Obama to issue new proposals on job creation, debt reduction

By Zachary A. Goldfarb and Peter Wallsten, Published : August 17

ALPHA, Ill. — President Obama has decided to press Congress for a new round of stimulus spending and tax cuts as he seeks to address the great domestic policy quandary of his tenure: how to spur job growth in an age of austerity.

Obama will lay out a series of ideas in a major address right after Labor Day, when he and
a largely antagonistic Congress will return from vacation, the White House said Wednesday.

The president is thinking about proposing tax cuts for companies that hire workers, new spending for roads and construction, and other measures that would target the long-term unemployed, according to administration officials and other people familiar with the matter. Some ideas, such as providing mortgage relief for struggling homeowners, could come through executive action.

Obama also plans to announce a major push for new deficit reduction, urging the special congressional committee formed in the debt-ceiling deal this month to identify even more savings than the $1.5 trillion it has been tasked with finding.

In packaging the two, he will make the case that short-term spending can lead to long-term savings.

“We can’t afford to just do one or the other. We’ve got to do both,” Obama said Wednesday in this farming town in northwestern Illinois, population 671, the last stop of his three-day bus tour through the rural Midwest.

He did not reveal details. But his remarks and additional comments from advisers and others familiar with the White House’s planning suggest that he will pressure Republican lawmakers this fall to back off their objections to additional spending in the short term. Many Democrats have expressed frustration that the White House allowed Republicans during the debt-ceiling negotiations to focus solely on deficit reduction while not pushing harder for steps that would energize the economy.

“When Congress gets back in September, my basic argument to them is this: We should not have to choose between getting our fiscal house in order and jobs and growth,” Obama said in an earlier stop Wednesday in Atkinson, Ill.

The president’s decision to lay out a jobs plan — announced on the final day of his bus tour — follows months of criticism from lawmakers in both parties that the White House has not addressed the country’s stubbornly high unemployment rate.

The issue is consistently a top concern for voters, and with 15 months to go before Obama stands for reelection, polls show deep disappointment in his handling of the economy.

A Gallup poll released Wednesday showed that just 26 percent of Americans approve of the president’s handling of the economy. More than a third, according to a Washington Post-ABC News survey last month, said he has made economic matters worse.

Deficit reduction

Compounding the White House’s challenge is the fact that many voters, particularly independents, who have been turning their backs on the president in recent surveys, want to see serious deficit reduction — a goal that might seem at odds with any program to boost spending.

Republican lawmakers signaled Wednesday that they are unlikely to embrace any new spending.

“We must put an end to the policy uncertainty constantly being driven by this administration,” House Majority Leader Eric Cantor (Va.) wrote in a memo to colleagues. “That means stopping the discussions of new stimulus spending with money that we simply do not have.”

The question hanging over Obama’s economic speech next month is how far he will go beyond the ideas he has already proposed, including the renewal of a payroll tax cut and the passage of three free-trade bills.

White House officials have largely reached a consensus that the president should propose more steps to help the economy, but that the American public doesn’t have an appetite for heavy federal spending and that Congress is unlikely to a pass anything new of significant ambition.

At a corn seed factory on Wednesday in Atkinson, Obama touched on an idea that could be under consideration: an overhaul of unemployment insurance that would make the program more flexible, pay for job training and pay companies to hire jobless workers. The federal government in the past has tried, with mixed success, to spur hiring through a special tax cut.

A wide range of independent economists agree that the best prescription for the ailing recovery is pairing efforts to boost the economy now, which would include spending increases and tax cuts, with efforts to tame the national debt over the coming decade, through spending cuts and tax increases when the economy is in better shape.

White House allies, many of whom have pushed Obama in recent weeks to focus on job creation, said Wednesday that the president faces a stiff political test in explaining to voters the merits of short-term spending and long-term reduction of the federal deficit.

“That’s not that easy from a public relations perspective, but the imperative is to change the debate to job creation,” said John Podesta, president of the liberal Center for American Progress.

Rep. Chris Van Hollen (Md.), one of six Democrats on the newly formed “supercommittee” that will try to find ways to cut the debt, said Obama will have to “clearly articulate why those twin goals work together and why they do not work at cross purposes.”

He added: “The good news is that the American people seem to be in the same place that the right policy would dictate. Clearly they want to focus on jobs and the economy, but they also recognize the need to develop a long-term plan to reduce the deficit.”

Obama faces pressure from his own base. On Wednesday, a leading member of the Congressional Black Caucus lashed out at him for not visiting any black communities during his bus trip. The comments from Rep. Maxine Waters (D-Calif.), coming at a caucus jobs event in Detroit, illustrated the brewing tensions between African American political leaders and the first black president over black unemployment, which now tops 16 percent.

“We’re getting tired,” Waters said, according to a video taken at the public forum and published by the Web site TheGrio.com. “We want to give the president every opportunity to show what he can do and what he’s prepared to lead on. . . . But our people are hurting. The unemployment is unconscionable. We don’t know what the strategy is.”

Obama’s challenges

Obama’s performance during the bus tour illustrated the multiple challenges he faces — and the multiple messages he’s seeking to deliver.

At times, he struck the pose of an above-it-all leader urging Washington to compromise on a “balanced” agreement to cut the nation’s debt. Other times, he was a partisan infighter attacking the 2012 Republican presidential candidates and Congress. At times, he adopted the role of an everyman coming to the heartland to hear what locals had to say.

“You’ll hear a lot of folks . . . say that government is broken. Well, government and politics are two different things,” Obama said in Cannon Falls, Minn., on the first day. “Government is Social Security. Government are teachers in the classroom. Government are our firefighters and our police officers.”

The next day, at a rural economic forum in northeastern Iowa, he expressed a more limited view of Washington.

“America is going to come back from this recession stronger than before,” he said. “I’m also convinced that comeback isn’t going to be driven by Washington.”

In the end, he said later in the day, “it’s not either-or.”

Wallsten reported from Washington. Staff writers David Nakamura and Peyton Craighill in Washington contributed to this report.