Obama Offers $447B Spending, Tax-Cut Plan to Spur Jobs
By Mike Dorning- Sep 9, 2011 7:08 AM GMT+0800
President Barack Obama called on Congress to pass a jobs plan that would inject $447 billion into the economy through infrastructure spending, subsidies to local governments to stem teacher layoffs, and cutting in half the payroll taxes paid by workers and small-business owners.
The package is heavily geared toward tax cuts, which account for more than half the dollar value of the stimulus, and administration officials said they believe that will have the greatest appeal to Republican members of Congress.
“The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy,” Obama told a joint session of Congress tonight, according to a text of the address released by the White House.
A $105 billion infrastructure proposal includes money for school modernization, transportation projects and rehabilitation of vacant properties. Most of the economic impact from the infrastructure spending would be next year though some of it would come in 2013, an administration official said.
“Ultimately, our recovery will be driven not by Washington, but by our businesses and workers,” the president said. “But we can help. We can make a difference.”
The administration estimated that $35 billion it’s seeking in direct aid to state and local governments to stem layoffs of educators and emergency personnel would save the jobs of 280,000 teachers, according to a White House fact sheet.
Payroll Tax Cuts
The centerpiece of the plan is cuts in payroll taxes, which cover the first $106,800 in earnings and are evenly split between employers and employees. Obama would reduce the portion paid by workers next year to 3.1 percent from 6.2 percent. The rate had been cut 2 percentage points under the terms of a tax deal reached last year, and that reduction is set to expire Dec. 31.
The White House also would use temporary payroll tax cuts next year to offer incentives for new hiring and assist small businesses.
Businesses would get the same 3.1-point reduction on taxes they pay on the first $5 million of their payroll, a limit that skews the benefit toward smaller firms. The full 6.2 percent employer contribution would be waived on the first $50 million net increase in a company’s payroll.
The proposal includes additional tax credits for hiring veterans and workers who have been unemployed more than six months. The administration also wants to make it illegal for employers to discriminate against applicants who are unemployed.
The fiscal boost from the jobs package next year would be larger than in the first year of the 2009 economic stimulus, said Mark Zandi, chief economist at Moody’s Analytics Inc.
Boost to Growth
Zandi, who was briefed on the plan before the president’s speech, forecast passage of the entire jobs package would add 2 percentage points to economic growth next year and bring down the unemployment rate by 1 percentage point compared with current policy, under which a temporary payroll tax cut and an extended unemployment benefits both expire Dec. 31.
With his address to a rare joint session of Congress on jobs, the top concern of voters as the 2012 election campaign gets under way, Obama is seeking to frame choices for voters as much as present a plan for lawmakers.
He proposed the stimulus plan in the House chamber, where the Republican majority has signaled opposition to new spending. As job growth has stalled and the unemployment rate hovers above 9 percent, Obama’s job-approval ratings are scraping new lows as public doubts about his stewardship of the economy rise.
Deficit Plans
Obama said the cost of the initiative will be covered. Next week, he’ll send a plan on how to offset the spending to the special 12-member congressional committee charged with coming up with $1.5 trillion in deficit cuts.
“I am sending this Congress a plan that you should pass right away,” Obama told lawmakers, according to the text. “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans, including many who sit here tonight. And everything in this bill will be paid for.”
Obama said he will release a “more ambitious” plan to reduce the deficit by Sept. 19 that would cover the cost of his proposals as well as stabilize the nation’s debt burden.
Job Training
In another step aimed at the long-term jobless, Obama proposed granting states authority to pay unemployment benefits to people who have been jobless more than six months while they train for jobs at businesses at no cost to the employer for up to eight weeks.
States also would be able to use unemployment insurance funds to make up for wages lost by workers whose hours were cut back in lieu of a layoff and for workers 50 and older who took a lower-paying job after a layoff.
The White House wants to incorporate the changes in the unemployment insurance program along with a one-year continuation of extended unemployment benefits due to expire Dec. 31. The extended benefits cover jobless workers for up to 99 weeks.
The administration considered and rejected a temporary repatriation holiday that would allow companies to return overseas profits without paying corporate income taxes on the proceeds. The White House concluded that it would not have as great an impact on job growth as the hiring incentives it included, said an administration official.
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