Credit'?? can they still get hired?? Seriously, things like this need to be addressed. There are people who are unemployable because they chose to keep a roof over their head instead of paying their credit cards.

JMT's picture

{{A $4,000 per employee tax credit for employers that hire workers who have been unemployed for greater than 6 months}}}

What if they have 'Bad Credit'?? can they still get hired?? Seriously, things like this need to be addressed. There are people who are unemployable because they chose to keep a roof over their head instead of paying their credit cards.

Cheyenne's picture

What in the hell is WRONG with this asshead? He told us the $787 billion stimulus plan would smooth everything over. It's over 2 years later and I don't know ANYONE with the balls to argue for that pile of shit. The biggest difference between then and now is the price of fucking bacon, which is closing in on my willingness to pay for it, the King of Food.

So all of sudden $447 billion is gonna cut it? I don't see how in the fuck the same engine's suddenly gonna work on 1/4 the amount of bacon. Who WRITES this shit? In the name of merciful Jesus, at least put some mustard on these dwindling turds. Have some decency, a sense of shame.

And did I read this morning on about more... bank stress tests?! I can't fucking believe the half-life of hackneyed chicken shit is so short.

JMT's picture

But people who have REAL skills and who are not socially inept ARE getting hired. The majority of the adult population aged 25-55 is working -- that is fact.

This is a total waste of money and doesn't address the real issues basically the structural problems causing unemployment. There are millions upon millions of unfilled jobs where unemployment rate could be 6.5% or lower

Cheyenne's picture

You mean a structural problem like Wall Street is allowed to steal money from Main Street through a patented business method called fraud? Because that's all Wall Street is, robbers. And until robbers are put in jail, this country will remain in the Depression now going on 3 years.

kahunabear's picture

"at least put some mustard on these dwindling turds."

Grey Poupon?

boattrash's picture

If this "Must Pass" Jobs Plan is so fuc#### great, why do we need to extend unemployment benefits for another year? Maybe all of the new jobs will be Gov. workers passing out my tax dollars...

Die Weiße Rose's picture

interesting experiment:

Now no-one is going to pay any tax and spending will go up by another 500 billion...

just stack on more Debt, now US $15 trillion and counting but where is it all going to come from ?  

Fact is, in our digital age, Robots have taken over manufacturing, just look at the car Industry, you simply don't need millions of workers anymore to produce anything... all you need is a program, one operator punching in numbers and the robo-computers will do the work for millions. Most Jobs are redundant and will never come back and this is the same in every Industry in any developed country across the globe.


Dugald's picture

Its   called   PROGRESS...........Which in time becomes REGRESS......At a time when we need more jobs created we have employers large and small, doing their level best to automate and reduce the need for workers......Is the end result near total automation?....Leading to  very few jobs that provide salaries with which to purchase all those wonderfully automated products....and this is PROGRESS.......The other day at our local Woolworths I watched customers happily using the automated checkouts, did they not know they were helping to reduce jobs, if they did, did they even give a rats arse...most likley not! age 78 I am now convinced the we humans sow the seeds of our own destruction and with a savoir faire/blundering stupidity that is hard to believe.

Will all this lead to another Glorious Industial Revolution  where small children sit in dark mine shafts with one slice of bread, opening and shutting ventilation doors, fighting off rats intent on their slice of bread.  I won't be around to see what happens, but I really do fear for our great grandchildren.

FreedomGuy's picture

Somebody makes all those robots, components, transportation, metalurgy, etc. You only look at the end of the line. The truth is the people making the robots make more than the people who use the robots.

In theory, if we get efficient enough we all gain lots of leisure time as efficiency increases. Think of microwave popcorn versus the old method of popping it over the stove. You get the same stuff in 1/3 the time and 1/10th the effort. Now you have time to produce or enjoy other things.

how to trade armageddon's picture

Market's take on Obama speech:

Zzzzzzzzzzzz. snnrh. Oh shit I fell asleep. Damn, I hope I didn't miss the Chinese inflation numbers.

beentheredonethat's picture

Read this to the tune of "a world turned upside down"

These are ideas straight out of his economic guru Krueger - who has published that raising the minimum wage increases employment and pulling demand forward (cash for klunkers) increases output and more unemployment benefits make people look for work to continue to draw them. My question is that if these things all work why dont we do them times ten- lets decrease the payroll tax to 0, raise minimum wage to 20$, extend benefits forever, and offer cash for all used cars.

jmc8888's picture

So more people (about 500) can get refinanced mortgages, for houses still valued too much. 

Meanwhile by doing so, they are on the hook for most likely a 'legal' mortgage, and the banks will be alerted to some people who were outside their view and foreclose on them. 

Of course, that new loan could be challenged.  But challenging a straight up fraudulent mortgage would most likely have more weight to your case than a newer one that isn't securitized. 

As for impact on the housing market, nil.

Also since when will getting paid faster (but the same amount) really help create jobs.  Or get people to move their businesses back from china.  Of course, only for federal contracts. 

Again, those work programs are most likely slave labor.

..and yeah again younger people are screwed with medicare (not just by fraud of the monetarism system each and every day that subverts them, but by giving up and decreeing we must do it and not let the fraud do it).  The fraudsters say thank you for doing their work for them.  They'll still continue on and push for more regardless.

Instead of calling fraud, fraud, and using easy laws to end and rectify it, we have to go through this dog and pony shitshow of slitting our own throats and enacting gimmicks.  

About as much change as the words in the Quran from one century to the next. (hint: you cannot do it)

Surely Nero's tarded monetarist plan will work...if reality was Candyland.

JuicedGamma's picture

Didn't we learn anything from the George Bush tax cuts? Once "temporary" tax cuts are enacted it's damn hard to allow the old rates to return.

Our politicians are a bunch of coward bitches.

FreedomGuy's picture

So, you think tax increases will help reduce unemployment?