Financial Regulatory Forum

Obama pushes plans for more job creation

By Reuters Staff
December 8, 2009

By Alister Bull and Patricia Zengerle

WASHINGTON, Dec 8 (Reuters) – President Barack Obama on Tuesday offered modest steps to spur jobs and defended his push to get the U.S. economy growing, amid deep public dismay over double-digit unemployment that has eroded his popularity.

Obama proposed small business tax cuts and energy efficiency rebates — a so-called cash-for-caulkers program — to boost jobs, but gave no details on the cost of the action.

He also called for an extension of unemployment and health insurance benefits for the more than 15 million out-of-work Americans, and stressed that reducing the jobless rate was the best way to tackle the country’s record deficit.

“There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice,” Obama said in a speech.

There was no immediate financial market reaction to his remarks, which had been broadly anticipated.

“He was trying to thread the needle between short-term stimulus and long-term fiscal responsibility, or deficit reduction,” said Ted Gayer, a senior fellow at the Brookings Institution, where Obama spoke.

The White House must placate investors nervous about deficit spending with the political imperative of getting the jobless rate down.

U.S. unemployment dipped slightly to 10 percent last month. But Americans remain anxious about the economy, nudging Obama’s approval ratings to 50 percent or below and potentially dimming his Democratic Party’s prospects in midterm congressional elections next November.

A CNN/Opinion Research Corp. survey released on Tuesday found that American optimism on the economy is fading. Only 34 percent of those polled thought things were going well, down 3 percentage points since November.

“I voted for Obama last year, but I’m not sure I’d vote for the Democrats again next year,” said Alicia Lockheart in Phoenix, Arizona.

She lost her job eight months ago and said she now gets by on food stamps and child support.

ORDINARY AMERICANS

Obama’s speech was the latest effort to show that he is focused on the woes of ordinary Americans, and follows a White House jobs forum and visit last week to Allentown, Pennsylvania, in the industrial heartland.

It is vital for Obama to show Americans he is not getting distracted by other pressing issues like the war in Afghanistan and his effort to overhaul the healthcare system.

His remarks were also on the eve of a trip to Oslo, where Obama will accept the Nobel Peace Prize on Thursday, and a week before he attends a climate change summit in Copenhagen.

An administration official told reporters the White House was considering spending another $50 billion on roads, bridges and other infrastructure over the next year but did not specify where the money would come from. This would add to funds already earmarked to upgrade transportation under a $787 billion government stimulus package Obama signed in February.

House of Representatives Democratic leader Steny Hoyer separately said a jobs package being crafted by U.S. lawmakers could cost up to $150 billion. Other Democrats said they wanted to spend up to $200 billion.

The White House was careful not to put a price tag on its initiatives, saying that it would work with Congress to hammer out proposals and this would shape the eventual costs.

Critics said if the measures were to do any good for jobs, they would not come cheap.

“I can’t think of anything that will solve the economic problems they are facing that won’t cost money,” said Alex Brill, a research fellow at the American Enterprise Institute, a conservative think tank in Washington.

FOCUS ON TARP

Obama is being pressured by Democrats in Congress to consider using some money from a $700 billion bank rescue fund that has been returned to the public purse.

But Obama said some of the money from the Troubled Asset Relief Program, or TARP, which has cost about $200 billion less than previously thought, will be used to pay down the record U.S. budget deficit and the program will be wound down.

The savings will also free up money elsewhere in the budget to shift resources to help create jobs, and an administration official was at pains to stress that strict laws determine how TARP funds themselves can be spent.

Republicans oppose diverting any of this money from deficit reduction and they criticized Obama for steps they suggested would aggravate the country’s record budget shortfall, which hit $1.4 trillion in the financial year that ended Sept. 30.

“It seems that the policy of this administration on job creation is, ‘If you got it, spend it,’” said Representative Mike Pence, the third-ranking House Republican.

Obama, anticipating the Republican line of attack, all but accused the opposition party of hypocrisy for having supported tax cuts and spending increases under his Republican predecessor, George W. Bush, that laid the ground for the federal deficits.

“These budget-busting tax cuts and spending programs were approved by many of the same people who are now waxing political about fiscal responsibility while opposing our efforts to reduce deficits by getting healthcare costs under control,” Obama said. “It’s a sight to see.”

(Additional reporting by Jeff Mason, Andy Sullivan, Steve Holland and Matt Spetalnick in Washington, Tim Gaynor in Phoenix)

(Editing by Xavier Briand) ((For a FACTBOX, click on [ID:nN07156812]))

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