Washington scrambles to create jobs

By Tami Luhby, senior writer

NEW YORK (CNNMoney.com) -- Boosting employment tops the to-do list in Washington this year.

In his State of the Union address Wednesday, President Obama said his administration will focus on accelerating hiring in the short run and, in the longer term, on fostering sustainable jobs that grow wages.

"Jobs must be our No. 1 focus in 2010, and that is why I am calling for a new jobs bill tonight," said Obama, which evoked applause from both sides of the political aisle. "People are out of work. They are hurting. They need our help. I want a jobs bill on my desk without delay. "

Lawmakers are expected to quickly turn the president's initiatives into legislation.

Senators Byron Dorgan, D-N.D., and Dick Durbin, D-Ill., are working on a proposal to be introduced Thursday. The package will target four areas: Small businesses, infrastructure, clean energy, and assistance to states to keep teachers, firefighters and other public employees on the job, according to a Democratic aide.

Meanwhile, Senators Charles Schumer, D-N.Y., and Orrin Hatch, R-Utah, unveiled their plans to boost hiring in an op-ed piece Wednesday. Any company that brings on a worker who has been unemployed for at least two months will not have to pay the 6.2% Social Security payroll tax on that employee for the rest of the year, according to the plan. Employers would receive an additional $1,000 credit on its 2011 taxes for keeping the workers on the payroll continuously for a year.

"Our two-pronged approach would be a far more effective use of taxpayer dollars than other proposals under discussion, all of which could cost many times more with very little guaranteed improvement in unemployment," the senators wrote.

The White House's plans

The administration's effort will center on tax incentives for small businesses, traditionally the engine of job creation, the president said in his speech. Obama advocated cutting levies on small businesses so they can invest more in their firms, hire more workers and raise the wages of existing employees. He also wants to use $30 billion of leftover bank bailout funds to encourage community banks to lend more to small companies.

In an effort to help all businesses, Obama said he will support extending the bonus depreciation tax incentive for companies that purchase equipment, allowing them to deduct half the cost in the first year.

The president also highlighted one of his favored job creation methods: investing in infrastructure. He believes pouring more money into road, bridge, rail and water projects is a good way to build jobs quickly and improve the economy in the long term.

"We can put Americans to work today building the infrastructure of tomorrow," Obama said. On Thursday, he plans to visit Tampa, where workers will soon break ground on a high-speed rail project. "There are projects like that all across this country that will create jobs and help our nation move goods, services, and information."

Obama also emphasized the need to invest more in energy projects, specifically encouraging families to retrofit their homes with energy-saving measures. This creates jobs and saves families money, he said. He also called for building new nuclear power plants, investing in biofuels and clean coal technology, and passing an energy and climate bill.

The president highlighted the achievements of his $862 billion stimulus package, which he said boosted employment by 2 million jobs -- including 300,000 in education and 200,000 in construction and clean energy -- since it was enacted nearly a year ago. It is on track to support another 1.5 million positions by year's end, he said.

Other economic items on Obama's agenda that could contribute to job growth include doubling exports in the next five years and passing reform measures that will foster a strong, healthy financial market.

Obama praised the House for passing a jobs bill last month and urged the Senate to swiftly do the same.

Shifting focus

The White House renewed the focus on creating jobs last month, bringing together more than 100 business owners, economists and other experts for a brainstorming session with administration officials.

Soon after, the House passed a $154 billion jobs bill that would funnel more funds to infrastructure and to states. It would also extend the deadline to file for unemployment insurance and the federal COBRA subsidy through June. They currently are set to expire at the end of next month.

The administration had hoped the Senate would quickly pass the House measure, but the landscape changed after the GOP secured their 41st seat in the Senate after winning a special election in Massachusetts last week. Now, it's likely any jobs package will have to include measures that will appeal to both Democrats and Republicans.

Unemployment, which stands at 10%, has emerged as a key indicator of the success of the Obama administration's efforts to prop up the economy after the worst downturn since the Great Depression.

White House officials credit the $862 billion stimulus package passed last February with helping pull the nation out of the recession.

But Republicans point to the high unemployment rate as proof that the administration's measures are not working. Instead, they have proposed their own job creation bill, which includes lowering payroll taxes on employers and halting regulations that impose new burdens on businesses.

"Good government policy should spur economic growth, and strengthen the private sector's ability to create new jobs," said Bob McDonnell, the newly elected Virginia governor who gave the Republican response. "We must enact policies that promote entrepreneurship and innovation, so America can better compete with the world. What government should not do is pile on more taxation, regulation, and litigation that kill jobs and hurt the middle class." To top of page

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