PRESIDENT BARACK Obama yesterday began to fulfil his promise to take his American Jobs Act “to every corner of this country” by addressing an enthusiastic audience of 8,900 at the University of Richmond in Virginia.
The president repeated much of the speech he’d delivered to a joint session of Congress on Thursday night. There was “nothing radical” in the Bill, he said, noting that it has already received some support from Republicans. Mr Obama pointed and smiled at a man holding a “four more years” placard, and urged the audience to put pressure on their congressmen to pass his Bill.
Republicans had for months accused Mr Obama of making no concrete economic proposals. Now, if Congress rejects his Bill, he can blame them for the crisis. As the president noted, this is “an urgent time” for the US, with 9.1 per cent unemployment and fears the country is on the verge of falling back into recession. Fourteen million Americans are unemployed.
Mr Obama’s plan received positive reviews. Energetic, feisty, intense, aggressive and spirited were some of the adjectives used to describe his speech. Mark Zandi, the chief economist at Moody’s Analytics, said the Jobs Act could add two percentage points to GDP growth and foster 1.9 million jobs.
In a speech that attempted to shift the focus from deficit reduction to job creation – a priority supported by opinion polls – Mr Obama mocked Republican dogma.
“Some of you sincerely believe that the only solution to our economic challenges is to simply cut most government spending and eliminate most government regulation,” he said.
“In fact, this larger notion that the only thing we can do to restore prosperity is just dismantle government, refund everybody’s money, and let everyone write their own rules, and tell everyone they’re on their own – that’s not who we are. That’s not the story of America.”
Mr Obama chose the home district of the house majority leader Eric Cantor, one of his fiercest opponents in the recent debt ceiling crisis, for yesterday’s speech. His next stop, next Tuesday will be in Columbus Ohio, the political turf of house speaker John Boehner.
The Republican leadership responded mildly to Thursday night’s speech, heeding opinion polls showing public disgust at politicians’ behaviour during the debt ceiling crisis. “I think it would surprise all of us how quickly optimism could return if the relation between the parties could improve,” Mr Cantor told a press luncheon on Thursday.
Mr Obama crafted his draft law to appeal to Republican sensibilities.
He did not utter the word “stimulus”, which the Republicans have turned into an epithet since the last $787 billion package in 2009.
Although his plan would cost an estimated $447 billion, more than half of it is comprised of tax breaks for workers ($175 billion) and small business employers ($70 billion).
Most of the measures – payroll tax reduction, unemployment benefits, an infrastructure bank – have figured in earlier Obama speeches. But the cut in the tax imposed on employers is new, and the size of reduction in taxes on salaries was also unprecedented.
The plan would decrease the employers’ tax from 6.2 to 3.1 per cent, and grant a tax holiday for new hires in 2012. Employees currently benefit from a 2 per cent reduction in payroll tax, which was due to revert to 6.2 per cent next year.
Mr Obama wants to reduce it to 3.1 per cent – an estimated gain of $1,500 for the average family.
The Jobs Act would commit $62 billion to renewing benefits for the long-term unemployed, and $140 billion for infrastructure and preserving the jobs of teachers, police and firefighters who would otherwise lose them.
“We have badly decaying roads and bridges all over the country,” Mr Obama said. “Our highways are clogged with traffic. Our skies are the most congested in the world. It’s an outrage . . . And now we’re going to sit back and watch China build newer airports and faster railroads?”
But the Bill is unlikely to pass in entirety, and even if it does, there is no guarantee Americans will spend the extra cash from tax cuts, or that tax breaks will induce businessmen to employ people they would not have hired otherwise.
Financing the $447 billion package will be the biggest sticking point.
The common wisdom among economists is that the US needs short-term stimulus and long-term deficit reduction, and that the deficit will only decrease through a combination of tax hikes for the rich and cuts in government “entitlements”.
When the president tried this approach in “grand bargain” negotiations with Mr Boehner in July, it was rejected by Republicans.
Mr Obama made clear on Thursday night that he will again propose raising taxes on the rich – anathema to Republicans – and cutting Medicare and Medicaid, which the Democrats oppose.
The breakdown: $447bn tax cuts and spending package
Employee payroll tax holiday – $175 billion (€127.9 billion) one-year extension and expansion of the scheme that would halve the tax rate to 3.1 per cent in 2012
Employer payroll tax holiday – $65 billion to encourage small businesses to hire more workers, includes halving employer payroll taxes to 3.1 per cent for the first $5 million of a company’s wage bill in 2012
Housing – broader homeowner access to mortgage refinancing and through especially low borrowing costs
Extending 100 per cent company expensing into 2012
$5 billion immediate tax break for investment in new plant and equipment
$85 billion aid package for state and local government
$30 billion teachers’ pay package
$5 billion to keep firefighters and police officers in employment
$30 billion schools and community college building programme
$15 billion to rehabilitate and refurbish vacant and foreclosed homes
$5 billion to help low-income youths and adult workers
Road, rail and aviation infrastructure – $50 billion in highways, transit, rail and aviation, including upgrading airports Infrastructure bank – $10 billion to capitalise an infrastructure bank to leverage private and public infrastructure investment “without earmarks or traditional influence”
Extending unemployment insurance, bridge to work – $49 billion for a one-year extension of long-term unemployment benefits
$8 billion for tax credits for long-term unemployed