Limited in his ability to create jobs through direct spending, President
Barack Obama is considering measures to encourage the private sector
to free up its cash reserves and hire more workers to ease the
nation’s unemployment crush.
As Obama prepares to unveil a new jobs agenda next week, his aides are
reviewing options that would provide tax incentives to employers who
expand their payrolls. That approach is a more indirect effort to
spur the economy and relies less on government intervention and
massive public works projects.
Among the proposals circulating in theWhite House is a $33 billion tax
credit that Obama first proposed early last year but that Congress
whittled into a smaller one-year package.
Under one version of the plan, employers would receive a tax credit of up
to $5,000, subtracted from their share of federal payroll taxes, for
every net new hire.White House officials caution that the overall
jobs plan is still subject to change.
The tax credit, however, is a relatively untested idea. Congress passed a
version in March 2010, known as the HIRE Act, which provided $13
billion in tax credits to qualified employers who hired new workers.
But there is no government data to track its success.
“The HIRE Act was very small,” saidMark Zandi, chief economist at
Moody’s Analytics and an occasional adviser to Democrats and
Republicans. “It really didn’t add to payrolls.”
“It would have to be bigger,” he added. “Something more along
the lines that the Obama administration proposed in 2010.”
While promising a major jobs package, Obama is hamstrung by budget cuts and
a tight debt ceiling that he had a hand in negotiating.
As a result, economists predict that while the president’s initiatives
could eliminate some drag on the economy and maintain the status quo,
they won’t be enough to propel it to new heights Still, Obama
on Wednesday predicted his plan could push the economy to grow 1
percent to 1.5 percent faster.
“That could mean half a million to a million additional jobs,” he said
Tuesday in an interview with radio talk show host Tom Joyner.
Obama’s jobs package is designed to supplement other proposals already in the
pipeline, including free trade agreements with South Korea, Colombia
and Panama and the renewal of a highway construction bill.
On Wednesday, Obama will call on Congress to pass federal highway
legislation before the current law expires Sept. 30. Seeking to blunt
congressional partisanship, Obama will be joined by the leaders of
two occasionally warring factions — AFL-CIO President Richard
Trumka and David Chavern, chief operating officer of the U.S. Chamber
At a minimum, the president’s jobs plan will call on Congress to extend
current payroll tax cuts and jobless benefits, spend money for new
construction projects and offer incentives to businesses to hire more
“We don’t have magic bullets, but what we do have, I think, is the
capacity to do some things right now that would make a big
difference,” Obama told Joyner.
The labor movement is wary.
“This is a moment that working people and quite frankly history will judge
President Obama on his presidency,” Trumka said last week. “Will
he commit all his energy and focus on bold solutions on the job
crisis or will he continue to work with the tea party to offer cuts
to middle class programs like Social Security all the while
pretending that the deficit is where our economic problems really
Obama faces a divided Congress, where Republicans, demanding fiscal
austerity, reject the notion that short term infusions of taxpayer
money into the economy can prod a sluggish recovery.Moreover, a large
package even half the size of the $825 billion stimulus Congress
approved in 2009 would move the government closer to its new debt
ceiling before the November 2012 election, something Obama is
determined to avoid.
The president is certain to call for extending a one-year payroll tax cut
for workers and unemployment benefits that expire in January, at a
combined cost of about $175 billion.
Obama also has promoted the creation of an “infrastructure bank,”
a fund that would be seeded by the government but fed by private
investment to pay for major road, bridge and other public
construction. Even advocates of the plan, however, say that proposal
probably would not be in place to generate jobs for about two years.
“A big chunk of the loss of employment was in the construction
industry,” Obama said on Joyner’s talk show. “Well, the
fact of the matter is that although the housing market is going to
take some time to recover, we’ve got a lot of stuff that needs to get
done. There are schools all across the country that right now you
could put people to work fixing up. There are roads and bridges right
now that need to be improved.”
Among other measures under consideration, but not yet decided:
—A major school construction initiative of up to $50 billion. Its
advocates include Vice President Joe Biden’s former chief economic
adviser, Jared Bernstein, who monitored progress of the 2009
stimulus. Bernstein said school construction and renovation would be
far more labor intensive than some of the public projects paid for by
the stimulus. “We kind of thought during the recovery act that
we would see 50 hard hats and 10 machines, and it ended up being the
other way around at some of these sites,” he said.
—Encouraging corporations to bring into the United States some of their foreign
sources of income at preferential tax rates in exchange for job
creation measures. SomeWhite House officials are not too enthusiastic
about this idea, however, because they believe it can be easily
—Tying unemployment insurance payments to on-the job training. Obama has
applauded a program under way in Georgia in which jobless benefits go
to employers who hire the unemployed as trainees.