New Job-Creation Plan Targets Small Businesses
December 9, 2009
In an effort to help remedy the nation's unemployment situation, the Obama administration yesterday unveiled a new plan to stimulate job growth, with a focus on supporting small business hiring and funding additional infrastructure projects.
In a speech given at the Brookings Institution yesterday, President Obama announced the details of a new job creation program built largely around the $787 billion economic stimulus package passed earlier this year. Based on the results of a high-profile "job summit," the new plan will target small businesses through credit allowances and implement a new round of infrastructure development.
The unemployment rate unexpectedly fell last month, from 10.2 percent to 10 percent, and the pace of job losses also declined. Unemployment nonetheless remains high and the job market remains unsteady as the number of new positions created was still outweighed by the number of jobs shed.
"[E]ven 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. There are more than 7 million fewer Americans with jobs today than when this recession began. That's a staggering figure," 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."
The new initiative entails wholly eliminating capital gains taxes on small business investment, extending write-offs to encourage business expansion and introducing a tax credit to reward companies for hiring new workers. Much of the effort will be exerted through assistance to the Small Business Administration (SBA), as the government plans to waive fees and increase guarantees for SBA-backed loans.
In addition, as the Troubled Asset Relief Program (TARP) is expected to come in at $200 billion below its initial projected cost, some of the savings will be applied to increase SBA lending to small businesses and to unlock frozen credit that has hindered small and medium-sized business growth, the Washington Post reports.
Other highlights from the new program include an additional investment in infrastructure spending, which will total $50 billion according to the Wall Street Journal, to invest more in the country's roads, bridges, airports, water systems and communication networks while also generating new jobs within the industrial sector. Initiatives for promoting energy efficiency and creating more clean-energy jobs were also announced.
"Small business, infrastructure, clean energy: these are areas in which we can put Americans to work while putting our nation on a sturdier economic footing," the President said.
"Small business groups are happy about the help, but at the same time they worry that a host of Obama's signature policies could more than offset them," Forbes says, citing health care reform, yesterday's move by the Environmental Protection Agency to regulate greenhouse gases under the Clean Air Act and "longstanding concerns" that "lawmakers will counter the expiration of the Bush-era tax cuts with a broad range of tax increases."
Moreover, critics of the new proposal claim it will function like a smaller, less-effective stimulus plan or extend some of the measures of the previous one without addressing more fundamental economic problems. For example, a separate Forbes report says that although a portion of the leftover or returned TARP funds will be applied to paying down the budget deficit, it is unlikely to make a major dent in the trillion-dollar plus shortfall.
The tax credit to reward companies for hiring new employees is also generating debate because it may provide a temporary boost to payrolls without producing sustainable long-term gains in job creation, which typically depends on demand.
"If you're just going out to hire someone just for a tax credit, what kind of job will you put them in that has any longevity to it?" Ralph Braun, chief executive of transportation equipment firm Braun Corp., told the Journal. "You have to have a customer for that employee to serve so I'm confused how a tax credit would stimulate anything."
An Address on Jobs and the Economy by President Barack Obama The Brookings Institution, Dec. 9, 2009
Obama Lays Out Strategy for Jobs by Michael A. Fletcher The Washington Post, Dec. 9, 2009
Obama Pushes New Job Stimulus by Jonathan Weisman The Wall Street Journal, Dec. 9, 2009
Obama's Small Business Conundrum Brian Wingfield Forbes, Dec. 08, 2009
Obama Not Cutting It on the Economy
by Dan Gerstein
Forbes, Dec. 9, 2009