President Obama laid out an ambitious jobs program last week that, if approved by Congress, could complicate a newly launched effort to make long-term spending cuts to trim deficits.
With an unemployment rate persistently hovering around 9 percent and eating away at his popularity, Obama tried to seize the initiative to fix an ailing economy in an address to a joint session of Congress on Sept. 8. The speech drew polite and positive reaction from several quarters — including leading Republicans who have been at odds with the president in recent months — although pressure to restrain federal spending is likely to affect any deal.
Nonetheless, the president struck a bold and determined tone.
“I know there’s been a lot of skepticism about whether the politics of the moment will allow us to pass this jobs plan — or any jobs plan,” Obama said. “But know this: The next election is 14 months away. And the people who sent us here — the people who hired us to work for them — they don’t have the luxury of waiting 14 months.”
The $447 billion package includes several tax-cutting provisions, as well as spending to create jobs for highway and transportation workers, preserve teaching and first-responder jobs, and provide additional help and incentives on behalf of those who have been unemployed for a long time. (Details, p. 1867)
In response, leaders in Congress, which itself has been pummeled in recent polls, suggested that at least some of the president’s suggestions are worth considering.
“The proposals the president outlined tonight merit consideration,” House Speaker John A. Boehner, R-Ohio, said after the speech, adding that he hopes Obama will weigh Republican proposals too, such as the House GOP’s recent drive to limit federal regulations on businesses.
Boehner’s chief lieutenant, Majority Leader Eric Cantor, R-Va., was similarly positive about the president’s speech, saying that “there are certainly goals the president outlined that we can work with him on.” The following day, Obama took his case to the University of Richmond, in Cantor’s district, indicating that the White House plans an aggressive political push.
The largest element of the plan would expand a temporary reduction in the Social Security personal payroll tax, cutting it in half through 2012 at a cost of $175 billion. Some top Republicans, including Cantor, have signaled openness to that idea. In a bid to get companies to start hiring, Obama also proposed cutting the employer part of the Social Security tax, also by half.
On Unemployment, Recovery Lags: Click here to view chart
But as popular — or at least uncritical — as the initial reaction was, the proposal comes just as Congress, through its Joint Select Committee on Deficit Reduction, is preparing to try to trim at least $1.2 trillion in spending over the next 10 years. The panel met for the first time in the hours preceding the president’s address, and while the initial comments from panel members were conciliatory, differences about where to cut and whether to raise new revenue already make their task difficult. (Committee, p. 1868)
Democrats in both chambers have been pushing for the panel to add job creation to its responsibilities, while Republicans have generally been skeptical of that idea or flat-out opposed to it. Texas Republican John Cornyn, chairman of the National Republican Senatorial Committee, said Sept. 7 that if the joint committee comes up with tax changes that promote job growth, he could support them. But he dismissed spending initiatives aimed at job creation. “We’ve been there, done that,” he said.
Some budget hawks say the committee may be able to juggle the two seemingly contradictory economic imperatives: reducing government red ink while giving a boost to job creation. Others say such a melded effort might compromise the panel’s core mission.
And even those who are open to the idea are wary of pursuing short-term economic stimulus proposals that are not financed.
Robert L. Bixby, executive director of the Concord Coalition, was one of several deficit hawks who said the jobs issue is not incompatible with the joint committee’s work, in view of the nation’s tepid recovery from recession — so long as costs are offset.
“If the president has something that looks like it has good potential bang for the buck in the short term and would pay for it over a 10-year period, that would be something that you would want to consider,” Bixby said.
No matter how critical addressing the economy may appear to be, however, some, such as former Comptroller General David M. Walker, founder and chief executive of the Comeback America Initiative, say deficit reduction and jobs programs should be kept separate. The joint committee members “should focus solely on achieving their deficit reduction objectives,” he said, suggesting that to do otherwise would weaken the panel’s budgetary mission.
Steve Bell, senior director of the Economic Policy Project at the Bipartisan Policy Center, said it will be difficult for the joint committee to avoid jobs measures. “In the battle between debt and jobs — those two scary four-letter words — in my 36 years, I’ve never seen jobs lose,” said Bell, who previously served as a top Senate aide. Bell said he would like to see the committee propose a one-year suspension of the payroll tax to encourage economic growth. That was one of the recommendations in a deficit reduction proposal developed last year by Bell’s former boss Pete V. Domenici, a Republican from New Mexico who served as Senate Budget Committee chairman in the 1980s, and former Congressional Budget Office (CBO) Director Alice Rivlin.
Where the Jobs Are — and Aren't: Click here to view chart
Some lawmakers as well as budget observers have urged the committee to go beyond its statutory mandate to seek a minimum of $1.2 trillion in deficit reduction, and the president himself promoted the goal in his speech.
“Tonight, I’m asking you to increase [the $1.2 trillion amount] so that it covers the full cost” of the jobs proposal, Obama told lawmakers. He vowed a “more ambitious plan — a plan that will not only cover the cost of this jobs bill but stabilize our debt in the long run.” As part of his push, Obama said that the Americans with the highest incomes should pay higher taxes and that changes to corporate tax levies might be part of his plan.
Senate Budget Chairman Kent Conrad, D-N.D., said the panel should aim for $4 trillion in deficit reduction, a target he has advocated for months. Conrad wants the committee to include jobs growth stimulus in the form of an infrastructure program.
Some lawmakers, such as Massachusetts Sen. John Kerry, a Democratic member of the joint committee, say it is not possible to curtail the deficit without getting the economy back on track. Kerry said committee members were discussing a two-step deficit reduction process, but he did not provide details.
Many economists agree that the goals of boosting job growth and deficit reduction are not contradictory. “For all of the talk about medium-term and long-term budget reduction packages, none of them are going to work if the economy doesn’t get back on its feet,” said William G. Gale, senior fellow at the Brookings Institution. “And so doing both of those things now would be better than doing either one of them, which is much better than doing neither of those.”
Likewise, Douglas Holtz-Eakin, a former CBO director and adviser to Republican Sen. John McCain’s 2008 presidential bid, said the joint committee should be just as concerned with jobs as with the deficit. “Growth and jobs should be a focus of the committee. But we are past the time when temporary stimulus measures of the kind we have seen in the recovery act and since are appropriate,” Holtz-Eakin said. He said the panel could spur economic growth by tackling a tax overhaul and restructuring Social Security to make it sustainable.
Just after the president’s speech last week, the Senate quickly dispatched a GOP effort to reprise arguments about raising the federal debt limit. In a mainly party-line vote, the chamber rejected, 45-52, a move to consider a joint resolution (S J Res 25) disapproving of a request by Obama for a $900 billion debt limit increase. The disapproval process was established as part of the budget law (PL 112-25) enacted Aug. 2 to avert an unprecedented government default. Under the procedure, the debt limit was increased by $400 billion. An additional $500 billion increase will occur if a disapproval measure does not become law. (Senate vote 130, p. 1880)
Majority Leader Harry Reid, D-Nev., told his colleagues earlier Sept. 8 that if they wanted to move forward on the disapproval resolution, then the chamber could have 10 hours of debate and roll call votes Sept. 9, a Friday that had previously been scheduled for no substantive floor activity. The Reid maneuver served to pressure senators in two ways: to keep them in town for the president’s speech and, if they wanted to get home earlier for the weekend, to vote against the motion to proceed.
Republican David Vitter took Reid to task on his Facebook page for the scheduling.
“So now I’ll miss my own Saints game party at home. Always knew Harry was a Dirty Birds fan!” Vitter wrote, referring to the Atlanta Falcons, an NFL division rival of the New Orleans Saints. Vitter had planned to skip the president’s speech and host a party in his home state to watch the Saints in their season opener. Vitter voted for the motion, but all Democrats except for Ben Nelson of Nebraska voted no, releasing themselves from a Friday session.