13 September 2011, 12:57

Obama urges Congress to pass jobs act

Obama urges Congress to pass jobs act
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Monday President Obama urged Congress to pass his 447-billion-dollar American Jobs Act, legislation he introduced last week, which he says will jump-start the economy and put Americans back to work. A large portion of the plan is comprised of tax cuts for working Americans and small businesses and includes spending initiatives in areas like infrastructure.

Monday President Obama urged Congress to pass his 447-billion-dollar American Jobs Act, legislation he introduced last week, which he says will jump-start the economy and put Americans back to work. A large portion of the plan is comprised of tax cuts for working Americans and small businesses and includes spending initiatives in areas like infrastructure. However, part of the plan, drawing most support from the Republicans, involved tax cuts instead of spending. Jamelle Bouie, a Writing Fellow for The American Prospect magazine in Washington D.C., Scheherazade Rehman, Professor of International Economics at George Washington University, and Thomas Kochan,Professor at the MIT Sloan School of Business, the author of Restoring the American Dream: A Working Families' Agenda for America, talk about the president’s American Jobs Act.

Rob Sachs: Today President Obama is urging Congress to pass his 447-billion-dollar American Jobs Act, legislation he introduced last week, which he says will jump-start the economy and put Americans back to work.

Barack Obama: “This is a bill that is based on ideas from both Democrats and Republicans. And this is the bill that Congress needs to pass. No games. No politics. No delays."

A large portion of the plan is comprised of tax cuts for working Americans and small businesses and includes spending initiatives in areas like infrastructure.

Jessica Jordan: But parts of the plan, drawing the most support from the Republicans, involve tax cuts instead of spending. House Speaker John Boehner said the new jobs proposal merits consideration and he hopes the two parties can work together on the legislation. Joining us on the line to talk about the president’s American Jobs Act is Jamelle Bouie, a Writing Fellow with The American Prospect, as well as Scheherazade Rehman, Professor of International Economics at George Washington University.

Rob Sachs: What do you make of this plan and will it actually create jobs?

Scheherazade Rehman: I think that’s the 400-billion-dollar question, or to put it correctly, the 447-billion-dollar question. Half of the plan, half of the 447 billion dollars is geared to tax cuts for Americans and small businesses and the other portion is spending on infrastructure. And I think that one has to be a little bit careful here. The Republicans are opposing the spending part of the plan and supporting the tax cut part of the plan. Let’s dissects those two very quickly in terms of actual job creation of these two mechanisms. Reducing tax burdens will certainly ease the minds of small businesses. And those are just temporary tax cuts. That’s what we have to remember – those tax cuts are temporary. And they are more likely to serve small-business owners to survive this storm as opposed to thrive, which means they won’t be hiring. Hiring is traditionally tends to play long-term economic goals, and these tax incentives are short-term. So I think this is a little catch here in terms of the incentives, in terms of trying to get business owners, small or large, to hire, because there is a lot of uncertainly about their economic future. The spending portion of the bill, which is geared to infrastructure, most definitely will create jobs. But, unfortunately, that’s the part that the Republicans are objecting to.

Jessica Jordan: Jamelle, do you agree that these incentives the president is proposing for employers in his jobs plan are short-term incentives? And what does that really mean for employers, both large and small?

Jamelle Bouie: Those are definitely short-term incentives, and I’m sure that small businesses, especially with long-term perspectives, are not satisfied with the current decisions. That said, I actually think, as far as tax cuts are concerned, it’s probably the ones that are more focused on the expanded payroll tax cuts. I’ll particularly point out that presumably there will be businesses here and there, perhaps many businesses that will use that extra money to invest in hiring. But more significant is the fact that 447 billion dollars in payroll tax cuts is spent on insurance – it’s money that will go directly to the hands of working people, of people that are most likely to depend on that money. And I think that, more so, more than tax cuts, will generate the demand that is necessary to speed up economic growth. And to have more people purchasing things we need to hire more people, and, to this effect, will become much more relevant.

Rob Sachs: We’ve just looked at this debate over the debt ceiling and over how to conquer the national debt. The Republicans really stood firm and said we are not going to vote for anything that involves increasing taxes and increasing revenues. And they took it right to the eleventh hour in terms of possibly defaulting on the debt. And it looks like here they are saying: we are not going to do anything that involves putting out money to stimulate the economy and maybe its infrastructure things here and there. Is there any inkling that there could be any compromise, or is it that here we are basically offered: “take it or leave it”?

Jamelle Bouie:This morning there were reports that an unnamed senior House Republican aide asked why do we appear ready to hand the president a win when he is on the ropes right now? I think that’s a way to look at the current American politics. If you pass that bill it’ll be a major victory and increase Obama’s reelection chances. For the Republicans, interested in winning back the White House, which I would presume is what all Republicans want, there is no reason you would do it, even if you believe that the American Jobs Act will create jobs and help the economy, it’s still, if you are thinking politically, improved economy does mean a victory for the president in the close election. A half percentage point off GDP during the election year means the difference between the victory and defeat. So I wouldn’t expect any chances for a compromise. And I should say I don’t think Republicans are intentionally sabotaging the economy. I think many Republicans sincerely believe that increased deficit spending is the wrong prognosis for the economy. And that reasoning is also “helped along” by the fact that opposing this sort of spending lies within what they wanted.

Jessica Jordan:Once thing we do know about the plan is that the president is saying it will pay for itself: “This bill cuts taxes for small businesses that hire new employees and for small businesses that raise salaries for current employees. It cuts your payroll tax in half and all businesses can write off investments they make this year and next year. And the American Jobs Act is not going to add to the debt. It’s fully paid for. I want to repeat that. It is fully paid for. It’s not going to add a dime to the deficit.” The Obama administration came out saying that they have a plan for actually paying for this bill, raising 447 billion dollars. But one of the primary pieces will be to limit itemized reductions for individuals making more than $200,000 a year. Is that the way to go and do you think that will be looked upon favourably by Republicans?

Scheherazade Rehman:I think it’s a step in the right direction. By no means is that going to solve the debt problem. The debt problem needs much more serious restructuring in terms of cutting spending and, more importantly, is complete restructuring of our tax code and we know that’s down the road. I want to respond to one comment that was made previously about the Republicans not negotiating at the table still today. I think they are probably more amenable now because we had a summer of very toxic negotiations over the nation’s debt ceiling. We’ve triggered what is an unprecedented downgrade in the American credit rating and the Republicans took a hit in terms of the public relations for this. And I think that they need to redeem themselves, they know it, or they will suffer the consequences of this debt ceiling debacle and other things down in the vote box next year. So I think that, if there is ever a chance for compromise, it’s now. Boehner and Cantor both see that some redemption has to happen for the Republican Party at this point. So I think you have to be very careful: this is not going to be a good economic year for us. I can’t see how you can jump-start an economy that has a 13-trillion-dollar debt with a 447-billion-dollar jobs plan. We had original stimulus of $700 billion and we know that was not enough to stimulate the jobs or the economy. And so it begs the question in a very flat economy: if you can’t jump-start it how can you jump-start jobs? And the Republicans have to ask themselves: they are throwing away more money after a plan that is simply not enough to jump start this economy.

Rob Sachs: Are you hoping there will be more stimuli in this package or are you thinking this is just a cursory amount?

Scheherazade Rehman:Absolutely. I would have hoped that this bill would be a lot larger and obviously paying for itself in various ways. The problem is that, in the short run, we have to spend money. There is no other way to jump-start growth in this economy. In the long run, clearly, the budget has to be cut, and a tax has to be rewritten, and spending has to be cut.

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