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Obama proposes $477 American Jobs Act

September 15th, 2011

Image from Associated Press

With lingering concerns about the economy, President Obama made a blunt call to Congress to pass a $477 billion dollar job promotion plan last Thursday night.

There is a clear need for economic change.

Nationwide, unemployment stayed at 9.1 percent in August as employers did not create any new jobs.

With elections only 14 months away, there are both economic and political pressures involved.

The plan includes cutting payroll taxes in half for 98 percent of businesses.

It also provides tax credits of $5,600 to $9,600 to businesses that hire veterans and advocates measures designed to prevent up to 280,000 teacher layoffs.

The proposal also includes plans to modernize at least 35,000 public schools with new infrastructure and renovations, primarily in rural and urban areas.

Obama also proposes improving unemployment insurance by taking measures that might stop more than five million Americans from losing their benefits.

Obama wants to propose a $4,000 tax credit for businesses hiring previously long-term employed Americans. The plan also includes measures to cut payroll taxes in half for over 160 million workers.

Entitled The American Jobs Act,  Obama claimed that nothing should be “controversial about this piece of legislation. 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.”

Obama seemed optimistic about the bill’s prospect, an optimism shared by House Majority Leader Eric Cantor (R-Va.), who said he “heard plenty in the president’s speech last night where I think that there is a lot of room for commonality, and we can get something done quickly.”

However, as House Speaker John Boehner (R-Ohio) indicated, Republican support for some elements of the proposal will not necessarily translate into support for the total package.

Figure from The Wall Street Journal

Boehner and other Republican leaders sent a letter to Obama expressing concern about passing a single bill.

In the letter, Republicans said, “As we are certain your advisers have told you, not all your ideas should be packaged in a single legislative vehicle.”

One example comes from House Republican Mike Simpson (R- Idaho), who is concerned about the school modernization elements. He said, “All of the sudden the federal government takes over building schools? I don’t know if that’s a challenge we want to take on.”

Other congressmen are even less optimistic about the plan. “It simply doubles down on the same failed policies that he has pursued before. And, I don’t expect they will be any more successful than they were the first time around,” claimed Republican Senator Orrin Hatch (Utah).  “I fear what he’s putting forward owes more to political positioning than sound economics and tax policy.”

However, according to John Carroll professor Larry Schwab, “Some ideas are so politically popular that they will have to pass. Everyone wants returning veterans to find jobs.”

Schwab also said many Republicans will oppose parts of the bill because of the spending.

But if Obama wants any chance of re-election he will have to get the economy working again soon.

Unless there is some unforseen dramatic change in foreign affairs, the economy will be the whole ball game, said Schwab.

Despite some initial agreement, the success of the bill became more bleak after Obama released his payment plan for the bill on Monday.

In regards to the financing of the bill, $405 billion would come from repealing itemized deductions for the rich and $62 billion from cutting out tax cuts for investment fund managers, corporate–jet owners, and oil and gas companies.

These would go into effect in 2013, and would be active  over the next 10 years.

Upon hearing Obama’s funding proposal, Michael Steele, Boehner’s spokesman, told The Wall Street Journal, “It would be fair to say this tax increase on job creators is the kind of proposal both parties have opposed in the past.”

The proposal of The American Jobs Act is timely considering Obama’s approval rating is at 40 percent according to the most recent Gallup polls.

With the Republican primary debates heating up and the 2012 presidential campaigns underway, Obama’s chances for re-election may be tied to the success of this policy.