President Barack Obama’s jobs plan would provide a 1.25 per cent increase to GDP next year, according to an analysis by Goldman Sachs — but its chances of passing are lower than ever.Expectations for the plan were never high — but Obama’s “pay-fors” have effectively scuttled the plan, and eliminated any remnants of bipartisan talk in Washington.
Republicans are poised to modify the president’s proposal substantially — if they agree to take it up at all — while the White House says it will not accept any changes to the bill.
“We’re not in a negotiation to break up the package,” former Obama advisor David Axelrod said on ABC’s Good Morning America. “It’s not an a la carte menu.”
Some sort of compromise over the payroll tax component of Obama’s plan could certainly be reached — Republicans have backed similar measures before — but that would only raise GDP by about 0.5 per cent, according to Goldman.
Here is Goldman’s analysis of the impact of the jobs plan on GDP:
Since there appears to be much greater support in Congress for the tax cut components of the President’s proposal than for his spending plans, we have estimated the effects of the package with only the tax provisions and in its entirety. We estimate that the President’s proposal as a whole would increase GDP in 2012 by 1.25 per cent versus current law, on a Q4/Q4 basis and excluding any second round spending effects. Compared with our baseline estimate for fiscal policy that already assumes extension of the 2 percentage point payroll tax cut, the effect would be just under one per cent. However, if Congress were to adopt only the tax based components of the President’s proposal, we estimate it would boost GDP in 2012 by just over 0.5 percentage point on a Q4/Q4 basis compared with current law.
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