Obama jobs plan: big ideas, but a big hole to fill in hiring
President Obama proposed a new set of job-creation proposals Tuesday designed to confront a stark problem: Even though the rate of job cuts in the economy has eased, the pace of hiring remains far below normal.
That issue 鈥� how to spur hiring 鈥� is the central one for policymakers considering how to bring down America鈥檚 unemployment rate in the next year.
Mr. Obama said his proposals have the best chance to succeed, delivering the 鈥済reatest number of jobs [at] the greatest value for our economy.鈥�
came in three broad areas:
鈥� Small business. A new temporary tax credit would go to businesses that add workers to their payrolls. Other tax breaks would encourage business investment, such as a one-year capital-gains tax rate of zero for new investments in small firms. Obama also called for continuing programs already under way to support small-business lending.
鈥� Infrastructure. The president called for more spending on transportation and water projects in the next year, expanding the existing stimulus spending in this area by perhaps $50 billion.
鈥� Clean energy. He proposed rebates for families to retrofit their houses to be more energy efficient. Modeled on the 鈥�cash for clunkers鈥� scheme that boosted auto sales this year, the program has been dubbed 鈥渃ash for caulkers.鈥�
The key ideas will require congressional approval, so many of the details and dollar figures must still be negotiated in coming weeks.
Obama鈥檚 proposals come as the job market has stabilized somewhat, but with employers still reluctant to hire.
The job market includes lots of monthly turbulence, as several million workers are hired, fired, or leave their jobs. The key is how it all nets out: Are employers adding more workers than they are letting go?
Rate of hiring far below normal
What鈥檚 happened during this recession is that the rate of hiring has fallen far below the normal, and well below the level seen during and after the 2001 recession. Today, employers are hiring just three workers each month for every 100 jobs in the economy. More typical would be a 4 percent hiring rate, judging by Labor Department records on job turnover that go back only 10 years.
鈥淓ven though we have reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who have been swept up in the flood,鈥� Obama said , given at the Brookings Institution in Washington. 鈥淭here are more than 7 million fewer Americans with jobs today than when this recession began.鈥�
That leaves what Obama called a big 鈥渉ole鈥� to fill, even though economists say the initial Obama stimulus program, the $787 billion American Recovery and Reinvestment Act, may have saved or created about 1 million jobs this year.
White House officials shied away from providing an overall cost estimate for the new proposals, but $200 billion might be an upper limit. That鈥檚 the amount by which the costs of the Troubled Asset Relief Program (TARP) are beating forecasts, according to the Treasury.
In a briefing for reporters before the speech, a senior administration official said the fact that the TARP costs for bank rescue are less than expected provides fiscal 鈥渟pace to do 鈥� a set of jobs proposals and have a lower deficit鈥� in the federal budget. The official said some other factors will add a bit more fiscal wiggle room as well.
Tapping TARP a good idea?
Republican lawmakers, however, question the idea of considering TARP "savings" as a source of funds.
Just because one program has come in with a smaller cost than expected doesn鈥檛 magically create money to use in another place, they argue. The TARP program added to the deficit, and the new jobs program will too, they say.
鈥淸Obama is] doubling down on the big-government 鈥榮timulus鈥� approach that isn鈥檛 working,鈥� House minority leader John Boehner of Ohio said in a statement Tuesday. 鈥淣ever mind that the implications of having a $12 trillion national debt and red ink as far as the eye can see continue to pile up, the latest being the threat of a downgraded credit rating.鈥�
On Tuesday the debt-rating firm that the US and Britain could lose their AAA credit ratings, due to a worsening debt outlook.
Critics of White House policies that more needs to be done to fix credit markets, and that Obama has dampened hiring by making employers uncertain about the tax and regulatory climate in the years ahead. They also warned that it will be hard to design the new tax credit so that it is both effective at spurring hiring and can鈥檛 be gamed by employers.
Within his three-part plan, Obama called for a range of steps, including:
鈥� Extending Recovery Act tax breaks for businesses to depreciate the cost of equipment.
鈥� Increasing Small Business Administration loan guarantees, and continuing Treasury efforts to use the TARP to support small business lending.
鈥� Expanding a Recovery Act program that provides incentives for businesses to invest in the production of renewable energy in the US.
The White House also said it is working with Congress on other expanded stimulus efforts: to extend the Recovery Act provision that helps jobless Americans pay for COBRA health insurance, to provide $250 payments to seniors and veterans, and to grant a new round of aid to state and local governments.
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See also:
Using TARP funds for job creation: creative or reckless?
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