President Obama finally seems to be admitting that last winter’s $787 billion economic recovery plan hasn’t created jobs fast enough.
Put aside all the administration’s rhetoric about all the jobs it has “saved or created.” Unemployment is still at 10 percent nationwide. That statistic matters most.
Unfortunately, the president’s latest proposal for creating jobs is too vague about its cost and doesn’t put enough emphasis on tax cuts for small businesses.
Obama’s other “problem” number is the federal deficit, which reached a mammoth $1.42 trillion in fiscal 2009 and should be about the same this year. Even as the administration tries to put people back to work, the government can’t afford to add significantly to the swollen national debt, which exceeds $12 trillion.
The higher the debt rises, the more likely interest rates are to climb, hindering job growth, and increasing the cost of everything from home mortgages to car loans.
Faced with these challenges, Obama wants to create jobs using as much as $50 billion in new spending for highway and bridge construction, plus incentives for retrofitting homes to make them more energy efficient, and cutting taxes for small businesses.
But the $787 billion stimulus plan already contains $51.2 billion for transportation and other infrastructure projects, including $27 billion for highways and bridges. However, only about 20 percent of the money set aside for contracts, grants, and loans in the recovery plan has been spent. Instead of stuffing more borrowed funds into the clogged cash pipeline, the government should work more efficiently to spend the money that’s already committed.
A better idea from Obama is to eliminate capital gains taxes on small business investment. He also would extend a break allowing small businesses to immediately write off as much as $250,000 in certain investments, and allow businesses to deduct more capital expenses.
Those proposals are worthy because they target the small businesses that have been most responsible for job growth coming out of recessions. Small businesses still find it difficult to obtain bank loans to expand operations.
A jobs summit held at the Pennsylvania Convention Center on Dec. 3 also looked at how to free up more capital for small businesses. Led by Philadelphia Democratic state Reps. Dwight Evans and John Myers, some participants suggested loan guarantees would be more effective than tax credits to thaw credit markets.
Obama also urged congressional leaders to create a tax incentive to encourage small businesses to add and keep workers. One idea worth pursuing is a so-called job sharing tax credit, in which firms essentially receive a rebate for expanding their payroll.