The Administration wants Congress to move on the American Jobs Act and “pass the bill,” but Harry Reid wants to postpone consideration for now while the Senate focuses on the China Trade Bill.

Bloomberg asked 34 economists about the American Jobs Act, and by and large they said passage of the bill would prevent a recession.  By providing a mild stimulus from infrastructure spending and extending or expanding current tax cuts and unemployment insurance that would otherwise expire, the AJA would provide a modest boost to the economy; doing nothing would make matters worse.

The economists consensus viewpoint is otherwise pretty pessimistic, however. There’s a modest difference between a 1 percent increase in GDP and a 1 percent decrease, but the economists don’t even see anything close to a 2 percent jump in GDP out of the deal. And the expected jobs numbers are pretty weak:

The legislation, submitted to Congress this month, would increase gross domestic product by 0.6 percent next year and add or keep 275,000 workers on payrolls, the median estimates in the survey of 34 economists showed. The program would also lower the jobless rate by 0.2 percentage point in 2012, economists said.

Economists in the survey are less optimistic than Treasury Secretary Timothy F. Geithner, who has cited estimates for a 1.5 percent boost to gross domestic product. Even so, the program may bolster Obama’s re-election prospects by lowering a jobless rate that has stayed near 9 percent or more since April 2009.

The plan “prevents a contraction of the economy in the first quarter” of next year, said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, who participated in the survey. “It leads to more retention of workers than net new hires.”

It’s true that parts of the American Jobs Act extend policies already in place. By definition this is not stimulative; it’s anti-contractionary compared to letting the measures expire. But these are sharply lower estimates than what Goldman Sachs and Mark Zandi put out right after the release of the AJA.  They  estimated about 1 million additional jobs and a 1.5 to 2 percent increase in GDP.

This was a bipartisan group of economists, but not all agreed.  The trade lobby National Federation of Independent Business predicted no impact from the $447 billion plan, which is frankly ridiculous.

It’s worth knowing what economists believe the nation will leave on the table with the American Jobs Act, but there’s no real sense that the bill will pass. Heck, the White House can’t even get the Democratic Senate to commit to a vote. Harry Reid supports the AJA, but he wants to put off the vote until later in October. And it’s very interesting what Reid wants to pass in its place:

Despite early and regular pleas from the White House, Senate Democrats say they will not move immediately to take up President Obama’s jobs bill when they return next week from a short recess.

“We’ll get to that,” Senate Majority Leader Harry M. Reid (D-Nev.) said Monday night when asked if the likely passage of a temporary spending bill to keep the government functioning meant the Senate could now consider the president’s package […]

Reid, who is sponsoring the package in the Senate, said Monday the Senate will first take up debate next week on a bill to punish China and other nations for currency ma­nipu­la­tion.

“I don’t think there’s anything more important for a jobs measure than China trade, and that’s what we’re going to work on next week,” he said.

The Chinese currency measure, according to an estimate by the Alliance for American manufacturing, would lead to two MILLION jobs coming back to the US.  They believe it would force a revaluation of the renminbi relative to the dollar, rebalancing the trade relationship between the two countries. That is vitally important to make exports a driver of recovery.

What’s more, the measure has strong bipartisan support. It got over 360 votes in the House back in 2010, and it passed easily in the Senate years earlier. There are 201 co-sponsors for the House measure, and they may force a vote even if the House GOP leadership doesn’t want the bill to come to the floor.

In other words, Reid is RIGHT that the Chinese currency bill is potentially a more important jobs bill than the American Jobs Act.  It has the added benefit of being more likely to pass.

There’s only one problem. The White House doesn’t want the bill.

The White House isn’t thrilled with the China measure, revealing the latest rift with congressional Democrats over the direction of a jobs agenda — as Obama tries to walk a diplomatic tightrope with a powerful economic trading partner.

The critical vote comes Monday, when the Senate is likely to move ahead on the bill to crack down on Chinese currency policies. Seizing on concerns over the jobless rate, the legislation has created some odd bedfellows in Congress: Republicans whose states have been hit by outsourcing and progressive Democrats from battleground states with manufacturing hubs, like Michigan and Ohio, who want to protect their ailing industries from what they consider unfair competition.

The legislation, long championed by Sens. Chuck Schumer (D-N.Y.), Lindsey Graham (R-S.C.), Olympia Snowe (R-Maine), Debbie Stabenow (D-Mich.) and Brown, would penalize China with tariffs for allegedly keeping the value of its yuan artificially low in an attempt to maintain low Chinese wages and cheaper exports that are more attractive in foreign markets.

Multinationals don’t want to see the products they produce in China get more expensive. The Chamber of Commerce is on record against the bill. The White House probably doesn’t want to anger them, nor do they want to raise the ire of China, preferring a soft (read: non-existent) diplomacy.

This could end up being a major embarrassment for the White House with an election year upcoming. Could Obama possibly veto a bill that pressures China to stop manipulating its currency? Stay tuned.

David Dayen

David Dayen