While President Obama seeks to jump start the economy with his new $447 billion American Jobs Act legislation emphasizing the urgent need for action, Congress remains fighting the battles of the summer over debt and deficit. The review and approval process will take a strong political bent and the eventual compromise may do little to help a country stuck in economic doldrums.
While you might like most of the Jobs Act components listed below, remember that it’s not funded as some would like you to believe. The measure includes new revenue from such things as closing the loophole for corporate jet depreciation, repealing oil subsidies, limiting tax deductions for higher income earners and changing the tax treatment of carried interest. However, to fully pay for the American Jobs Act the President will call on the Joint Committee to come up with additional deficit reduction necessary to pay for the Act and still meet its deficit target.
There are many things to like about the Jobs Act, but at the same time there are elements that actually could be hindering our recovering. Some key points:
The President’s plan will cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below this threshold.
The plan will expand the payroll tax cut passed last year to cut workers payroll taxes in half in 2012 – providing a $1,500 tax cut to the typical American family, without negatively impacting the Social Security Trust Fund.
The plan will completely eliminate payroll taxes for firms that increase their payroll by adding new workers or increasing the wages of their current worker (the benefit is capped at the first $50 million in payroll increases).
A Returning Heroes hiring tax credit for veterans provides tax credits from $5,600 to $9,600 to encourage the hiring of unemployed veterans.
$35 billion is dedicated to preventing up to 280,000 teacher layoffs, while keeping cops and firefighters on the job.
The plan calls for $25 billion in funds to modernize at least 35,000 public schools across the country, supporting new science labs, internet-ready classrooms and renovations at schools across the country. The projects will create construction jobs in local communities.
The plan includes $50 billion in immediate investments for highways, transit, rail and aviation, helping to modernize an infrastructure that now receives a grade of “D” from the American Society of Civil Engineers. It would hundreds of thousands of construction workers back on the job.
The plan includes investments to improve our airports, support NextGen Air Traffic Modernization efforts, and resources for the TIGER and TIFIA programs, which target competitive dollars to innovative multi-modal infrastructure programs.
A New Project Rebuild is included, which will put people to work rehabilitating homes, businesses and communities, leveraging private capital and scaling land banks and other public-private collaborations.
The proposal extends unemployment insurance to prevent 5 million Americans looking for work from losing their benefits.
Includes work-based reforms to prevent layoffs and give states greater flexibility to use UI funds to best support job-seekers, including:
Work-Sharing: UI for workers whose employers choose work-sharing over layoffs.
A new Bridge to Work program: builds on and improves state programs where those displaced take temporary, voluntary work or pursue on-the-job training.
Innovative entrepreneurship and wage insurance programs: States will be empowered to implement wage insurance to help reemploy older workers and programs that make it easier for unemployed workers to start their own businesses.
The plan adds a $4,000 tax credit to employers for hiring long-term unemployed workers.
It expands job opportunities for low-income youth and adults through a fund for successful approaches for subsidized employment, training programs and summer/year-round jobs for youth.
Note: continuing the unemployment benefits to workers who have been out of work for an extended period of time may have created a even greater dilemma: people won’t take jobs that are available to them. They are used to living off their unemployment (along with the underground, cash work they can do to supplement their income) and finding a job is not as necessary as it might be. Employers are stating time and again that they have jobs, but can’t find people to do them.
Allowing more Americans to refinance their mortgages at today’s 4 percent interest rates can put more than $2,000 a year in a family’s pocket. An economic team will work with Fannie Mae and Freddie Mac, their regulator the FHFA, major lenders and industry leaders to remove the barriers that exist in the current refinancing program (HARP) to help more borrowers benefit from today’s historically low interest rates. This has the potential to not only help these borrowers, but their communities and the American taxpayer, by keeping borrowers in their homes and reducing risk to Fannie Mae and Freddie Mac.
The plan is proposing to extend 100 percent expensing, allowing all firms – large and small – to take an immediate deduction on investments in new plants and equipment.
As part of the Startup America initiative, the administration will work with the SEC to conduct a comprehensive review of securities regulations to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection, including expanding “crowdfunding” opportunities and increasing mini-offerings.
The act calls for Congress to pass comprehensive patent reform, increase guarantees for bonds to help small businesses compete for infrastructure projects and remove burdensome withholding requirements that keep capital out of the hands of job creators.
The President is calling for Congress to pass a National Infrastructure Bank capitalized with $10 billion, in order to leverage private and public capital and to invest in a broad range of infrastructure projects of national and regional significance, without earmarks or traditional political influence.
The plan mentions regulatory reductions to help entrepreneurs and small businesses access capital but doesn’t specifically say how access to Small Business Administration loans would be made easier. Today, getting a government backed loan is a red tape nightmare. Overhauling the bureaucracy of the SBA would be a good start.
Doesn’t Go Far Enough
Some of the items not included in this lengthy jobs act are the high rate of business insurance, the healthcare mandates and costly proposed rules and regulations. Obviously it also doesn’t go near enough to cut out-of-control spending in Washington D.C.
Representative Greg Walden suggests that the economy can be helped by “freezing the tidal wave of proposed federal regulations aimed at job creators until Congress can review and approve them. Federal agencies are moving forward with a mind-boggling 4,257 new regulations that only add to the uncertainty that small business owners already feel. According to the Small Business Administration, regulations cost U.S. employers $1.75 trillion every year.
“Here in Oregon, we’re battling the EPA on numerous rules that threaten to destroy hundreds of jobs in rural Oregon by shutting down the cement plant in Durkee and further regulating boilers all across the state.”
Walden is also urging the approval of three pending trade agreements with Colombia, Panama and South Korea that open new markets to Oregon products and, he says, create up to 250,000 new American jobs.
If you look at the job bills that have passed the House (see box), but are waiting action in the Senate, one has to ask: what the heck is the Senate doing? The prudent thing to do is for congressional representatives to step away from the pending presidential election and get to work in removing obstacles that hinder creating new jobs and approving pending agreements that will add to the economy. pha