President Barack Obama proposed a $447 billion jobs package on Thursday to help boost the U.S. economy, challenging Congress to pass legislation made up largely of tax cuts for workers and businesses.
MICHAEL WORKMAN, SENIOR ECONOMIST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:
It's pretty positive if they are willing to offer these incentives for people to be employed. The big risk going forward is that the labor market in the U.S. doesn't pick up strongly enough, because that keeps the housing area under extreme pressure. Outside of the major cities things are terribly weak, unemployment rates are 15 percent or more.
The government really needs to provide some kind incentive here for the private sector to lift employment.
There hasn't been much reaction in currency markets. There is still this overriding issue on the currency front of whether the central bank will introduce another round of QE and what form it will take.
MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW YORK
At this stage, any fiscal stimulus is probably good. We're looking forward to further details and we are hoping Congress can work together to deliver a jobs plan that supports growth and delivers jobs. Nonfarm payrolls have been very poor. Republicans are dead set against increasing the budget deficit. Still, we need to focus on jobs first. After that, we can worry about taxes. Everyone's taxes will head higher eventually, but that's not a productive discussion to have at this stage. I think markets will have a reserved reaction because until it's clear there is bipartisan support, people are not likely to get too enthusiastic. It's a good start, but we need to see more.
YUNOSUKE IKEDA, SENIOR FX STRATEGIST, NOMURA SECURITIES
Cuts in payroll tax weren't expected. The total size of the package is bigger than a previously reported $300 billion. On the other hand, the package did not include anything like HIA2 as some had speculated. But overall it is mildly positive for the dollar, judging from the headlines.
The euro/dollar will come under pressure especially after the ECB dropped its tightening policy bias. Of course there's a lot of talk of Operation Twist from the Fed, but looking at Treasuries yields, that's pretty much priced in already.
CHRISTIAN COOPER, HEAD OF U.S. DOLLAR DERIVATIVES TRADING, JEFFERIES & CO., NEW YORK
President Obama understands the value and necessity of an upside surprise to communicate the clear resolve he has to get the country moving again.
The $447 billion total is larger than most had anticipated, but of course, many of these proposals will face stiff resistance from the Republicans in Congress. As expected, the largest single entry is the extension of the payroll tax holiday. However, the President also proposed increasing the size of that tax cut from the current 2 percent to 3.1 percent, for a total cost of $175 billion. Other large programs include a one-year extension of emergency unemployment benefits, and a cut in the employer side of payroll taxes for the first $5 million in wages per firm. The President stated an intention to pay for the program over the next ten years, and will release a deficit reduction plan in the next two weeks.
CHARLES BLAHOUS, MERCATUS CENTER AT GEORGE MASON UNIVERSITY
Taking real tax revenue away from Social Security and issuing debt in its place - the policy now in effect - is the worst of all worlds, both for the program and for the budget. said Blahous.
If we conclude that economic stimulus is so important that it justifies cutting Social Security's tax revenue stream, fine. But let's not issue a second round of debt to paper over that choice, crediting the Trust Fund with phantom revenues.
ROBERT FRANK, ECONOMICS PROFESSOR AT CORNELL UNIVERSITY
Frank said he believes the jobs package should have been larger, carrying a pricetag of $600 billion and would have liked to see more money going toward infrastructure spending than tax cuts because it would have a more direct effect on the economy.
There is pretty broad agreement that the best, most effective use of money to stimulate the economy is through grants to the states that help prevent teacher and police layoffs, spending on infrastructure projects. Those kinds of things get you a big multiplier.
If you give tax cuts, those dollars get hoarded for the most part.
Republicans have a majority in the House and they've got enough votes to kill any law in the Senate so the president's options obviously are limited in terms of what he can hope to get through those chambers.
MICHAEL YOSHIKAMI, PRESIDENT AND CHIEF INVESTMENT STRATEGIST AT YCMNET ADVISORS IN WALNUT CREEK, CALIFORNIA
The plan is bigger than what we were looking for, suggesting a real shock and awe strategy. This is almost half a trillion dollars, which isn't an insignificant step.
My initial reaction is that what's needed to move job growth is tax credits, and the extension of the payroll credit makes sense. We'll have to see how this gets paid for, and how big the whole thing ends up being after negotiations. If the proposal is that this will be paid for through higher taxes on the wealthy, that will have major roadblocks.
The changes to mortgage issues-- which, let's be clear, will put a greater burden on Freddie Mac-- will have a stimulative impact. I think this will be a positive for stocks tomorrow.
JONATHAN COWAN, PRESIDENT OF THIRD WAY, WASHINGTON
With this speech, the president reaffirmed that he is a pro-growth Democrat. His plan includes ideas from the left, right, and center to rev up the jobs engine, said Cowan.
A functioning Congress should be able to pass this. Soon we will see if Republicans are permanently beholden to the Tea Party or are prepared to find common ground and get something done to help boost our economy.
FOREIGN EXCHANGE: The dollar trimmed slight early losses versus the euro