By David Cho and Michael A. Fletcher
Washington Post Staff Writer
Tuesday, December 8, 2009
President Obama plans to outline Tuesday a major push to tackle one of the biggest threats to the economy and to his administration: the soaring unemployment rate.
Ten months after signing into law a $787 billion stimulus package to boost the economy, Obama faces mounting pressures from the nation's yawning $12 trillion debt burden and its growing ranks of jobless Americans.
Obama has set out to tackle both concerns, though he is not expected to detail programs or precise spending figures in his speech at the Brookings Institution. He has suggested that the two issues are linked and hinted that job creation may ultimately command more resources and attention from the administration.
"If we can't grow our economy, then it is going to be that much harder for us to reduce the deficit," Obama said at an administration jobs summit last week. "The single most important thing we could do right now for deficit reduction is to spark strong economic growth."
Administration officials said Monday that Wall Street firms are repaying federal bailout funds faster than expected, a development that is sparking a debate in Washington over what to do with the repayments. Leading House Democrats want to tap those funds for a new jobs bill. Republicans, who want to rein in the nation's growing deficit, oppose the efforts to spend money from the bailout fund, known as the Troubled Assets Relief Program.
Administration officials also have been debating which cause is a higher priority and how to best divert TARP funds to create jobs. Some senior Treasury Department officials have pushed to constrain spending, while others in the administration, such as left-leaning economist Jared Bernstein, have argued for economic stimulus measures.
These aides have been weighing several proposals to help the jobless over the past few months. The president's Economic Recovery Advisory Board has recommended a weatherization program, dubbed "cash for caulkers," that would provide financial incentives for people to make their homes more energy-efficient. Other initiatives under consideration include extending jobless benefits and health-care aid for people out of work, providing a new round of federal aid to states to prevent them from laying off public employees, freeing credit for small businesses, and establishing an infrastructure bank that would allow the federal government to float bonds for large public works projects.
House Speaker Nancy Pelosi (D-Calif.) is crafting a bill that proposes similar measures, and aides are in discussions with the administration over how much to spend on these initiatives and how much can come from TARP.
Administration officials have not disclosed the White House's specific plans. Aides said that Obama's speech would outline some -- but not all -- of his job-creation ideas.
"We don't think there is one silver bullet, one plan, one speech or a singular piece of legislation that alone will solve double-digit unemployment," said Dan Pfeiffer, the White House communications director. "And the president's speech will not represent the totality of our plans for continued economic recovery."
Aside from supporting legislative efforts by Democrats in the House, administration officials are also examining new ways the government could use TARP to spark small-business lending with the aim of creating or saving jobs.
"TARP has turned out to be much cheaper than we had expected, although not cheap," Obama told reporters Monday. "It means that some of that money can be devoted to deficit reduction. And 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?"
Administration officials said they are slashing their estimate of the losses from TARP by about $200 billion. The White House had projected in August that the massive program would lose about $341 billion over the next 10 years. But officials scaled back the estimate after once-shaky Wall Street firms began recovering much more quickly than expected. In addition, several TARP initiatives have been funded with smaller amounts than originally planned.
Since TARP became law in October 2008, about $139 billion of the money has not been allocated to any programs. Banks have paid dividends and interest of about $15 billion and returned aid worth a total of about $71 billion, a Treasury official said Monday. Last week, Bank of America said it would soon repay an additional $45 billion. The official said the Treasury expects a total of $175 billion in repayments from banks by the end of next year.
Politics may ultimately play into the decision of how to use the unspent bailout funds, analysts said. The administration is aware that worries over high unemployment often trump voters' concerns about budget deficits, said analysts and economists in contact with Obama's aides. Democrats on Capitol Hill say the idea of using a Wall Street bailout to help small businesses has a lot of appeal among lawmakers and voters.
"Unemployment is very real. People see it every day," said Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning think tank. "If we are sitting at 10 percent unemployment and we are talking about balancing the budget, that's almost impossible to manage."
Other economists disagree. While limiting the spending of unallocated TARP funds would not significantly affect the nation's budget deficit, it would send a signal to the financial markets that the government will not go on a massive spending binge each time an economic crisis breaks out.
"The big mistake that people are making is treating the returns of TARP money as if it were a special kind of windfall," said Garett Jones, senior scholar at the Mercatus Center at George Mason University. "This should be about setting a pattern for the future and getting in the habit . . . of constraining the deficit."