Jobs: America’s Challenge

Dealing with his lowest approval rates yet, President Obama discussed the nation’s economic situation amongst a joint session of Congress. In his much anticipated speech, the president called on Congress to take immediate action on a newly proposed bill, titled the “American Jobs Act”, estimated at $447 billion in tax cuts and new government spending.


The focus of the plan cuts payroll taxes that pay for Social Security, giving a tax break to workers and businesses. Obama proposed not only extending the 2% payroll tax cut scheduled to expire in December, but increasing it to 3.1%. He also calls for the elimination of the 6.2% tax on the wages of new hires or on pay raises for current employers in its entirety. These provisions, estimated at around $240 billion, account for the majority of plan’s price tag. The plan also includes new spending for teachers and school construction, and an extension of jobless benefits.

The remaining $140 billion in the package would be funneled into public works and state aid. $25 billion would be sent to state and local governments to refurbish 35,000 schools and $35 billion would be used to keep teachers, police and firefighters employed. Another $50 billion would go to immediate investments in highways and public transport, and $10 billion for an infrastructure bank that would try to gather and utilize private capital for public works. While such spending has a relatively high impact on the economy, it has proven difficult to find projects that are both “shovel-ready” (the stage in which an economic stimulus project is advanced enough that laborers may immediately be employed to start work) and worth executing.

The president’s current priority is the prevention of a double-dip recession. In February, his budget office predicted the economy would grow by 3% this year. Despite the optimistic outlook, the difficult economic situation forced the White House to admittedly downgrade that to just 1.6% last month. Meanwhile, according to The Economist, the fading impact of Obama’s original $820 billion stimulus and the expiration of $200 billion more in support added last December threaten to knock 2% from gross domestic product next year. Furthermore, tax collections have risen more than expected this year, which represents a further unanticipated fiscal tightening. Unaddressed, these factors could move the economy into recession.

By ensuring that his proposals have some degree of Republican roots and approval, the president has sought to make it difficult for his plans to be obstructed. The proposed infrastructure bank, for example, is modeled on a measure proposed by Democrat John Kerry and Republican Kay Hutchison. The U.S. Chamber of Commerce, a frequent opponent of many of President Obama’s ideas, agrees on higher infrastructure spending.

Republicans however, have branded President Obama’s previous stimulus a failure and show little interest in passing anything that may help him get re-elected. Their stance however, may forcibly be heading in a new direction. Congress’ approval ratings have fallen further than President Obama’s. Such was the price Republicans paid for by dragging the country to the brink of default in August in an effort to force the President to accept bigger spending cuts. A Wall Street Journal/NBC poll found that voters blame Republicans more than President Obama for Standard & Poor’s subsequent decision to downgrade the country’s credit rating.

In an effort to reconcile to some degree, Republicans are promising to seek common ground with Mr Obama. John Boehner, Speaker of the House of Representatives, said that Obama’s ideas “merit consideration.”

A far cry from support however, Republicans will most likely cherry pick and pass the parts they like, most notably free-trade deals. Administration officials put the odds of passing the proposed tax cuts at better than 50% but are less confident on the spending provisions. After the first meeting, the morning before Obama’s speech, John Kyl, a Republican senator, threatened to quit if defense spending were touched. Jeb Hensarling, the panel’s Republican co-chairman, said to The Economist that President Obama’s plan makes the “already arduous challenge of finding bipartisan agreement on deficit reduction nearly impossible.”

It seems that despite the urgency to act however, the odds of this bill coming to pass in its entirety seem slim. The polls may be an effective way for the American public to express their disproval for Congress or the President, but at 14 months from now, waiting until election day is a luxury this country’s economy does not have.

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