WASHINGTON — President Barack Obama called for a major new burst of federal spending Tuesday, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment.
Despite Republican criticism concerning record federal deficits, Obama said the U.S. must continue to “spend our way out of this recession” as long as so many people are out of work. More than 7 million Americans have lost their jobs since the recession began two years ago, and the jobless rate stands at 10 percent, a statistic Obama called “staggering.”
Congressional approval would be required for the new spending, the amount unspecified but sure to be at least tens of billions of dollars.
“We avoided the depression many feared,” Obama said in a speech at the Brookings Institution, a Washington think tank. But, he added, “Our work is far from done.”
It was the third time in a week the president had presided over a high-profile event on jobs, responding to rising pleas in Congress that he spend more time discussing unemployment as midterm election season draws near.
Obama proposed new spending for highway and bridge construction, for small business tax cuts and for retrofitting millions of homes to make them more energy-efficient. He said he wanted to extend economic stimulus programs to keep unemployment insurance from expiring for millions of out-of-work Americans and to help laid-off workers keep their health insurance. He proposed an additional $250 apiece in stimulus spending for seniors and veterans and aid to state and local governments to discourage them from laying off teachers, police officers and firefighters.
He did not give a price tag for the new package but said he would work with Congress on deciding how to pay for it.
Proposals in Congress being advanced by Democratic leaders that cover much the same ground would add up to $170 billion or more. Administration aides suggested the infrastructure proposals alone being weighed by the president could cost about $50 billion.
Republicans ridiculed the president’s speech and his parallel call for doing more to hold down government deficits.
“At least the president’s proposal will result in one new job — he’ll need to hire a magician to make this new deficit spending appear fiscally responsible,” said Sen. Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee. House GOP leader John Boehner of Ohio declared the president “out of ideas and out of touch.”
While Obama did not propose the kind of direct federal public works jobs that were created in the 1930s, he said government action could set the stage for more job creation by private business. Many of his proposals would extend or expand programs included in the mammoth $787 billion stimulus package passed last winter.
While acknowledging increasing concerns in Congress and among the public over the nation’s growing debt, Obama said critics present a “false choice” between paying down deficits and investing in job creation and economic growth.
“Even as we have had to spend our way out of this recession in the near term, we have begun to make the hard choices necessary to get our country on a more stable fiscal footing in the long run,” he said.
To find money to pay for the new programs, the administration is pointing to the Treasury Department’s report on Monday that it expects to get back $200 billion in taxpayer-approved bank bailout funds faster than expected.
Obama suggested this windfall would help the government spend money on job creation at the same time it eats into the nation’s debt, which now totals $12 trillion.
He called the bank bailout, under the 2008 Troubled Asset Relief Program (TARP), “galling.”
“There has rarely been a less loved — or more necessary — emergency program,” Obama said.
The program is due to go out of business at the end of this year, although Congress is expected to extend it to next October.
The perception that the program mainly bailed out Wall Street bankers while doing little to help ordinary Americans has fed anti-Washington sentiment across the nation.
In clear acknowledgment of this sentiment, Obama said the unexpected $200 billion in repaid loans and other savings “gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.”
But Republicans cried foul, claiming that the leftover and repaid TARP money must be used exclusively for deficit reduction or additional bank bailouts, as the law setting it up spells out, and not for what amounts to an expensive new stimulus program to create jobs.
“The stimulus money clearly was a spending bill. TARP was a loan — a loan to be paid back. And we know that a number of the banks are, in fact, paying it back,” said Senate Minority Leader Mitch McConnell, R-Ky. “So I don’t think raiding a loan program to launch another spending spree is the best way to create jobs.”
David Walker, president of the Peter G. Peterson Foundation, a group that promotes fiscal responsibility, said that just because the government hasn’t had to spend all the TARP money on banks “doesn’t mean we should automatically spend it on something else.”
Walker, former head of Congress’ Government Accountability Office, said in an interview that clearly defined objectives or conditions were missing from both the $700 billion bank bailout law passed in October 2008 and this year’s $787 billion stimulus package. He said, “You can’t change history, but you need to learn from past mistakes to make sure that you don’t repeat them.”
Liberal groups praised Obama’s new initiatives. “We think that Obama made a step in the right direction,” said Karen Dolan of the Institute for Policy Studies. “He’s finally tapping into that moral outrage of the American people at the Wall Street bailouts.”
A major part of his package includes new incentives for small businesses, which account for two-thirds of the nation’s work force. He proposed a new tax cut for small businesses that hire in 2010 and an elimination for one year of the capital gains tax on profits from small-business investments.
Obama also proposed an elimination of fees on loans to small businesses, coupled with federal guarantees of those loans through the end of next year. His proposal for new tax breaks for energy-efficient retrofits in homes is modeled on the now-expired Cash for Clunkers rebates for trading in used vehicles for more fuel-efficient vehicles. Some administration officials have dubbed the proposed new program “Cash for Caulkers.”
Although the unemployment rate inched down to 10 percent in November from 10.2 percent in October, more of America’s largest companies will shrink their staffs than will hire in the next six months, according to a new survey by the Business Roundtable.
A Labor Department report on Tuesday showed there were about 6.3 unemployed people, on average, for each job opening in October. Comparable November figures were not yet available.
[8:44 a.m. – 12/8/2009] – Obama To Lay Out Plans To Combat Joblessness
WASHINGTON — President Barack Obama will speak Tuesday on his plans to put Americans back to work amid a double-digit jobless rate, a political poison pill that threatens to diminish or even reverse Democratic congressional majorities in elections next year.
Heading into the speech, with unemployment figures slightly improved in October but still standing at 10 percent, Obama suggested he might turn to unspent money in the massive federal bailout program to fund job growth. The bailout was put in place in the final weeks of George W. Bush’s administration and is credited with preventing a feared meltdown of the American financial system.
The war in Afghanistan and health care reform, meanwhile, have taken the spotlight for much of Obama’s first year in office. However, American voters often vote on pocketbook issues over all others, and the effort to heal the ailing U.S. economy could prove to be the most crucial to his Democratic Party’s fortunes at next year’s congressional elections.
Obama will be looking for something that can dramatically reverse the fortunes of millions of U.S. families that have lost not only jobs, but huge portions of retirement savings and, in many cases, seen their homes taken over in mortgage foreclosures.
He also may be seeking to show his commitment to the problems of everyday Americans before he flies off to Oslo to receive the Nobel peace prize Thursday.
The U.S. economy looks to be on the mend after the deepest downturn since at least World War II, but unemployment and scarce credit for small businesses have left the electorate in a sour mood. That could magnify the historic tendency of U.S. voters to vote against members of Congress of the president’s party in the first national balloting after a change in the White House.
The Democrats currently hold a majority in both chambers of Congress. Obama succeeded Bush on Jan. 20 and will be midway through his term at the time of the November 2010 congressional elections.
There has been particular focus in Congress on ways to use leftover funds in the $700 billion Troubled Asset Relief Program (TARP) to pay for new spending on roads and bridges and to save the jobs of firefighters, teachers and other public employees. Republican leaders are voicing strong opposition to that idea, saying all the money should go toward reducing the federal deficit.
The Obama administration will lose $200 billion less than expected from the federal bailout program, according to a Treasury official who spoke on condition of anonymity because that new projection had not been released. That’s down from the a $341 billion estimate of August. The lower estimate reflected faster repayments by big banks and less spending on some of the rescue programs as the financial sector recovered from its free fall more quickly than anticipated.
“TARP has turned out to be much cheaper than we had expected,” Obama told reporters Monday in a brief question-and-answer period.
Turning a highly unpopular financial rescue programlike TARP into a potentially popular one that creates new jobs has strong political appeal for Obama and Democrats in Congress. Republican critics have depicted such an approach as a backdoor way of enacting a second economic stimulus package
The president’s spokesman, Robert Gibbs, later said his boss was “looking at whether or not using that for legislation (TARP) to create an environment for increased hiring for jobs, whether that would be available.” The funds were initially appropriated in October 2008 when the U.S. financial system appeared on the verge of collapse. It apparently was not clear how much or even whether the leftover money could be diverted to other uses.
“The question is are there selective approaches that are consistent with the original goals of TARP — for example, making sure that small businesses are still getting lending — that would be appropriate in accelerating job growth,” Obama said.
Regardless of whether that money can be applied to invigorating small businesses and boosting employment in both the private sector and among state and local governments, Gibbs was downplaying quick fixes.
“The president is not going to unveil the silver bullet idea which adds all the jobs that are — all the jobs that will be made up by the loss and the economic downturn and then some,” the spokesman said.