Washington Limited in his ability to create jobs through direct spending, President Barack Obama is considering measures to encourage the private sector to free up its cash reserves and hire more workers to ease the nation’s unemployment crush.
As Obama prepares to unveil a new jobs agenda next week, his aides are reviewing options that would provide tax incentives to employers who expand their payrolls. That approach is a more indirect effort to spur the economy and relies less on government intervention and massive public works projects.
Among the proposals circulating in the White House is a $33 billion tax credit that Obama first proposed early last year but that Congress whittled into a smaller one-year package.
Under one version of the plan, employers would receive a tax credit of up to $5,000, subtracted from their share of federal payroll taxes, for every net new hire. White House officials caution that the overall jobs plan is still subject to change.
The tax credit, however, is a relatively untested idea. Congress passed a version in March 2010, known as the HIRE Act, which provided $13 billion in tax credits to qualified employers who hired new workers. But there is no government data to track its success.
“The HIRE Act was very small,” said Mark Zandi, chief economist at Moody’s Analytics and an occasional adviser to Democrats and Republicans. “It really didn’t add to payrolls.”
“It would have to be bigger,” he added. “Something more along the lines that the Obama administration proposed in 2010.”
While promising a major jobs package, Obama is hamstrung by budget cuts and a tight debt ceiling that he had a hand in negotiating.
As a result, economists predict that while the president’s initiatives could eliminate some drag on the economy and maintain the status quo, they won’t be enough to propel it to new heights.
Obama’s jobs package is designed to supplement other proposals already in the pipeline, including free trade agreements with South Korea, Colombia and Panama and the renewal of a highway construction bill.
Today, Obama will call on Congress to pass federal highway legislation before the current law expires Sept. 30.