Obama jobs plan: Bailout for Main Street
President wants to extend tax breaks for small business, invest in infrastructure and give rebates to consumers who make homes energy efficient.
WASHINGTON (CNNMoney.com) -- President Obama on Tuesday outlined a broad new proposal to try to spur jobs and give more help to Main Street consumers and businesses.
In a speech at the Brookings Institution, Obama said he wants to give small businesses tax breaks for new hires and equipment purchases. He also wants to expand American Recovery and Reinvestment Act programs and spend some $50 billion more on roads, bridges, aviation and water projects.
Finally, Obama would offer consumers rebates for retro-fitting their homes to consume less energy.
"Even though we have reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who have been swept up in the flood," Obama said. "And it speaks to an urgent need to accelerate job growth in the short term while laying a new foundation for lasting economic growth."
However most of what Obama proposed is not new and is an extension of existing stimulus programs. Also, Obama did not give a price tag for his proposals but pointed out that there is more wiggle room in the federal budget since the 2008 financial system bailout program will cost $200 billion less than expected.
"This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street," Obama said.
Lawmakers on Capitol Hill have been talking for the past several weeks about tapping the $700 billion Troubled Asset Relief Program to help Main Street.
Under the law, the administration can continue its TARP authority in 2010 without seeking congressional approval. Treasury officials have signaled they plan to extend it.
And while some lawmakers have talked about using TARP money for stimulus, top White House officials said Tuesday that they don't have the authority to directly use funds set aside for TARP on infrastructure projects.
Instead, they argued that the government would have to borrow less for new stimulus plans, because it will spend less on TARP than originally anticipated.
"Tim Geithner can't spend TARP dollars on highways," a White House official said in a media briefing. "What we're talking about is the fiscal room we have in terms of the overall borrowing need for the country. There's now more space to do things on jobs."
However, it's not an apples-for-apples trade, budget experts say. The administration's projected $200 billion figure is an estimate over time, not new dollars available today.
Congress could decide, for example, to use some of the $73 billion that banks have returned to the government on new spending programs, since those are actual dollars. But lawmakers don't have a new pot of $200 billion in savings to work with.
"If, magically, what you've done thus far costs less than you anticipated, that's good news for the American taxpayer," said Donald B. Marron, an acting director of the Congressional Budget Office during the last Bush Administration. "But that, by itself, doesn't free up money you can deploy."
On Capitol Hill, Democratic House leaders have been discussing spending as much as $70 billion to pay for infrastructure projects to create jobs, according to senior Democratic House aides.
Republicans have blasted the idea of tapping any unexpected fiscal headroom from TARP for job creation. Instead, they say that any gains on government investments in banks or unexpected savings should be used to pay down the skyrocketing deficit.
"This makes me so angry. I was there. I know all about TARP," House Minority Leader Rep. John Boehner, R-Ohio, said on Tuesday. "First, it was never intended that all this money would ever have to be spent. But any money that wasn't spent was to go to the deficit. And the idea of taking this money and spending it is repulsive."
Three top Senate Republicans held a press conference criticizing the president's proposal and accusing the administration of turning TARP into another stimulus package.
"It was the intent of the law when it passed that any funds that were paid back in should go back in the Treasury - should be used to pay down the debt," said Sen. John Thune, R-S.D. "They shouldn't be recycled, re-spent, reused, allowing TARP to become what is essentially a political slush fund to be used for whatever the administration decides to use it for."
During his speech, Obama stressed that it was equally critical to both reduce debts and spend more to create jobs. He insisted that both could be done at the same time.
"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.
Here's how Obama's proposals break down:
Small Business: Obama would eliminate for one year capital gains taxes on new investments in the stock of small businesses. The details are not clear but the plan builds on an existing, less generous, Recovery Act tax break.
Obama would also extend through 2010 tax breaks for certain small business capital investments up to $250,000. And small businesses would get a tax break for hiring new employees. He would also eliminate fees for loans made through the Small Business Administration. Those fees had been waived for most of this year, but the funding ran out two weeks ago.
Business: All companies would for another year pay fewer taxes on capital expenditures - a temporary benefit that kicked in with the Recovery Act.
Infrastructure: Obama would spend approximately $50 billion on infrastructure projects for roads, bridges, airports and ports. The House has talked about spending $70 billion on a similar initiative.
Energy: He would offer rebates to consumers who retrofit their homes, making changes such as caulking or replacing windows with more energy efficient products. Obama would also expand a stimulus program that gives greater borrowing power to private companies that create manufacturing jobs producing machines, such as wind turbines, that cut down on greenhouse gasses.
Safety net: Obama said he wants Congress to extend unemployment benefits and offer more help for the jobless paying for Cobra health insurance. He wants to give seniors and veterans $250 payments and also give money to states to prevent layoffs of teachers, police officers and firefighters.