Obama sketches a plan for job creation
Reporting from Los Angeles and Washington Nathan Olivarez-Giles -- President Obama’s latest proposals to create jobs in a stagnant economy left the hard work up to Congress -- and that means any package is unlikely to get approved until early next year.
Democrats have to craft the plan based on broad sketches Obama announced Tuesday that would cost tens of billions of dollars. Most Republicans don’t want to spend any money on job creation, arguing that government efforts in that area have been ineffective and that the focus should instead be on reducing the $1.4-trillion deficit.
If Congress does not act soon, it probably shouldn’t act at all, said Brian Bethune, chief U.S. financial economist for IHS Global Insight. “I think there’s a window right now to catch a little wind,” with the economy growing again, he said. “But if they don’t seize it now, [legislation] certainly won’t have much impact next year.”
Obama, in a speech at the Brookings Institution, a Washington think tank, called on Congress to work with him on approving new spending and tax incentives focused on three areas:
* Helping small businesses expand;
* Increasing investments in highways, bridges and other infrastructure;
* Adding incentives, particularly for consumers, for energy efficiency and so-called green energy.
“There is only so much government can do,” Obama said. “Job creation will ultimately depend on the real job creators: businesses across America. But government can help lay the groundwork on which the private sector can better generate jobs, growth and innovation.”
Naresh Solanki, owner of Bestway Supermarkets, which has nine locations in the Los Angeles area, said he hoped any federal job-creation efforts would allow him to rehire employees he had to lay off this year.
“Before the recession, we were looking at expanding,” said Solanki, who employs about 400 people. “But with sales down, we can’t justify spending the capital. We need to keep the people we have working and refill the jobs we lost before we can start growing again.”
The work hasn’t gone away, even though revenue has declined, he said. “And if more people are employed, then they’ll have more money to spend, and that helps the economy, that helps families, that helps businesses -- it helps everybody.”
Senior administration officials did not place an overall price tag on the plan but said the infrastructure component alone would cost about $50 billion. They suggested the upper limit might be $200 billion.
That’s the amount the Treasury Department now estimates will be shaved from long-term deficit projections because of lower-than-anticipated losses in the Troubled Asset Relief Program.
“This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street,” Obama said.
He described TARP as a “flawed” and “hastily” launched program that the administration was now “going to wind down.” The administration is not proposing to pay for job-creation plans by using money directly from the $700-billion TARP fund. But the lower long-term cost of TARP frees up money to spend on job creation without further adding to a projected $1.4-trillion budget deficit this year, senior administration officials said.
Some Republicans blasted Obama for not pumping all the TARP savings, the result of more banks repaying their bailout money, into reducing the deficit, as the law creating the program requires.
“It was very clear that the TARP money, if not spent, was supposed to go to deficit reduction,” said Sen. John McCain (R-Ariz.). “So now they want to use that $200 billion as another slush fund.”
But senior administration officials said the only job-creation effort that TARP money would be used for would be to continue the Treasury Department’s efforts to encourage small-business lending.
Lourdes Sobrino, for instance, can’t get a bank loan for her Lulu’s Mexican-style gelatin desserts business to move manufacturing equipment to a new building. The company, with 45 employees, has been in business for 28 years and has been profitable through the recession, she said.
Banks have told her they don’t want to take the risk for her $500,000 move, even though she said her company has a long history of good credit and timely debt payments.
“If I can’t get funding by Jan. 22, I might have to close my doors,” she said. “It’s a scary thought.”
In many cases, Obama proposes to extend or expand parts of the separate $787-billion stimulus plan that the administration believes have been successful.
Among the new proposals are eliminating capital gains taxes for one year on new investments in small-business stock. The administration also wants to extend provisions set to expire at the end of this year that encourage business spending, including the ability to expense immediately any investment up to $250,000 rather than writing it off over time.
That would be coupled with a depreciation incentive that allows firms to accelerate the rate at which they can deduct the cost of capital purchases.
Obama also called for a new tax incentive to encourage businesses to hire, but he did not make a specific proposal. Senior administration officials said they would develop a proposal with Congress.
Some lawmakers have touted proposals such as a tax credit for new hires or a temporary cut in the payroll tax.
One proposal for consumers would provide rebates for people who make their homes more energy efficient. The idea, which some have dubbed “cash for caulkers,” is designed to replicate the popular “cash for clunkers” program of last summer, which used tax rebates to encourage consumers to trade in old cars and buy new ones.
The administration hopes firms that sell insulation and other weatherization supplies will follow the lead of auto dealers, who promoted the clunkers program to boost sales.
Small-business groups said the specific proposals might help encourage more hiring but were modest moves.
Until consumers spend more, firms are reluctant to invest in new hires or equipment, no matter what the incentives, said William Dennis, a senior fellow at the National Federation of Independent Business Research Foundation.
“Small-business owners have to see people walking in the door,” he said. “They have to have a reason to invest.”
Obama’s call to action came as both houses of Congress have been gearing up to pass some sort of job-creation measure. He was expected to meet with top Democrats on the issue today at the White House.
House leaders are weighing a push for an ambitious -- and potentially expensive -- bill before they recess for the year to demonstrate that lawmakers are moving quickly to ease unemployment. But the Senate, tied up with healthcare legislation, is unlikely to act before next year.
Rep. Chris Van Hollen (D-Md.), a member of the House leadership team, said he expected the House to vote on a package this month centered on $50 billion to $70 billion of spending on infrastructure projects. Other job-creation measures would be left until next year.
Van Hollen said the entire effort was likely to cost $150 billion to $200 billion -- and he said Democrats needed to act boldly. “You need to boost this fledgling economic recovery,” he said. “You need to keep the momentum going.”
But some Democrats remain wary of being labeled profligate spenders. Some said the $200-billion figure cited by Obama could be politically acceptable because of the TARP savings, but others said any kind of a triple-digit figure attached to the bill would be politically dangerous.
Christi Parsons in the Washington bureau contributed to this report.