As the opposition-controlled US House of Representatives scrutinizes President Barack Obama's US$450 billion jobs plan, Moody's Analytics has concluded that the proposal would increase real GDP growth in 2012 by 2 percentage points, add 1.9 million jobs, and reduce the unemployment rate by a full percentage point, compared with current fiscal policy.
"Recession risks are uncomfortably high largely because confidence is low," says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. "President Obama’s much-anticipated jobs plan is a laudable effort to support the struggling economy."
If fully implemented, Zandi says the plan would go a long way toward stabilizing confidence, forestalling another recession, and jump-starting a self-sustaining economic expansion.
But it isn't cheap. Zandi estimates the cost at approximately US$250 billion in the form of tax cuts and another US$200 billion through spending increases. "Moreover, the plan fails to address the ongoing foreclosure crisis and housing slump, major impediments to the recovery," he concedes.
The outcome of the fight to push the plan through the divided Congress will closely watched by Asia’s CFOs, like everyone else. The US is key to the global economic recovery and remains a vital market for Asian exports.