Congress and the administration in the past three years already have used many of the standard moves in the playbook for spurring job growth, but President Obama rolled out a couple of new and untried ideas in his State of the Union address Tuesday with hopes of attracting lawmakers from both parties.
In a move to the center, he appealed for increased trade through a newly minted agreement with South Korea — emphasizing his theme of job growth and economic renewal through exports. At the same time, Mr. Obama threw his support behind plans to pare corporate tax rates in an effort to make job creation in the U.S. more attractive to corporations that wander abroad because of lower tax rates and labor costs.
Although the president’s plans in those areas likely will strike a bipartisan chord and build on the rapprochement with Republicans that emerged before Christmas with a deal to cut taxes and extend unemployment benefits, other parts of Mr. Obama’s job-creating agenda are expected to land with a hollow thud in the halls of Congress and are given little chance of enactment.
In particular, the president’s plan to increase spending on highways, bridges and other infrastructure — even though such public works projects have been a tried and true way to create jobs for thousands of unemployed construction workers since the Great Depression — will run headlong into Republican plans to slash transportation funding and other parts of the domestic budget by as much as 40 percent in coming years.
Likewise, any further plans for showering money on education, health care and green energy in an effort to create jobs likely will fall into a black hole in the Republican-led House.
“There is no money,” said Charles Krueger, an analyst at MF Global Washington Research group. “Obama’s $50 billion infrastructure plan faces long odds” despite well-documented needs for repairing bridges and roads, he said. “Congress still has the power of the purse and is loath to cut a check for any program, even if Obama labels it ’investments in our future.’”
Indeed, Republican leaders have been warning Mr. Obama not to ask for more spending but rather to help them lead the charge in downsizing the government. At the same time, they are encouraging him to take the more centrist tack on trade and corporate taxes that the White House is promising.
“I’m hopeful that the president has listened to the American people,” House Speaker John A. Boehner, Ohio Republican, said Tuesday in anticipation of the president’s call for expanding “investments” in selected areas. “I’m hopeful that the word ’investment’ really isn’t more stimulus spending and a bigger government here in Washington.”
Senate Minority Leader Mitch McConnell told “Fox News Sunday” that the “investments” in Mr. Obama’s $800 billion stimulus bill, enacted two years ago, tried to generate jobs through increased spending on green-energy projects, infrastructure, health care and education, to little effect.
After losing more than 8 million jobs during the recession, the economy in the past year added 1.1 million jobs — not enough to satisfy the 14 million people looking for work or dramatically lower an unemployment rate stuck at about 9.4 percent.
But Mr. McConnell praised the idea of lowering corporate tax rates and pushing free trade.
“To the extent he actually wants to do some of these things, our answer is going to be yes,” the Kentucky Republican said. “We have the second highest corporate tax rate in the world right now. It’s not competitive. It doesn’t help us create American jobs.”
Mr. McConnell added that Republicans are eager to take up a trade agreement with South Korea as well as deals negotiated with Panama and Colombia by the George W. Bush administration. The White House estimates that the South Korean trade agreement would generate 70,000 jobs.
House Ways and Means Committee Chairman Dave Camp, Michigan Republican, on Tuesday called for enacting all three pending trade agreements within the next six months as “a sure-fire way to create American jobs by growing U.S. exports.”
On the trade front, Mr. Obama faces a fight with the left wing of his party.
Democrats in Congress have been reluctant to move on trade agreements, contending that the deals usually provide lopsided benefits for countries seeking access to U.S. markets and need to be modified to address concerns about workers’ rights and pollution.
The Economic Policy Institute, a labor-funded group, estimates that Mr. Obama’s Korean trade deal will cost the U.S. 159,000 jobs, taking into account the jobs lost in industries that compete with South Korean imports.
“Whether trade creates U.S. jobs depends on net export gains and reducing the trade deficit, which our past policies have not done,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “U.S. export growth under past free trade agreements has been less than half that of countries with which we do not have agreements.”
On corporate tax reform, Mr. Krueger noted that a bipartisan group of senators already is drafting a comprehensive bill that targets for elimination many cherished loopholes in the interest of reducing the top rate from 34 percent to as low as 28 percent. That would make keeping corporate offices and plants in the U.S. and hiring American workers more attractive to global corporations.
But analysts are not sure how far Mr. Obama will go in endorsing such an ambitious rewrite of the tax code. Treasury Secretary Timothy F. Geithner has been meeting with corporate executives in recent weeks in developing the administration’s blueprint, and has given few clues about the specifics.
Businesses are downright enthusiastic about legislation this year that would promote free trade and cut corporate taxes, and insist it will get the great American job machine up and running again.
“The federal corporate tax rate in the United States is about 9 percentage points above the G-20 average,” said Brian Gardner, a Washington analyst at Keefe, Bruyette & Woods. “This compromises U.S. competitiveness,” he said, touching on a major theme in Mr. Obama’s speech.
“We think Republicans and the administration can agree to cut corporate taxes to the G-20 average or lower and hang a big ’Open for Business’ sign for companies around the globe,” he said. “There are few measures that will be as helpful for increasing employment.”
Manufacturing groups and many other businesses also support Mr. Obama’s call for increased spending on infrastructure. They say decaying roads and bridges are hurting the efficiency of U.S. industries and making them less competitive in global markets.
• Patrice Hill can be reached at phill@washingtontimes.com.
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