New tax breaks for business on table

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By Anne E. Kornblut and Lori Montgomery
Washington Post Staff Writers
Friday, September 3, 2010

With just two months until the November elections, the White House is seriously weighing a package of business tax breaks - potentially worth hundreds of billions of dollars - to spur hiring and combat Republican charges that Democratic tax policies hurt small businesses, according to people with knowledge of the deliberations.

Among the options under consideration are a temporary payroll-tax holiday and a permanent extension of the now-expired research-and-development tax credit, which rewards companies that conduct research into new technologies within the United States.

Administration officials have struggled to develop new economic policies and an effective message to blunt expected Republican gains in Congress and defuse complaints from Democrats that President Obama is fumbling the issue most important to voters. Following Obama's vacation and focus on foreign policy in recent weeks, White House advisers have arranged a series of economic events for the president next week, including two trips to swing states and a news conference.

"We'll continue to do everything we can, understanding that recovery will require persistent effort. There are no silver bullets," senior Obama adviser David Axelrod said in an interview Thursday. "At the same time, we have to make clear our ideas and theirs, and the fact that the Washington Republicans, having helped create this recession, have attempted to block our every effort to deal with it."

But with the unemployment rate expected to rise again in jobs numbers due out Friday, panic is setting in among many Democratic candidates who fear it is too late for Obama to convince voters that he understands the depth of the nation's economic woes and can fix them.

White House officials cautioned that no tax cuts have been settled on and that a more limited measure could emerge. Policy staffers are debating a range of options. For example, a payroll-tax holiday - a top priority of many business groups - could be applied only to new hires or extended to current employees. It could be limited to small businesses or extended to larger firms.

Timing problems

If administration officials can agree on a policy path, it is not clear that it would be approved in the current environment on Capitol Hill. And even if Congress did approve new measures to bolster the economy, they would probably come too late to make a difference in the lives of recession-weary voters before the midterms.

"Substantively, there is nothing they could do between now and Election Day that would have any measurable effect on the economy. Nothing," said the Brookings Institution's William Galston, who was a domestic-policy adviser to President Bill Clinton.

Over the past year, with the jobless rate hovering near 10 percent, Obama has repeatedly promised to shift from other matters to the economy. He did so again this week, saying during his Oval Office address on Iraq that he would turn to the economy "in the days to come."

But some Democratic candidates and political operatives feel the president is not doing enough to help them keep control of Congress, privately expressing frustration that Obama has recently emphasized issues other than the economy.

"We did the mosque, Katrina, Iraq, and now Middle East peace?" said a Democratic strategist who works closely with multiple candidates and spoke on the condition of anonymity. "And in between you redo the Oval Office? It has become a joke."

Many economists say Obama's policies have been reasonably effective at pulling the nation back from recession. Last year's stimulus package - now estimated to cost $814 billion - protected as many as 3.3 million jobs, according the independent Congressional Budget Office.


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