Right-wing media figures are attacking President Obama for claiming that extending unemployment benefits and the payroll tax cut will create more jobs than the Keystone XL pipeline. In fact, economists say that unemployment benefits and payroll tax cuts will put money in people's pockets and therefore lead to job creation and economic growth, while the pipeline would create at most a few thousand temporary jobs and could actually destroy more jobs than it creates.
Obama: More Jobs Will Come From Extending Unemployment Insurance And Payroll Tax Cut Than From Keystone Pipeline
Obama: “However Many Jobs Might Be Generated By A Keystone Pipeline, They're Going To Be A Lot Fewer Than The Jobs That Are Created By Extending The Payroll Tax Cut And Extending Unemployment Insurance.” From a December 8 statement by Obama:
OBAMA: Keep in mind, on the payroll tax cut, this is something that Democrats and Republicans agreed to last year with little fanfare, and it was good for the economy. And independent economists estimate that for us to not extend it right now -- to not extend payroll tax cut, not extend unemployment insurance -- would have a significant, adverse impact on our economy, right at a time when we're supposed to be growing the economy.
So when I hear the Speaker or the Senate Republican leader wanting to dicker, wanting to see what can they extract from us in order to get this done, my response to them is, just do the right thing: Focus on the American people, focus on the economy right now.
I know the suggestion right now is, is that somehow, well, this Keystone issue will create jobs. That's being determined by the State Department right now, and there is a process. But here's what I know: However many jobs might be generated by a Keystone pipeline, they're going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance. [WhiteHouse.gov, 12/8/11]
Conservative Media Mock Obama Over Remarks
Jim Hoft: “Our Doofus In Chief Believes Handing Out Unemployment Benefits Creates More Jobs Than Building A Gas Pipeline.” In a December 8 post on his blog Gateway Pundit, titled “Obama: More Jobs Created With Unemployment Checks Than With Keystone Pipeline ... Huh?,” Jim Hoft wrote:
How Pelosi-esque. Our Doofus in Chief believes handing out unemployment benefits creates more jobs than building a gas pipeline.
And you wonder why he's the worst jobs president since the Great Depression? [Gateway Pundit, 12/8/11]
Fox's Perino: “The Pipeline Would Be 20 Thousand Jobs Plus Others For That Middle-Class, Blue Collar Worker, Much More Beneficial Than A Temporary Payroll Tax Cut.” From the December 8 edition of Fox News' The Five:
DANA PERINO (co-host): I think though that the Republicans were pretty smart in tying the payroll tax cut to the pipeline, and the reason is the pipeline would be 20 thousand jobs plus others for that middle-class blue collar worker, much more beneficial than a temporary payroll tax cut of which the American Enterprise Institute Alex Brill says only 22 percent of people actually spend that money.
PERINO: Can we hear the sound bite? Can we hear the sound bite? Because a lot of people do know about the pipeline, and we're going to make sure even more of them do now.
OBAMA [video clip]: Here's what I know. However many jobs might be generated by a Keystone pipeline, they're going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance.
PERINO: So for the next year, who benefits from a delay in the payroll -- in the XL pipeline? It is white collar lawyers, PR folks, the communicators, and the bureaucrats. It doesn't help the middle class workers that he said he wanted to help the other day.
BOB BECKEL (co-host): Of course it does.
KIMBERLY GUILFOYLE (co-host): All the wrong people are going to benefit from it. That's the problem. Why not create some jobs and be for it? [Fox News, The Five, 12/8/11]
MichelleMalkin.com's Powers Mocks Obama's Claim That More Jobs Would Come From Extending Unemployment Insurance And Payroll Tax Cut Than Keystone Pipeline. In a December 8 MichelleMalkin.com post, Doug Powers quoted from a Washington Examiner write-up of Obama's remarks and stated:
Look for the White House to propose a compromise that would be acceptable to both labor unions and environmentalists while creating more jobs than anybody can possibly imagine: The construction of a 1,600 mile pipeline through which would flow economy-boosting unemployment checks. [MichelleMalkin.com, 12/8/11]
In Fact, Economists Agree That Unemployment Benefits Have A Strong Effect On Job Creation And Growth
EPI: Extending Unemployment Benefits Through 2012 Will Create Roughly 560,000 Jobs. In a November 4 report, Economic Policy Institute (EPI) President Lawrence Mishel and EPI researcher Heidi Shierholz wrote:
While it would cost an estimated $45 billion to continue the extensions, the economic boost would be much greater because this spending would have a large “multiplier” effect. Long-term unemployed workers are almost by definition cash-strapped and have very little choice but to immediately spend their unemployment benefits. Unemployment benefits spent on rent, groceries, and other necessities increase economic activity, and that increased economic activity saves and creates jobs throughout the economy. For this reason, economists, including those at the Congressional Budget Office, widely recognize government spending on unemployment insurance benefits as one of the most effective things that can be done in a recession to generate jobs. Spending $45 billion on unemployment insurance extensions in 2012 would increase GDP by an estimated $72 billion, raising our $15.2 trillion GDP by roughly 0.5 percent. This increase in economic activity translates into roughly 560,000 payroll jobs. In other words, extending the federally funded unemployment insurance extensions through 2012 would not only extend a lifeline to the families of millions of long-term unemployed workers, it would also generate spending that supports well over half a million jobs. If this program is discontinued, the economy will lose these jobs.
Of the $72 billion increase in GDP related to continuing the unemployment insurance benefit extensions through 2012, some 37.4 percent, or $26.9 billion, would be recouped in higher revenues, as more people and firms pay taxes, and in lower expenditures. Consequently, the effective cost to the budget of continuing the UI benefits extension for a year is $18.1 billion instead of $45 billion. This means that the continuation of unemployment insurance benefit extensions through 2012 would save 560,000 jobs at an effective cost of around $32,000 per position. That alone is a good deal, but when we remember that these expenditures would assist millions of families of the long-term unemployed during the worst downturn in seven decades, the case for continuing the extensions could not be more clear. [EPI, 11/4/11]
Dean Baker: Unemployment Insurance “Stimulates The Economy” By “Put[ting] Money In ... [The] Pockets” Of People Who Are “Very Likely To Spend” It. In an email to Media Matters, Dean Baker, co-director of the Center for Economic and Policy Research, stated:
UI stimulates the economy for the same reason that tax cuts provide stimulus to the economy, they put money in people's pockets. However, UI benefits will provide more stimulus per dollar because they are going to people who we know are very likely to spend the money. A large portion of money paid out in tax cuts are likely to be saved, especially if they go to the wealthy. [Email to Media Matters, 8/30/11]
CBO Scored “Increasing Aid To The Unemployed” As The Highest-Scoring Policy Proposal To Efficiently Stimulate Economy. In a November 2011 report on “Policies for Increasing Economic Growth and Employment in 2012 and 2013,” the nonpartisan Congressional Budget Office (CBO) stated:
Policies that would have the largest effects on output and employment per dollar of budgetary cost in 2012 and 2013 are ones that would reduce the marginal cost to businesses of adding employees or that would be targeted toward people who would be most likely to spend the additional income. Such policies include reducing employers' payroll taxes (especially if limited to firms that increase their payroll), increasing aid to the unemployed, and providing additional refundable tax credits in 2012 for lower- and middle-income households. [CBO, 11/15/11]
According to a table in the report, the CBO estimated that increasing aid to the unemployed would have the greatest effect on GDP per dollar of budgetary cost and the highest cumulative effect on employment of the policy options considered.
Mark Zandi Estimated That Extending Unemployment Benefits Provides Significant Stimulus. In 2008 congressional testimony, Mark Zandi, Moody's Economy.com chief economist and a former adviser to John McCain, ranked extended unemployment benefits behind only food stamps in terms of economic “bang for the buck.” The Economic Policy Institute created the following graphic based on Zandi's figures:
Economists Also Say That A Payroll Tax Cut Leads To Jobs And Economic Growth
Frank: “Perhaps The Most Promising” Policy To Reduce Unemployment “Is A Payroll Tax Holiday.” In a June 25 New York Times op-ed, Robert Frank, economics professor at Cornell University, wrote:
If the economy could generate jobs at the median wage for even half of these people, national income would grow by more than 10 times the total interest cost of the 2011 deficit (which was less than $40 billion). So anyone who says that reducing the deficit is more urgent than reducing unemployment is saying, in effect, that we should burn hundreds of billions of dollars worth of goods and services in a national bonfire.
We ought to be tackling both problems at once. But in today's fractious political climate, many promising dual-purpose remedies -- like infrastructure investments that would generate large and rapid returns -- are called unthinkable, in the false belief that they would impoverish our grandchildren. Yet there are other ways to attack unemployment that could garner bipartisan support.
Perhaps the most promising is a payroll tax holiday. The payroll tax was originally meant to pay for Social Security, and in recent years, employees and employers have each contributed 6.2 percent of total salary -- with no additional levies on salaries beyond $106,800. Congress should both declare an immediate payroll tax holiday for employees and exempt employers from making contributions for newly hired workers -- and keep both provisions in effect until the end of next year. [The New York Times, 6/25/11]
Seidman: “To Boost Private Sector Spending And Jobs,” Congress Should Implement An “Immediate Suspension Of The Entire Employee Payroll Tax.” In a July 17 op-ed in Delaware's News Journal, University of Delaware economics professor Laurence Seidman wrote:
To boost private sector spending and jobs, any budget deal negotiated by the president and Congress should contain an immediate suspension of the entire employee payroll tax through 2012.
Why? Because leaving more money in people's paychecks will cause them to spend more, and in response to their spending, private sector employers will expand production and create private sector jobs. Without this stimulus to the private sector, the economy is likely to fall back into a deep recession.
According to the simulations, if the suspension begins promptly, then in the fourth quarter of 2012 the unemployment rate would be 1 percentage point lower than it would have been without the temporary employee payroll tax suspension. [News Journal, 7/17/11, accessed via Nexis]
Tyson: Jobs Plan Should Include “At The Very Least” An Extension Of “The Temporary Payroll Tax Cut For Employees.” In a September 6 post on the New York Times' Room for Debate blog, University of California, Berkeley professor and former Council of Economic Advisers chairwoman Laura Tyson wrote:
The labor market is suffering from two problems: first, an immediate jobs gap, primarily the result of the collapse in demand after the 2008 financial crisis, and second, a long-term gap in rewarding jobs for American workers, primarily the result of skill-biased technological change and global competition.
The jobs gap requires additional fiscal measures to increase private spending and promote job creation. At the very least, the temporary payroll tax cut for employees enacted at the end of 2010 should be extended and a temporary payroll tax cut for employers that increase their payrolls or a tax credit for new hires should be introduced. [The New York Times, 9/6/11]
CBPP: “Failure ... To Extend The Temporary Payroll Tax Cut” Would Remove “Needed Support From The Still-Weak Economy.” In a September 7 post, the Center on Budget and Policy Priorities (CBPP) noted: “Failure by Congress to extend the temporary payroll tax cut enacted last December would reduce all paychecks starting on January 1, withdrawing needed support from the still-weak economy.” From CBPP:
Failure by Congress to extend the temporary payroll tax cut enacted last December would reduce all paychecks starting on January 1, withdrawing needed support from the still-weak economy. The measure, part of the tax cut-unemployment insurance deal between President Obama and Republican leaders, reduces the employee share of the Social Security payroll tax, boosting workers' take-home pay by an estimated $120 billion in 2011. The tax cut is worth $934 to the average worker.
By extending the payroll tax cut -- and the provision of additional weeks of unemployment benefits to workers who have exhausted their 26 weeks of state-funded UI benefits without finding a job -- policymakers can avoid increasing the risk of renewed recession. But they should do more to reduce the probability of a double-dip recession and increase the probability of a sustainable recovery that generates sufficient jobs to shrink the massive jobs deficit. While a discussion of various steps needed to shore up the economy is beyond the scope of this paper, in the payroll tax arena, policymakers should consider strengthening the payroll tax reduction as part of a larger set of economic measures. [Center on Budget and Policy Priorities, 9/7/11]
Roubini: “What America Needs Is A Payroll Tax Cut.” In a September 17, 2010, Washington Post op-ed, Nouriel Roubini, professor at the New York University's Stern School of Business, wrote:
A much better option is for the administration to reduce the payroll tax for two years. The reduced labor costs would lead employers to hire more; for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households (paying down credit card debt and other legacies of the easy-credit years).
Low-income workers have historically shown a much higher propensity to consume when given extra money, so the payroll tax cut should be designed to provide a larger-percentage break to those on the low end of the income scale compared with the upper middle class. [The Washington Post, 9/17/10]
Krugman: Payroll Tax Cut Would Give Money To People “Who Might Very Well Spend It.” An August 30, 2010, CNBC.com article quoted Nobel Prize winning economist Paul Krugman as saying:
“If you give a temporary tax cut to wealthy people who are likely to be highly liquid, they are not going to spend very much of it at all,” Krugam [sic] said. “Give a temporary tax cut to corporations, who are sitting on piles of cash, they are not going to spend any of it.”
A payroll tax cut would be better, since it would put money in the hands of people “who might very well spend it,” he added. “But basically, I would take whatever we can, except that those high end tax cuts, corporate tax cuts, are going where the problem isn't; it's just a waste of money,” Krugman said. [CNBC.com, 8/30/10]
Reich: Eliminating Payroll Tax Would “Get The Economy Moving Again.” In an August 25, 2010, interview on America Public Media's Marketplace, former Secretary of Labor Robert Reich noted that eliminating payroll taxes would “get the economy moving again.” From Marketplace:
But here's an idea that might command everyone's support: Eliminate payroll taxes on the first $20,000 of income. Payroll taxes, you recall, include Social Security, Medicare and unemployment insurance. Make up the revenue loss by applying the payroll tax to incomes above $250,000.
This would immediately stimulate spending by adding to the paychecks of just about every working American. Right now, 80 percent of Americans pay more in payroll taxes than they do in income taxes. And lower-income workers, who would receive the largest proportion of the benefits, are more likely to spend the extra cash than are people with high incomes.
So how to get the economy moving again? Eliminate the payroll tax on the first $20,000 of income and apply it to income over $250,000 for two years.
How to keep the economy moving? Do this permanently. [American Public Media, Marketplace, 8/25/10]
Orszag: “To Mitigate The Harm To The Labor Market From ... Fiscal Drag, Policy Makers Should” Extend “The Existing Payroll Tax Holiday.” In a June 30 Bloomberg column, former Office of Management and Budget director Peter Orszag wrote:
Given our feeble labor market, it is particularly important that policy makers avoid overly hasty deficit reduction. Official projections for the federal budget show fiscal tightening in excess of 2 percent of GDP from fiscal year 2011 to 2012. To put that percentage in context, consider that the fiscal tightening in the U.K. from 2010 to 2011 -- which has received so much attention in the news media -- amounted to less than 1.5 percent of GDP.
To mitigate the harm to the labor market from this fiscal drag, policy makers should provide additional macroeconomic support in 2012 by extending the existing payroll tax holiday. But more than that, Congress should link the payroll tax to the unemployment rate. This would allow the tax holiday to automatically calibrate itself to existing conditions, providing support only when the economy is weak. If necessary, the underlying payroll tax rate could be raised to make this mechanism budget-neutral. [Bloomberg, 6/30/11]
By Contrast, Keystone XL Pipeline Would Have A Limited Or Negative Impact On Job Creation
TransCanada Said In 2010 That Keystone XL Pipeline “Is Expected To Create Over ... 13,000 New Jobs For American Workers.” [TransCanada, 9/14/10]
Wash. Post: Based On TransCanada's Numbers, “The Number Of People Employed” Would Actually Be 6,500. [The Washington Post, 11/5/11]
Cornell University Global Labor Institute: “The Effects Of KXL Construction Could Very Well Lead To More Jobs Being Lost Than Are Created.” An independent study of the effects of the Keystone XL pipeline by the Cornell University Global Labor Institute found:
The industry-generated jobs data are highly questionable and ultimately misleading. But this is only part of the problem. These industry-generated data attempt only to tell the positive side of the KXL jobs story. There is evidence to suggest that the effects of KXL construction could very well lead to more jobs being lost than are created. In this section, we show four ways that jobs can be destroyed or prevented by KXL -- higher petroleum prices, environmental damage such as spills, the impact of emissions on health and climate instability, and the chilling effect KXL approval could have on the emerging green economy.
Put simply, KXL's job creation potential is relatively small, and could be completely outweighed by the project's potential to destroy jobs through rising fuel costs, spill damage and clean up operations, air pollution and increased GHG emissions. [Cornell University Global Labor Institute, September 2011]
For more information about Keystone XL pipeline's potential impact on job creation, click here.