Our new report, in partnership with the Economic Policy Institute provides a specific, realistic roadmap for how policymakers can navigate the fiscal obstacle course in a way consistent with the broader goal of restoring full employment. Specifically, it explains the benefits of ending the upper-income Bush-era tax cuts and devoting half the savings to job-creation policies. TCF Budget Analyst Andrew Fieldhouse and EPI's Josh Bivens author this brief. Download Navigating the Fiscal Obstacle Course.
The policies Fieldhouse and Bivens propose to stimulate the economy and create jobs, and their economic impacts relative to current policy, are as follows:
-Continue and expand the Emergency Unemployment Compensation (EUC) program. The program is slated to terminate at the end of 2012, thus making it a component of the fiscal obstacle course. Continuing the program over 2013–2015 and allowing beneficiaries to claim up to 99 weeks of unemployment benefits in high-unemployment states (up from the 73 weeks the program currently supports in most high-unemployment states) would boost real GDP growth by 0.4 percentage points and increase employment by 539,000 jobs in 2013.
-Provide $120 billion in direct fiscal relief to distressed state governments over 2013–2015 through a combination of increased federal Medicaid funds (via the Federal Medical Assistance Percentages, or FMAP) and block grants. This would boost real GDP growth by 0.4 percentage points and increase employment by 495,000 jobs in 2013.
-Invest $234 billion over the next decade in surface transportation infrastructure and in establishing an infrastructure bank. This would boost real GDP growth by 0.2 percentage points and increase employment by 237,000 jobs in 2013, with even bigger gains in subsequent years as obligations and outlays ramp up.
-Invest $55 billion in education by funding school modernizations and rehiring laid-off teachers over 2013–2015. This would boost real GDP growth by 0.3 percentage points and increase employment by 354,000 jobs in 2013.
-Enact a targeted refundable tax rebate for 2013 to mitigate the impact of the Dec. 31, 2012, expiration of the payroll tax cut on lower- and middle-income households’ disposable income. This would boost real GDP growth by 0.4 percentage points and increase employment by 502,000 jobs in 2013.