The issue of unemployment in America has been one of the most significant political topics. In August of 2001, the unemployment rate of the US was approximately 4.9%. Now, 10 years later, the unemployment rate has nearly doubled, and is currently 9.1% (“U.S. Bureau of Labor Statistics.”). Unemployment has become a major problem today because of its negative effects on the economy overall. The American Recovery and Reinstatement Act was passed in 2009 by President Barack Obama with the aim of reducing unemployment rates and improving the economy through increasing unemployment benefits and government spending on infrastructure (Burtless). These actions were supposed to have stimulated economic growth and reduce the unemployment rate, but have been ineffective overall (Geewax). In a new effort to combat the unemployment which plagues the US, President Obama proposed the American Jobs Act to a joint session of Congress on September 8, 2011 (“Fact Sheet: The American Jobs Act.”).
Harry Reid, Senate majority leader, introduced the bill to Congress on September 13 (“S.1549: American Jobs Act of 2011″).In his televised speech on September 8, President Obama stated that the purpose of the American Jobs Act was to ” to put more people back to work and more money in the pockets of those who are working” and “provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business (Obama).” The American Jobs Act will cost nearly $447 billion, which will be financed through additional deficit reduction (“Fact Sheet: The American Jobs Act.”). The overall goal is to cut taxes for small businesses to encourage them to hire new employees, prevent current workers from losing jobs, and spending more on infrastructure to provide work for the unemployed (“Fact Sheet: The American Jobs Act.”).
There are several major views and beliefs on job creation and high unemployment rate solutions. Democrats, like President Obama, are supportive of government involvement in the economy and Keynesianism, the idea that the government should spend money when the economy is in a recession, but reduce spending when there is inflation (Wilson). An example of democratic economic policy is the American Recovery and Reinstatement Act, which pumped billions of dollars into the economy in a time of recession (Burtless). The Democratic view also promotes the government subsidizing work and infrastructure to create jobs (“What We Stand For: Economy & Job Creation | Democrats.org.”). In addition, the government should support small businesses by cutting taxes and increasing opportunities for investment to spur these businesses into creating jobs (“Fact Sheet: The American Jobs Act.”).
However, big businesses and corporations should be taxed more and regulated to prevent them from stifling small entrepreneurs and businesses in the markets (“Fact Sheet: The American Jobs Act.”). The American Jobs Act is very characteristic of the Democratic economic policy. Nearly $140 billion dollars from the American Jobs Act will be spent on subsidizing education improvement by hiring teachers and improving the quality of schools, improving transportation and neighborhoods, and other jobs and fields of work (“Fact Sheet: The American Jobs Act.”). President Obama stated that the this new bill “will lead to new jobs for construction workers, for teachers, for veterans, for first responders, young people and the long-term unemployed (Obama).” The belief of President Obama is that the government should directly spend money to hire new people by creating work and opportunities.
On the contrary, Republicans, like Speaker of the House John Boehner, support less government involvement in the economy and laissez-faire, a free economy with no government involvement (Wilson). Unlike Democrats, Republicans do not feel that government should take money through taxes to invest and subsidize work. Instead, taxes should be cut, especially for the rich, because it will promote investment by citizens, who can invest money in a much more natural and beneficial way than the government would be able to (Wilson). The Republican supported theory of “trickle-down economics” is that by allowing the rich to receive tax cuts, they will invest money that will trickle down through the economic classes and benefit all, as opposed to giving money directly to the lower or middle classes (Wilson). In relation to the American Jobs Act, the Republican view is generally opposed to major parts of the bill. Rick Perry, the Governor of Texas and leading Republican presidential candidate was not supportive of the bill and claimed that Obama had the “mistaken belief that we can spend our way to prosperity (qtd. in MacAskill).”
Perry’s response indicates that the ideal Republican solution to high unemployment would not be to “artificially” stimulate the economy through government spending, but rather a more “natural” way of allowing citizens to keep their money in the first place so they can invest and create jobs. Also, Republican Congressman Louie Gohmert introduced his own “American Jobs Act of 2011”, soon after Obama’s proposal, however, Gohmert’s bill is much different (Willingham). The bill aims to reduce corporate taxes from 35% to 0% and Gohmert states that “The American people want to see jobs and economic growth and this bill guarantees that outcome (Willingham).” His explanation of the bill is that corporations pay these taxes by building cost of the tax into the cost of products so that the consumer will pay for it and by reducing money given to American workers (Willingham). If there were no tax, it would provide the corporations and workers with more money to save and invest, which would help create new jobs (Willingham). Overall, Republicans are not very supportive of President Obama’s American Jobs Act.
The battle over the American Jobs Act also involves the interests of small businesses vs. the interests of big businesses. The American Jobs Act is specifically targeted towards small businesses and aims to provide tax cuts for them (“Fact Sheet: The American Jobs Act.”). It aims to make it easier for small businesses to grow, in the hope that they will hire more workers and reduce unemployment (“Fact Sheet: The American Jobs Act.”). In his speech, President Obama stated that “Everyone here knows that small businesses are where most new jobs begin. And you know that while corporate profits have come roaring back, smaller companies haven’t (Obama).” The American Jobs Act will cut taxes for the first $5 million in wages for small businesses (“Fact Sheet: The American Jobs Act.”). However, the new bill is definitely not beneficial to large corporations and the wealthy. Obama justified higher corporate taxes by saying that the bill ” asks the wealthiest Americans and biggest corporations to pay their fair share (Obama).” The bill is representative of the Democratic party’s view because it supports higher taxes for the wealthy and big corporations. This also the source for much Republican discontent with the bill. If this bill were passed, small businesses, not corporations, would be getting significant tax cuts and bonuses.
Personally, I feel that the American Jobs Act would be beneficial to the economy to an extent. I do believe that by spending money, the government will be able to create jobs, but this bill would cost $447 billion, which would eventually run out. The national debt is already at about 62.3 % of the GDP, and money cannot continuously be spent to hold up the economy (U.S. Bureau of Economic Analysis). After the money from this bill runs out, the economy may be too dependent on the government’s money and may crash without it. I think that the government should slowly cut taxes at the same time as reducing money spent to stimulate the economy. The economy will become less dependent on the government and will be able to function without government money. Also, I feel that neither the Democratic party nor the Republican party solution will work by themselves. Both ideologies should be combined and used in moderation. An immediate, short term solution should be to use this bill’s money to jump start the economy from recession, but slowly cut taxes for corporations and reduce government involvement in the long run, to give the economy both stability and longevity. Overall, the American Jobs Act, with some modifications, can be successful and help reduce unemployment.