Obama's fresh US$150bil plan to reinvigorate economy

  • Business
  • Wednesday, 09 Dec 2009

WASHINGTON: President Barack Obama set out fresh plans Tuesday to reinvigorate the U.S. economy, focusing on incentives to small businesses and hiring to bring down what he called the "staggering" 10 percent unemployment rate.

Obama called for perhaps US$150 billion or more in new federal spending, using money left over from a financial rescue plan - the Troubled Asset Relief Program - toward the small business community for investment and hiring.

He said additional funds also would be sought from other sources for infrastructure improvements and rebates to consumers who make their homes more energy efficient.

Obama has stepped up attention on America's high unemployment rate after spending much of the last few months focused mostly on health care and the war in Afghanistan.

The state of the economy -- and the jobless rate in particular -- could be the key issue in determining whether Democrats preserve their majorities in both chambers of Congress in next November's midterm elections.

Obama hopes his revamped plan will dramatically improve the fortunes of millions of U.S. families that have lost not only jobs, but also huge portions of retirement savings and, in many cases, seen their homes taken over in mortgage foreclosures.

"Our work is far from done. For 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," the president said.

"There are more than seven million fewer Americans with jobs today than when this recession began. That's a staggering figure... ."

The U.S. economy appears to be on the mend after the deepest downturn since at least World War II, but unemployment - which was slightly improved in November but still standing at 10 percent - and scarce credit for small businesses have left the electorate in a sour mood.

That could magnify the historic tendency of U.S. voters to cast their ballot against members of Congress of the president's party in the first national balloting after a change in the White House.

And, hoping to blunt the political fears of fellow Democrats and the deep economic anxiety of the U.S. public, Obama sounded a call to optimism that harkened back to President Franklin D. Roosevelt's leadership during the Great Depression:

"These have been a tough two years. And there will no doubt be difficult months ahead," Obama said.

"But the storms of the past are receding. The skies are brightening. And the horizon is beckoning once more."

And looking toward next year's vote, Obama recounted the history of what his administration has done to prevent a repeat of the decade-long depression of the 1930s, pointedly criticizing Republicans for mismanaging the economy.

"We were forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it over to others to solve," he said.

Obama noted that that new accounting showed the unpopular $700 billion TARP program, designed to bailout the American financial sector would end up costing the government $200 billion less than anticipated.

That money, he said, should be poured not only into reducing the national deficit but for giving small businesses the incentives to invest and restart hiring.

The Republican opposition in Congress has said the money should all go for deficit reduction.

Obama did not outline specifics, but senior administration officials part of the president's package would alter tax accounting temporarily to allow small business to report investments of up to $250,000 as an expense, thus reducing reported income and taxes on the profits.

Obama also proposed elimination of fees on government-originated loans to small businesses coupled with federal guarantees of those loans through the end of next year.

On infrastructure measures focused on pushing money still not spent in the separate $787 billion Recovery Act into projects more quickly.

The clean energy component would be designed to set up a rebate system akin the highly popular cash-for-clunkers program to encourage homeowners to invest in energy efficiency.

With the tough election year coming up, Obama and congressional Democrats are trying to turn the highly unpopular TARP financial rescue program into one that creates new jobs has strong political appeal.

Republican critics have depicted such an approach as a backdoor way of enacting a second economic stimulus package.

Some lawmakers put the total cost of the new proposals at $200 billion or more.

Estimates of a potential jobs bill range from $75 billion to $150 billion, said Rep. Steny Hoyer, the No. 2 Democrat in the House of Representatives.

Those billions would be on top of money for separate legislation for safety-net initiatives such as extending unemployment benefits for the long-term jobless and providing them health insurance subsidies.

White House economic adviser Jared Bernstein said the White House is considering spending $50 billion on infrastructure projects alone such as roads and bridges and water projects. - AP

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