|10-07-2009, 04:15 AM||#1|
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Obama Aides Act to Fix Safety Net
Obama Aides Act to Fix Safety Net
WASHINGTON — With unemployment expected to rise well into next year even as the economy slowly recovers, the Obama administration and Democratic leaders in Congress are discussing extending several safety net programs as well as proposing new tax incentives for businesses to renew hiring.
In Detroit last month, job seekers filled out applications for positions at a new bar and restaurant. Unemployment remains high.
President Obama’s economic team discussed a wide range of ideas at a meeting on Monday, following his Saturday radio address in which he said it would “explore additional options to promote job creation.” But officials emphasized that a decision was still far off and that in any event the effort would not add up to a second economic stimulus package, only an extension of the first.
“We’re thinking through all additional potential strategies for accelerating job creation,” said Mr. Obama’s senior adviser, David Axelrod.
The latest deliberations, and Mr. Obama’s added phrase in Saturday’s radio address, occurred against a backdrop of worsening joblessness. While some economists and policy makers say the recession is easing, a report on Friday showed unemployment in September inched up to 9.8 percent, a 26-year high.
Among the options for additional steps is some variation on Mr. Obama’s proposal during the stimulus debate to give employers a $3,000 tax credit for each new hire, which Congress rejected last winter partly out of concern that businesses would manipulate their payrolls to claim the credit. Another option would allow more businesses to deduct their net operating losses going back five years instead of the usual two; Congress limited the break to small businesses as part of the economic stimulus law.
The search for further remedies is part of a two-track effort in the White House and Congress. Democrats are also considering plans to continue through 2010 the extra unemployment assistance and health benefits available to people who are out of work for long periods. Also likely to be retained, some officials say, is a popular $8,000 tax credit for first-time homebuyers that was included in the $787 billion stimulus law and has helped rouse a housing market that nonetheless remains shaky.
The unemployment and health benefits are otherwise due to expire at the end of this year, and the homebuyer’s credit at the end of November. Extending the unemployment and health benefits alone through next year could cost up to $100 billion. Additional measures would raise the price at a time when the White House and Congress are confronting growing pressure to avoid adding to already high deficits.
Yet Democrats are more anxious about stemming the loss of jobs and creating new ones.
With economists forecasting that unemployment could hit 10 percent before job growth returns, perhaps in mid-2010, Democrats face month after month of bad news on the jobs front in a midterm election year, when a president’s party typically loses Congressional seats. Charlie Cook, a longtime nonpartisan election analyst, said last week that he was raising the odds of Democrats losing their House majority to about 50-50.
Even a modest stimulus package that mostly maintains current programs would ignite a debate about the effectiveness of the original $787 billion plan, stoking Republicans’ arguments that the package of spending and tax cuts was a waste of taxpayers’ money. While most economists agree with Democrats that job losses would have been worse without the stimulus, Mr. Obama remains on the defensive for his initial promise that it would save or create 3.5 million jobs.
Despite the bad jobs figures, Democrats in Congress generally agree with the White House that a second full-blown stimulus package is not needed, barring an economic relapse.
The $787 billion recovery plan was intended to stretch over two years, partly in anticipation that the downturn would be prolonged. About 60 percent of the total is yet to be released, and much of that will go toward projects like road-building, other construction and research that save or create jobs.
Mark Zandi, an economist who occasionally advises Congressional Democratic leaders, and before that advised Senator John McCain, Republican of Arizona, in his two presidential campaigns, has projected an additional 750,000 job losses through next March, which would bring total losses to almost 9 million since December 2007. Mr. Zandi predicted that the unemployment rate would peak at 10.5 percent next June.
It is “very important,” he said, for the government to “continue to provide significant support to the economy through next year.” At the least, he said, that should include extending the homebuyer’s credit, various business tax breaks and mortgage relief programs.
But the demands on the federal government are likely to expand beyond that in the coming year.
Continued job losses only add to the plight of the states, which already are reeling from reduced tax revenues and increased demand for social services. Most states were able to balance their budgets this year, as they are required to do, only with billions of dollars in infusions from Washington. And the fiscal outlook for the states is now worse than a year ago, according to agencies that monitor them.
As the White House and Congress proceed with discussions of what to do next, Congress is working to stretch unemployment compensation for people who have been out of work for up to 79 weeks, or a year and a half. The House passed a bill for 13 additional weeks of aid for jobless workers in the 27 states with unemployment rates of 8.5 percent or higher, but some senators want an extra 12 weeks of benefits available in all states.
With the safety net programs due to expire after Dec. 31, the White House and Congress have contemplated for some time that they would probably have to renew them.
Besides the extended unemployment and food stamp benefits, they would keep alive a subsidy for people who lose their jobs and opt for the Cobra program, which lets them buy continued health care coverage under their former employers’ insurance plans. The subsidy covers up to 65 percent of the insurance premiums for most workers.
As Democrats have found, aiding those who have lost their jobs is simpler than preventing more layoffs and creating new jobs.
“There may not be anything we can do,” said a Democratic Congressional leadership aide who spoke on condition of anonymity because he was not authorized to discuss the matter. “Under any circumstances, it’s going to take a while for jobs to recover.”