A new analysis of potential stimulus options from the Congressional Budget Office concludes that cutting employer payroll taxes would provide a bigger boost to GDP and employment than a similar cut in employee payroll taxes.
Of all the options measured, an across-the-board cut in employerpayroll taxes provides the third biggest employment bang for the buckfrom 2010-2015. Coming in at No. 2 is an employer payroll-tax cut forfirms that expand payroll.
Both of those payroll-tax options trump the employment impact ofinfrastructure spending or aid to states. This may reflect, in part,CBO’s judgment that aid to states and infrastructure spending wouldn’tramp up until 2011.
CBO estimates that by far the biggest bang for the buck, both in GDPand employment terms, would come from increasing aid to the unemployed,since those extra dollars of support are highly likely to be spent.
President Obama advocated a hiring tax credit in January 2009, buthis idea was left out of the $787 billion stimulus. He’s been talkingit up again in recent months, and CBO’s analysis increases the chancesthat he will get his wish.