December 12, 2011 9:59 am ET
This week's Sunday political talk shows saw a major focus on the debate over the payroll tax cut extension. On Face the Nation, Republican presidential candidate Rep. Michele Bachmann (R-MN) attacked President Obama and "Newt Romney" — a name for Newt Gingrich and Mitt Romney she came up with during Saturday's debate — over the payroll tax cut, saying there's no evidence the cut helped create jobs. Senate Minority Leader Mitch McConnell (R-KY) called the tax cut an 'emergency measure' and said it wouldn't be necessary if President Obama's "failed" policies hadn't resulted in a higher deficit and jobless rates. McConnell, along with Sen. Lindsey Graham (R-SC), also pushed for the Keystone Pipeline using discredited job creation numbers.
SEN. MITCH MCCONNELL: But at the same time, Chris, we'd like to create some jobs. And so we have the Keystone Pipeline in there, it's a shovel-ready project, it's the biggest, most important, ready-to-go project in America. Wouldn't cost the government a penny; not one penny. Three years of environmental studies have already been done, the Secretary of State was ready to sign off on it, the president then pulled it to the White House and delayed it for a year. This would create 20,000 jobs almost immediately; ready to go with no money. [Fox News Sunday, 12/11/11]
SEN. LINDSEY GRAHAM: The pipeline is probably not going to sell, and it is important that we extend the tax cut through next year, but even more important, we come up with sustainable policies that will turn America around. [...] And [President Obama's] policies are the biggest threat to the hard-working Americans. If you're a union guy, the pipeline would be good news for you because it would create 20,000 jobs. [Meet the Press, 12/11/11]
Cornell University Global Labor Institute: "Claim That KXL Will Create 20,000 Direct Construction And Manufacturing Jobs In The US Is Unsubstantiated" And Has The "Potential To Destroy Jobs." From a section of a report by Cornell University Global Labor Institute:
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]
- The construction of KXL will create far fewer jobs in the US than its proponents have claimed and may actually destroy more jobs than it generates.
- The industry's US job claims, and even the State Department's analysis, are linked to a $7 billion KXL project budget. However, the budget for KXL that will have a bearing on US jobs figures is dramatically lower—only around $3 to $4 billion.
- The claim that KXL will create 20,000 direct construction and manufacturing jobs in the US is unsubstantiated. There is strong evidence to suggest that a large portion of the primary material input for KXL—steel pipe—will not even be produced in the US
- The industry's job projections fail to consider the large number of jobs that could be lost by construction of KXL. This includes jobs lost due to consumers in the Midwest paying 10 to 20 cents more per gallon of gasoline and diesel fuel. These additional costs ($2 to $4 billion) will suppress other spending and cost jobs. Furthermore, pipeline spills, pollution and increased greenhouse gas emissions incur significant human health and economic costs, thus eliminating jobs.
TransCanada Claimed 13,000 "Shovel-Ready" Jobs Would Result From Keystone Pipeline Legislation. From a 2010 press release from TransCanada:
TransCanada Corporation (TransCanada) (TSX, NYSE: TRP) today is pleased to announce a Project Labor Agreement for a significant portion of U.S. construction of the proposed US$7 billion Keystone Gulf Coast Expansion Pipeline Project (Keystone XL). The agreement will provide TransCanada with a capable, well-trained and ready workforce in the U.S. to construct Keystone XL. During construction, the project is expected to create over seven million hours of labor and over 13,000 new jobs for American workers. [...]
"The proposed Keystone XL pipeline will have a significant impact on the North American economy through the thousands of manufacturing and construction jobs it is creating," says Russ Girling, TransCanada president and chief executive officer. "This project is entirely paid for with private sector dollars and is shovel ready." [TransCanada, 9/14/10]
13,000 Jobs Estimate Is "One Person, One Year," Meaning Number Of People Employed Over Two-Year Construction Project Would Be Closer To 6,500 Per Year. From the Washington Post:
A key question for the administration is how many jobs the Keystone XL project would create. TransCanada's initial estimate of 20,000 — which it said includes 13,000 direct construction jobs and 7,000 jobs among supply manufacturers — has been widely quoted by lawmakers and presidential candidates.
Girling said Friday that the 13,000 figure was "one person, one year," meaning that if the construction jobs lasted two years, the number of people employed in each of the two years would be 6,500. That brings the company's number closer to the State Department's; State says the project would create 5,000 to 6,000 construction jobs, a figure that was calculated by its contractor Cardno Entrix.
As for the 7,000 indirect supply chain jobs, the $1.9 billion already spent by TransCanada would reduce the number of jobs that would be created in the future. The Brixton Group, a firm working with opponents of the project, has argued that many of the indirect supply jobs would be outside the United States because about $1.7 billion worth of steel will be purchased from a Russian-owned mill in Canada. [Washington Post, 11/5/11, emphasis added]
REP. MICHELE BACHMANN: But also Newt Romney are on the same side of the president when it comes to cap-and-trade, the $700 billion bailout, illegal immigration, even the payroll tax this week which there isn't one shred of evidence that that has created a single job.
Zandi: "Without That Payroll Tax Cut This Year, I Think We'd Be Skirting Recession Now." During a June 26, 2011, appearance on CNN's State of the Union, Moody's Analytics economist Mark Zandi stated: "On the other side of that, there are a few things I think that can be done that would make a difference in the very short term if we need it. So extending the payroll tax holiday for another year seems like a reasonable thing to do. I think that can get done politically. Without that payroll tax cut this year, I think we'd be skirting recession now because of the higher energy prices." [CNN's State of the Union, 6/26/11, emphasis added]
Moody's: Every Dollar In Reduced Revenue From Payroll Tax Cut Expands Economy by $1.27. According to the Center on Budget and Policy priorities:
The rationale for enacting the temporary payroll tax cut last December — the economy was weak and a payroll tax cut would provide a more efficient bang-for-the-buck than many other tax-cut options — has become still more compelling today, given the renewed signs of economic weakness.
At a time of soft economy-wide demand, the tax cut increases consumer purchasing power in a manner that is both substantial (boosting take-home pay by 2 percent for most workers) and modestly progressive, since the wage cap limits the benefit for higher-income families (who are more likely to save rather than spend the additional money)
Largely for these reasons, Moody's Analytics estimates that every $1 reduction in federal tax revenue resulting from an employee-side payroll tax cut expands the economy by $1.27. [CBPP.org, 9/7/11, emphasis added, internal citation removed]
CBO Director In 2010: A Payroll Tax Cut Would Add Jobs And Spur The Economy. From Congressional Budget Office Director Douglas Elmendorf's February 23, 2010, testimony before the Joint Economic Committee:
A temporary reduction in employees' portion of the payroll tax would not immediately affect employers' costs. Instead, it would have initial effects similar to those of reducing other taxes for people below the 2010 income cap. The increase in take-home pay would spur additional spending by the households receiving the higher income, and that higher spending would, in turn, increase production and employment. Those effects would be spread over time, however, and the majority of the increased take-home pay would be saved rather than spent.
CBO estimates that reducing employees' payroll taxes would raise output cumulatively between 2010 and 2015 by $0.30 to $0.90 per dollar of total budgetary cost. CBO also estimates that the policy would add 3 to 9 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost. [Elmendorf Testimony, 2/23/10, emphasis added, via CBO.gov]
CBPP: Extending Payroll Tax Cut Will Reduce Risk That The Economy Will Continue To Grow Too Slowly. From the Center on Budget and Policy Priorities:
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 family. (The table below gives some examples of how the tax cut's expiration would affect workers in different occupations.)
Many economists have warned that letting the tax cut expire at the end of December would slow economic growth next year. To reduce the risk that the economy will continue to grow too slowly to lower unemployment or may even slide back into recession, policymakers should at a minimum extend the tax cut. [CBPP.org, 9/7/11, emphasis added, citation removed for clarity]
Failure To Extend Payroll Tax Cut Could Decrease GDP By $128 Billion And Cost Almost 1 Million Jobs. According to an issue brief from the Economic Policy Institute and The Century Foundation: "As part of December's deal to extend the Bush-era tax cuts for two years, Congress enacted a 2 percentage point reduction in the Social Security payroll tax for all workers, and it is set to expire at the end of the year. The cost of failing to extend the payroll tax cut is estimated by adjusting the cost of the 2011 payroll tax cut (JCT 2010) by CBO's projection of wage and salary growth (CBO 2011b), resulting in a cost of $117.8 billion. Applying a fiscal multiplier of 1.09 (Zandi 2010), we estimate that the failure to extend the payroll tax cut would decrease GDP by $128 billion (-0.8%) and lower nonfarm employment by 972,000 jobs. [Economic Policy Institute and The Century Foundation, 8/4/11, emphasis added]
Zandi: "Critical" To Extend Payroll Tax Holiday; Failure To Do So Will Increase Drag On Economy. According to Moody's Analytics Economist Mark Zandi: "To avoid recession, Congress and the administration must also find common ground on economic policy. If they do nothing, federal fiscal policy will shave 1.7 percentage points from real GDP growth next year. The triggers for this include the expiration of both this year's reduced payroll tax rate and emergency unemployment insurance benefits. Even a strong economy would have trouble digesting this, never mind one that is struggling to post any growth at all. [...] It is critical (and assumed in our baseline outlook) that lawmakers agree at least to extend and increase the payroll tax holiday for workers through 2012 as proposed by President Obama. This would reduce next year's fiscal drag to less than 1 percentage point-still a heavy lift for the economy, but doable. [Economy.com, 10/10/11]
Zandi: Extending Payroll Tax Cut Would Create 750,000 Jobs. From McClatchy: "The biggest contributor to job growth next year under the Obama plan would be extending the payroll tax holiday for workers, which Zandi estimates would add 750,000 jobs. The portion that is waved for employers would add another 300,000 jobs, he said. Infrastructure spending could add 400,000 jobs." [McClatchy, 9/8/11]
SEN. MITCH MCCONNELL: Well, if I could just briefly say, the reason we are having to deal with these emergency measures like extending the payroll tax holiday for another year is the president's policies all put in place in the first years of the administration when he had a completely compliant Congress had completely failed. They ran the debt up 35 percent. Unemployment basically hasn't budged. It's now at 8.6 percent. So, that's the reason we are discussing this kind of temporary measures.
CBPP: Present "Huge Deficits" Due To Bush Tax Cuts, Wars, And Recession. As the Center for Budget and Policy Priorities explains: "If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers' actions to combat it), we would not be facing these huge deficits in the near term." [CBPP.org, 5/10/11]
The Center for Budget and Policy Priorities prepared the following graphic showing that the Bush tax cuts and wars in Iraq and Afghanistan will account for nearly half of public debt by 2019:
The Bush Tax Cuts Are The Primary Driver Of Federal Budget Deficits Over The Next Decade. Below is a chart from Center on Budget and Policy Priorities showing the deficit impacts of war spending, financial recovery spending, the recession itself, and the Bush tax cuts:
Major Bush Policies Cost $5.07 Trillion Between Fiscal Years 2002-2009. According to the New York Times:
Budget estimates that didn't foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama's policies, taken out to 2017, add to deficits, but not by nearly as much. A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up. In future decades, when rising health costs with an aging population hit the budget in full force, deficits are projected to be far deeper than they are now. Effective health care reform, and a willingness to pay more taxes, will be the biggest factors in controlling those deficits.
[New York Times, 7/23/11]
The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:
From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months.The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]
PolitiFact: "True" That "Most Job Losses" Happened Before Obama Policies Took Effect. According to PolitiFact.com's analysis of President Obama's statement that "most of the jobs that we lost were lost before the economic policies we put in place had any effect":
Looking at BLS data on seasonally adjusted non-farm employment from December 2007, when the recession officially began, to January 2009, the month before the stimulus was enacted (a 25-month period), the jobs number declined by 4.4 million. [...]
When [Obama] refers to his economic policies, we presume he is referring to his main economic stimulus, the American Recovery and Reinvestment Act. It passed in February 2009, but it took several months before the impact of its spending was felt in the economy.
Job loss didn't stop, but Obama is right that it slowed down. In the 19 months from February 2009 through September 2010, the month of the most recent preliminary data, the overall job decline in the private and public sectors was 2.6 million. And the number of jobs lost per month has declined from around 700,000 a month at the beginning of the administration to months in which there were small net gains. [...]
'I watched the president on Stewart's show last night, and I thought his basic point about the timing of the employment losses was correct and ought to be noncontroversial,' Gary Burtless, a labor markets expert at the centrist-to-liberal Brookings Institution said in an e-mail. [PolitiFact.com, 10/27/10, emphasis added]
Since June 2009, The Private Sector Has Gained Over 1.7 Million Net Jobs. According to Bureau of Labor Statistics data, there were 107,936,000 private-sector jobs in June 2009. As of November 2011, the most recent report available, the data show that total is up to 109,719,000 — a net gain of 1,783,000 jobs in the private sector. [BLS.gov, accessed 12/11/11]
The Private Sector Has Added Jobs For 21 Straight Months. Minority Leader Pelosi's office prepared a graph based on BLS data for monthly private sector job gains and losses:
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