President Obama unveiled a comprehensive jobs bill that is designed to stimulate the economy and jump start job growth. It is a plan that is comprised of a variety of proposals from across the economic spectrum. It includes features such as tax cuts, spending increases, and financial incentives for employers who hire new workers. The President claims that the bill will all be paid for. I’d like to go over some of the details now.
The Jobs Act is being is being billed by the White House as a roadmap not just for recovery from the economic crisis, but for the revitalization of the American economy. It’s being billed as a plan for the rebuilding of the American Middle Class, and as a plan to make America more competitive globally throughout the 21st Century.
The plan has 5 major components: 1) tax cuts aimed at small businesses, 2) Job creation through infrastructure investment, 3) Aid for America’s currently unemployed, 4) tax cuts for the nation’s work force and 5) that the plan would be fully paid for, and would not add to the deficit. Let’s touch on each of these briefly.
1) tax cuts for small business. The president is proposing an extension of the payroll tax holiday for employers, for another year. His plan would cut in half the tax rate firms pay on their payroll expenses, from 6.2% to 3.1%. To spur job growth, the President is proposing a total refund of payroll taxes paid on added workers, or wage increases for current workers, above last year’s payroll levels. So here the President is trying to encourage job growth and also encourage wage increases for the currently employed.
The plan would extend 100% business expensing through 2012, which would allow businesses to expense the full value of any investments made during tax year 2012. This feature, the administration hopes, will serve to reward firms making investments. The plan also calls on the Obama administration to work with the SEC to try and reduce the regulatory burdens on small business capital formation.
The second element of the President’s jobs plan deals with job growth through infrastructure investment. The President’s plan calls for $50 billion in upgrades to the nation’s infrastructure. The funds would target national infrastructure projects such as modernizing highway and rail systems, as well as upgrading airport infrastructure. It would also include funding for innovative transportation such as high speed rail and next generation air traffic control.
The plan calls for the establishment of a national infrastructure bank. The NIB as it would be known would be an innovative way to fund infrastructure projects that may be hard to get funding for under current Federal programs. The proposal has garnered support from a broad spectrum of supporters including both republican and democratic senators, as well as the unlikely agreement from both the AFL-CIO (the nation’s largest and most powerful union) and the US Chamber of Commerce.
One of the aspects of the infrastructure investment calls for the modernization of at least 35,000 schools across the country, ranging from such upgrades as modernizing science labs and internet ready classrooms, to renovating and repairing existing facilities. The plan would prioritize consideration for rural schools and community colleges. The President hopes that these repairs will help make our school systems more competitive over the next century as well as, in the end, make our schools more cost efficient. The administration notes that schools in America spend over $6 billion a year on energy bills alone. That’s more than the annual budget for computers and textbooks combined.
There would also be $35 billion in aid to prevent the layoffs of teachers, police officers and firefighters across the country. The plan would pledge investment in local municipalities, to help them hire and retain up to 280,000 teachers nationwide, as well as public safety and first responder personnel. The funds would go toward helping to offset state layoffs set to take place due to budget cuts.
The plan would provide incentives to businesses who hire returning veterans, such as tax credits for hires of veterans who have been unemployed for 6 months or longer. There would be an even larger tax credit for hires of wounded veterans who have been unemployed for 6 months or longer.
There would be a $15 billion investment in communities, to repurpose distressed and vacant commercial properties in order to stem property declines. The plan would create partnerships between the federal and local governments, and the private sector, to support the redevelopment of communities. As for jobs, part of this $15 billion investment would go toward creating jobs to help rehabilitate and maintain those distressed properties.
The third element of the plan calls for the creation of new pathways back to work for unemployed Americans. The plan would call for reforms to the unemployment insurance system. With the main goals being to a) facilitate reemployment, b) prevent layoffs from occurring in the first place, and c) help provide greater flexibility to those who are currently unemployed.
The plan would require unemployed workers who are receiving benefits to check in with their local One-Stop Career Centers, where they’ll receive such career counseling services as skills assessments and employability workshops. The President’s plan will provide funding for States to conduct reviews of new claimant’s eligibility for benefits, as well as their job search efforts. The administration notes that these reviews have proven in the past to be an effective way of determining whether claimants are conducting job searches in the most effective way, and to offer suggestions if they’re found not to be.
The plan proposes a few reforms to the existing unemployment benefits system, which are aimed at providing flexibility to both employers and workers. The plan proposes a work-sharing reform aimed at preventing layoffs. The reform would allow workers to receive pro-rated unemployment benefits such as compensation for reduction in hours, from companies that would otherwise have to lay these workers off. The plan notes that work sharing programs currently operate in about 20 states as well other countries such as Germany and Japan. And have had an effect of lowering unemployment rates.
The plan would call for the institution of Bridge-to-Work programs, which allow individuals to take temporary employment assignments to keep their skills sharp, or train for a new job, while still receiving unemployment insurance. This feature would help connect the long term unemployed with potential new employers, and would subsidize the costs of developing newly skilled workers for those companies. This feature has garnered bipartisan support in the past, with even Republican House Speaker Boehner and Majority Leader Cantor showing support for this model.
The plan would institute wage insurance for people who are receiving unemployment benefits. This insurance would compensate individuals who take lower paying jobs instead of remaining unemployed, bridging at least part of the gap between a previous, higher pay scale and a new, lower one. This particular feature would help older workers the most, whom the administration points out face the most difficulty in finding new jobs after being laid off.
Additionally, the plan proposes extending unemployment insurance to unemployed workers who try to create their own jobs by starting their own small businesses. The plan would extend unemployment to those displaced workers willing to strike out on their own and create their own jobs.
The plan would provide employers with a tax credit of up to $4,000 for hiring the long term unemployed. It also proposes legislation to combat discrimination against the unemployed. Recent trends in job listings have had companies specifically stating in their listings, that applicants must be currently employed or employed within the last 6 months. The plan proposes making discrimination like that unlawful.
It would also provide aid for the country’s youth, young people aged 16-24, who the administration notes have an employment rate of only 45%. The plan would provide about $5 billion for both summer and year round job programs for youth.
The fourth element of the President’s plan focuses on ways to help Americans keep more of their income. The plan calls for cutting the payroll tax in half for some 160 million Americans. The administration contends that the tax cut would result in $1,500 in savings for the average family earning $50,000 a year. The savings would be even more for a household earning above that mark.
On this initiative the administration points out two things. 1) That a payroll tax cut is one of the most effective ways to stimulate the economy and help bolster the financial health of middle and working class Americans, and 2) That this proposal has garnered wide support in the past from Republicans and Democrats, Federal officials and State officials.
The President would also like to focus on the housing crisis by helping more Americans refinance their mortgages. The administration points out that interest rates are at historically low levels, and having the President’s economic team work with government and private actors to help remove barriers that exist in the current refinancing programs, would help more Americans take advantage of those rates.
The last element of the President’s plan is that according to the administration it will be completely paid for. That is, it will not add one cent to the deficit. The President proposes paying for the bill basically, by closing tax loopholes and raising some taxes on the wealthiest Americans. The proposed cost structure would include limits on itemized deductions for Americans in the top tax bracket, closing loopholes such as those that exist for the oil and gas industries, and changing depreciation rules for corporate jets.
Those are the elements of the President’s proposal. The plan is very thorough, and I believe makes an effort to find solutions that are thoughtful and impactful. It strikes me as quite a sincere proposal. It takes into account the different segments of the population that are in need of help, and makes every effort to be as responsible to everyone as possible. In short, it is a plan that tries to do the most good for the most people.
One thing that strikes me though, is the nature of the solutions proposed. And whether or not they are bold enough. The administration points out at every turn, that most of the solutions presented in the plan have been supported at one time or another, by Republicans. Several of them, the administration notes, even originated as Republican proposals.
But that is my question. Are the proposals the President is putting forth, being put forth because they are the best, boldest solutions? Are they being put forth because they are most in line with the President’s vision for moving forward? Or are they being put forth, because they are the solutions the Republicans would have the most trouble fighting against, because of their past support for them? Are they the solutions that are best for a game of political chess than for real progress?
There certainly are political realities that have to be taken into account by the President. There would be little nobility, and little progress, in putting forth proposals that have no hope for passing because of little support from the other party.
But the President must put forth solutions that are in line with his vision for the country. Whether they are bold or mundane. And the more authentic and uncalculating his proposals are, the better the response will be. There are some Republicans it seems to me, who have already made up their mind to not support this President no matter what he proposes. Unfortunately, even proposing initiatives that have garnered past support from those same Republicans, doesn’t seem likely to change that.
Now, one cannot argue with the fact however, that some of these proposals were in fact supported by Republican lawmakers in the past. And just because they are now being put forth by this President is not a good enough reason to be against them. If they were right for Americans when they were proposed by Republicans, they should still be right for Americans when they are proposed by this President.
Now, not every feature of the plan needs to be agreed to by Republicans. And the way to pay for the plan should be up for vigorous debate. But they should not reject the entire proposal out of hand either. There needs to be a give and take on the plan, so that the things that can get done get done, and the nation moves forward. If the economy gets better as a result, there will be enough credit to go around. For this President as well as for those in Congress who oppose him.