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Politically, It’s D.O.A. But Is Obama’s Jobs Plan a Good One?

Daily Ticker

President Obama is scheduled Thursday to unveil his plan to put Americans back to work. According to early reports, the plan follows a similar script the President used in 2009: government stimulus.

Specifically, the plan calls for $300 billion in government spending through tax cuts, infrastructure spending and aid to state and local governments.

"Almost half the stimulus would come from tax cuts, which include an extension of a two percentage-point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers," Al Hunt of Bloomberg reports.

The GOP may back the tax cuts but is likely to reject the overall plan on its face, calling it a repeat of failed measures.

Setting aside the GOP reaction ("We hate it!") and the likelihood of it passing ("Not over my dead body"), in the accompanying clip, The Daily Ticker's Henry Blodget asks Yahoo! Finance economics editor Daniel Gross if, in fact, the plan is a good one?

Tax cuts: The payroll tax cuts are a positive for business as it benefits both business owners and employees. In other words, it's a "tax cut to people who need it," Gross says.  "It's a regressive tax because it only is taxed on your first $106,00 of income," he says. "Presumably (those who benefit) will take that money and spend it, boosting demand for the good."  Unfortunately, Gross thinks the GOP will reject the idea even though it is a tax cut.  He speculates the GOP will agree to it only if Obama makes a concession on entitlement programs, something the Democratic base will not appreciate.

Infrastructure: Of course this is a good idea, according to Gross. "Our roads are terrible, traffic is bad, construction workers are idle." What better way to remedy the situation than to build and repair roads and bridges? Not only does it improve the standard of living, infrastructure improvements also create jobs and improves business conditions. Plus, if there were ever a time to take advantage of cheap borrowing costs, it's now, says Gross. Bottom line: If the U.S. wants to remain competitive against China and other emerging markets in Asia, the country needs better infrastructure.

Direct aid to states and local governments: While the private sector is adding jobs, albeit at a slow pace, government is cutting jobs. Since the end of the recession, government workers (federal, state and local) have lost roughly 600,000 jobs. State and local governments have been hit especially hard, with 200,000 fewer jobs in 2010 versus 2009. Obama's plan would focus on halting layoffs of teachers and first responders. That's something Gross can get behind. "I'm all for things that will keep people in their current jobs."

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