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Small-business tax cuts?

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Economist says President Obama’s plan will have an impact.

NPR | September 10, 2010

This is an unsettled time in the American economy. Last week, the stock market rose, but so did the unemployment rate. The nation lost jobs overall, but the number of private-sector jobs was up.

One thing everyone can agree on, though: The recovery has slowed. And this week, President Obama will unveil a new economic package including tax cuts for small businesses. The price tag: as high as $300 billion.
Mark Zandi, chief economist for Moody Analytics, says the plan will have an impact.

"I think it will be small, but I think it's worth doing," he tells NPR's Guy Raz. "Anything that can get more credit out to hard-pressed small businesses I think would be helpful."

According to Zandi, small businesses accounted for two-thirds of net job creation in the last economic expansion, and he sees tax incentives for businesses as a good way to help them grow.

These cuts would be part of what Zandi considers a much-needed expansion of the original stimulus act. He is one of several economists who worry that the original stimulus that passed in 2009 was not large enough to effectively battle the recession.

"I do think that the magnitude of the recession was much greater than anyone had thought," he says. "We dug a deeper hole than we were thinking back when the Recovery Act was put together."

The rise in the unemployment rate announced last week came as no surprise, he says. In fact, he wouldn't be surprised to see the jobless rate reach 10 percent by the end of the year.

"While we're creating jobs, we're not creating jobs fast enough to forestall increases in unemployment," he says. "We need 125, 150,000 per month just for a stable rate of unemployment."

But Zandi is hopeful and says U.S. manufacturers can grow by expanding the goods they produce to appeal to emerging economies in places like China and Brazil.

To listen to the story, click here.

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