President Barack Obama has laid out a $447 billion proposal of tax cuts, increased government spending and other programs aimed at stimulating hiring, creating jobs and boosting the nation’s sluggish economy.
“Pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or if they raise workers’ wages,” Obama told a joint session of Congress, in a nationally televised speech. “It will provide a jolt to an economy that has stalled and give companies confidence that if they invest and if they hire, there will be customers for their products and services.”
The White House proposal contains four main pieces:
- $70 billion in tax cuts to incentivize small businesses to hire.
- $140 billion in public works spending, including repairs to at least 35,000 schools, and more money to hire teachers and first responders.
- $62 billion to extend unemployment insurance benefits and to pay for tax breaks to companies that hire people who have been unemployed for more than six months.
- $175 billion in cuts to employee payroll taxes for 2012.
The president hopes the proposal will bring much-needed relief to the jobless, a boost to small businesses and a healthy injection of government and, if successful, consumer spending in an economy wheezing its way through a sputtering recovery. He also proposes to take another stab at helping struggling homeowners to refinance their mortgages.
Support mixed with skepticism
But even before the speech began, Republicans signaled that Obama’s ideas would face an uphill battle in Congress. “This isn’t a jobs plan. It’s a re-election plan,” said Senate Minority Leader Mitch McConnell, R-Ky. “That’s why Republicans will continue to press for policies that empower job creators, not Washington.”
The likeliest areas for compromise are the proposed payroll tax cuts, infrastructure financing and Medicare reform, according to Sen. John McCain, R-Ariz. “I’d be very curious how we’re going to pay for it,” McCain told CNN following Obama’s speech.
According to the website Politico, August estimates from Macroeconomic Advisers in St. Louis project that $120 billion in payroll tax cuts could generate 400,000 new jobs by the end of 2012 and increase the gross domestic product by half a percentage point. Even so, the firm also cautioned that with the dismal economic climate, “We expect most employers to conclude that it remains a bad time to hire, even with the tax benefit.”
Democrats and administration allies in the private sector praised the proposal and urged fast action by lawmakers to enact the president’s ideas, which Obama promised won’t add to the deficit.
“President Obama made clear tonight that it is critical that all of us work together to create jobs in America,” said GE Chairman and CEO Jeff Immelt.
The U.S. economy has struggled following the 2008 financial crisis and recession, with growth hovering around an anemic 1 percent. Despite officially being in a recovery, the country faces a stubborn unemployment rate of 9.1 percent, with more than 14 million people out of work.
Can it work?
“The jobs recession is so deep that these modest proposals, even if enacted, will do little to improve prospects for hiring,” said David Cross, president of Market Outlook, a consulting firm in San Diego. “If we see another downturn in the economy, it might provoke enough fear to generate some action, but I’m not sure about that either. I don’t think Congress sees the jobs crisis as a crisis since the so-called debt crisis has sucked all of the oxygen out of the debate about the lousy economy.”
Lisa Donner, executive director of Americans for Financial Reform in Washington, D.C., applauded the speech but also noted that the administration will have to resolve the nation’s housing crisis if the economy is expected to improve.
“The country needs large-scale mortgage modifications, including deep principal reductions, to resolve the problem and to help spur consumer demand,” Donner said in a statement.
Obama’s speech brought the audience of lawmakers to their feet with applause multiple times, as he pledged to keep debt low while also helping Americans without jobs.
“What I will not do is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades. I reject the idea that we need to ask people to choose between their jobs and their safety,” he said.
Job creation is one of the hottest topics in Washington, with almost every interest group and politician weighing in with competing proposals. For example, the AFL-CIO has a six-point jobs plan that includes infrastructure spending and extended unemployment benefits, but it also stresses the importance of providing aid to state and local governments and strengthening export policy.
Meanwhile, the National Association of Manufacturers, based in Washington, D.C., criticized the White House for failing to act on pending free trade agreements with Colombia, Panama and South Korea. “There are several steps that the president can take immediately to grow our economy and make the U.S. more competitive,” said NAM President and CEO Jay Timmons, calling for speedy approval of pending project permits and less regulation.
“By proposing steps that seem nonthreatening and relatively affordable, Obama hopes to force his adversaries to acquiesce, at least to the measures they have supported in the past,” wrote William Galston, a senior fellow at the Brookings Institution in Washington, D.C. “If they don’t, he will be positioned to argue that Republicans are putting party above country, working to defeat him for re-election even at the cost of further slowing the economy and possibly tipping it into a second recession.”