Tags: Obama | Jobs

Obama Looks to Spur Private Sector Hiring

Wednesday, 31 Aug 2011 12:35 AM

 

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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 direct intervention and massive public works projects.

Among the proposals circulating in the White 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," said Mark 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

At a minimum, the president's 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 workers.

"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 said Tuesday in an interview with radio talk show host Tom Joyner.

The labor movement is wary.

"This is a moment that working people and quite frankly history will judge President Obama on his presidency," AFL-CIO president Richard 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 lie."

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.

"That not only helps them keep their head above water, but it also circulates that money in the economy and makes sure that businesses have customers," Obama said.

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. Some White House officials are not too enthusiastic about this idea, however, because they believe it can be easily abused.

—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.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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