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08 Sep 2011 10:42
US President Barack Obama, whose popularity has fallen to new lows amid fears the American economy could be headed for another recession, will unveil a jobs package in a speech to Congress on Thursday.
The plan is expected to total more than $300-billion, according to US media reports.
Economic woes have clouded Obama’s 2012 re-election prospects and he faces pressure from Democratic allies to offer a bold plan for reducing the 9.1% unemployment rate.
In the speech, which will take place at 7pm (11pm GMT), Obama will unveil a mix of measures, some of which could clear the Democratic-led Senate as well as the Republican-led House of Representatives, and others that might face greater resistance.
Here are elements likely to be part of the speech:
Extensions of payroll tax cuts
Extending a payroll tax cut for workers first enacted last December is the centrepiece of Obama’s plan. Continuing the tax cut for another year would cost about $112-billion, according to the non-partisan Congressional Budget Office (CBO).
Congressional Republicans are lukewarm on the idea, with some saying the White House should focus on measures such as broad tax reform that would have a more lasting impact.
Macroeconomic Advisers, an economic consulting firm, estimates that extending the payroll tax holiday, emergency unemployment benefits and business expensing provisions through 2012 would boost employment by about 600 000 next year.
Obama has said public works projects, such as the repair of highways and school buildings, would be one way of putting unemployed construction workers back on the job while upgrading the country’s infrastructure.
Republicans contend large-scale spending initiatives have not helped the economy and point as evidence to the economy’s weakness despite the $800-billion stimulus package Obama and his fellow Democrats enacted in 2009.
But infrastructure spending is popular with voters and Republicans have indicated they might be willing to support some initiatives.
The CBO has said big construction projects often require years of planning and preparation.
Many road, bridge and sewer projects financed by the 2009 stimulus got bogged down in red tape and took a year or more to start construction.
In comments often cited by Republicans, Obama said in a New York Times Magazine interview last October that infrastructure spending could take time to trickle through the economy because “there’s no such thing as shovel-ready projects”.
Aid to states to prevent teacher layoffs
Obama is likely to propose federal help to states to prevent layoffs of teachers and emergency first responders.
Declines in government payrolls have put a damper on the job market in recent months, so economists say such aid could contribute to near-term improvement in the jobs picture.
Tax breaks for businesses
Obama is likely to propose extending the payroll tax cut to employers as a means of boosting hiring.
Another approach might be to reserve that tax cut for businesses that hire unemployed workers.
Critics say such tax breaks might have a limited effect on hiring because it might mostly reward firms already planning to add workers. But the incentive could accelerate some hiring decisions.
Extending unemployment aid
Congress has extended jobless aid several times to help people unemployed for more than six months. The extensions are due to lapse at the end of this year and Obama will call for their renewal, which would cost about $57-billion.
Economists say unemployment aid can stimulate the economy because those receiving it are likely to spend it quickly.
Training for the long-term unemployed
Obama is expected to unveil a training program targeted toward those who have been unemployed six months or more.
Modeled after a program in Georgia, called George Work$, it would provide on-the-job training for the unemployed at no cost to companies. The government would help with costs such as transportation, but proponents say it could save money in the budget if the workers are eventually hired and no longer need federal unemployment benefits.
House Republican leaders have expressed interest in it.
But before it translates into new jobs, the training program would have to be set up and participants would need to work through it, meaning its impact would not be immediate. Sixty percent of the participants in Georgia Work$, which started in 2003, have found jobs, although reportedly the program has not dented the state’s unemployment rate.
Help for struggling homeowners
The administration has been working for weeks on a mortgage relief program to meet the needs of troubled borrowers.
Obama’s speech could include a nod to efforts to strengthen the housing market by allowing more homeowners to refinance at the current low interest rates, according to sources familiar with the matter.
The refinancing initiative under consideration would broaden eligibility for refinancing for homeowners whose mortgages are backed by Fannie Mae, Freddie Mac and the Federal Housing Administration.
Republicans would likely oppose plans for broader refinancing that involve taxpayer subsidies, either directly from the government or through Fannie Mae and Freddie Mac. But the administration might be able to take executive action on some aspects of the plan.
Changes involving the mortgage giants would require approval by their regulator. The direct jobs impact from homeowner help is expected to be less significant than the potential improvement in consumer sentiment.
Any extra spending from reduced mortgage costs could lead to increased hiring, although that could take months and may not happen at all if households choose to save instead.—Reuters
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