President Obama made an impassioned appeal on Thursday night for $447 billion in tax cuts and government spending to boost the nation’s lagging economic recovery, calling on lawmakers to put politics aside and work together to solve the jobs crisis.
Before a joint session of Congress, the president announced a package of tax cuts for employers and employees, spending on schools and roads, aid to states to keep teachers in jobs, and assistance for the unemployed.
In a plainspoken speech, Obama repeatedly insisted that lawmakers approve the plan, which is composed of slightly more tax cuts than new spending. The program includes the repackaging of some previous Obama proposals and the extension of other initiatives, including temporary payroll tax cuts that were enacted last year. But he also called for several significant new steps, such as enlarging that tax cut to provide $1,500 in savings for the average family and offering another tax cut for businesses that hire new employees.
“The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working,” Obama said. “It will provide a jolt to an economy that has stalled and give companies confidence that if they invest and hire, there will be customers for their products and services. You should pass this jobs plan right away.”
The $447 billion cost of the program is more than half that of the stimulus package Congress passed in 2009 and reflects the severity of the nation’s economic challenge. Last week, the government reported that job creation came to a halt in August and that the nation’s unemployment rate was stuck at more than 9 percent, a sign that the economy was at risk of dipping back into recession.
Many economists say the government needs to pump hundreds of billions of dollars into the economy to avoid another downturn. But because virtually all of the measures in Obama’s plan would require congressional approval, few would have an immediate impact. Some economists warned that even if major tenets of the plan were to pass, overcoming deep Republican skepticism, they might do little more than keep the economy growing at a snail’s pace.
“The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy,” Obama said. “The question is whether we can restore some of the fairness and the security that has defined this nation since our beginning.”
Coming during the first chapter of the 2012 presidential campaign and at a moment of peril for the economy, the speech was one of the most pivotal of Obama’s presidency.
“There should be nothing controversial about this piece of legislation,” he told lawmakers. “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans — including many who sit here tonight. And everything in this bill will be paid for. Everything.”
The 32-minute address was an attempt by Obama to break from the acrimonious debate over government spending and deficits that has consumed Washington for much of the year.
He acknowledged that Congress has little appetite for spending that isn’t eventually paid for and pledged to provide a proposal Sept. 19 that would fund his jobs package. That deficit-reduction plan would also include proposals to tame the nation’s debt over the long term by overhauling entitlement programs and personal and corporate income taxes. Although the administration has offered few specifics, the plan is an effort by the president to revive elements of the “grand bargain” on debt reduction that he unsuccessfully tried to negotiate with House Speaker John A. Boehner (R-Ohio) over the summer.
Despite his call for bipartisanship, White House advisers have privately acknowledged that passage of the full package is unlikely. Advisers say Obama will blame Republicans for the jobs crisis if they don’t accept his proposal.
House Republicans have said they’re willing to work with Obama on payroll tax provisions and they have expressed support for some spending on infrastructure. But progress may be slow. Even now, two bills for funding construction at airports and on highways are tied up in interparty fighting in Congress.
The substantial majority of the jobs program would take effect within a year.
“I think it’s a laudable effort to try to boost the economy and the job market over the next 18 months. It’s big enough to turn fiscal policy from being a significant headwind to a modest tailwind,” said Mark Zandi, chief economist at Moody’s Analytics, who has advised both Democrats and Republicans.
But Douglas Holtz-Eakin, a conservative economist, said the plan would make little difference.
“It’s a philosophy that is more of the same — more temporary policies of a stimulus nature on the tax and infrastructure side that are unlikely to be significant enough to move the dial. It’s more political than real,” he said.
The jobs plan is a mix of new ideas and extensions and expansions of existing policies.
Obama is proposing extending and expanding the payroll tax cut, which this year was lowered to 4.2 percent from 6.2 percent. He proposes reducing that further in 2012, to 3.1 percent. The administration hopes the expanded tax cut would put more money into the pockets of middle-class families and spur them to spend at a time when a lack of consumer demand is a major drag on the economic recovery.
Obama will encourage hiring by cutting the payroll taxes that companies pay. Like workers, companies would need to pay only 3.1 percent in payroll taxes, half the 6.2 percent they now pay. In addition, firms that hire more workers or increase salaries would face no payroll taxes. The administration seeks to limit the employer payroll tax cuts so they would not be a boon for big corporations, which are already sitting on $2 trillion in cash that could be used for hiring.
Economists generally regard the payroll tax cuts as important tools to drive the economic recovery but say that the employee and employer parts of the plan have drawbacks.
“If you give somebody a tax cut and they just save it, then there are no jobs created,” said Nigel Gault, chief U.S. economist with IHS Global Insight. “Direct spending is probably better because direct spending directly creates jobs.”
Gault said there is another problem with the employer-side tax cuts. “All these proposals would be for one year. How much extra incentive is that going to give a business?” he said.
Obama is proposing $140 billion in government spending with most of that going toward the building of highways, roads, railways and aviation facilities, as well as modernizing public schools and community colleges.
The president is also responding to the major budget crunch affecting states and localities that has led to mass layoffs of municipal employees, especially teachers. His plan proposes $40 billion in aid to prevent the layoffs of up to 280,000 teachers — as well as police officers and firefighters.
The final part of the plan seeks to extend unemployment insurance benefits for the jobless. This effort, which would cost $62 billion, would overhaul unemployment insurance so that the jobless could continue to receive benefits while in job training. It also would offer tax credits of up to $4,000 for companies that hire people who have been unemployed for more than six months.
The president’s plan would subsidize employment for young workers as well as poor workers.
The plan proposes little for the nation’s housing market, which is one of the biggest drags on the economic recovery. He directed his housing team to work with Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency, to expand a refinance program that allows underwater homeowners to refinance their mortgages at historically low interest rates.
Staff writers David A. Fahrenthold and David Nakamura contributed to this report.