Obama Focuses on Small Businesses to Spur Job Growth

Dec. 8 (Bloomberg) -- President Barack Obama today proposed new spending on the nation’s infrastructure, tax credits for small businesses to spur hiring and incentives to make homes more energy efficient in a new round of measures aimed at cutting the jobless rate.

Obama also called for “mobilizing” remaining money in the financial-system bailout fund to open up more credit to small businesses.

The president didn’t give a price tag for the proposals. He said they would be at least partly offset by savings in the Troubled Asset Relief Program, which the Treasury has said would cost $200 billion less than originally projected.

“Given the challenge of accelerating the pace of hiring in the private sector, these targeted initiatives are right and they are needed,” Obama said in a speech at the Brookings Institution, a research organization in Washington. “But with a fiscal crisis to match our economic crisis, we also must be prudent about how we fund it.”

Continued high unemployment and a slow recovery from the worst U.S. recession since the 1930s threaten to sap Obama’s political support and slice into the Democratic Party’s majorities in Congress. The Fed forecasts the jobless rate will range from 9.3 percent to 9.7 percent in the fourth quarter of 2010 as voters are casting ballots in congressional elections next November.

Jobless Rate

The unemployment rate in November was 10 percent, down from a 26-year high of 10.2 percent the month before.

The president focused his remarks on steps to help small businesses, which he said create 65 percent of new jobs. Among them is a proposal to eliminate the capital gains tax on small businesses for a year. Two other measures, enhanced expense allowances and an accelerated depreciation tax incentive, are extensions of provisions in the current stimulus legislation.

The president also proposes to eliminate fees and increase loan guarantees for Small Business Administration programs.

As another way to create jobs, Obama said he’s asking Congress to “provide incentives for consumers who retrofit their homes to become more energy efficient.”

‘Cash for Caulkers’

That program, which has become known as “cash for caulkers,” is designed to spark more construction hiring and would benefit home-improvement retailers such as Atlanta-based Home Depot Inc. and Lowe’s Cos., based in Mooresville, North Carolina.

Obama said it would have the added benefit of lowering energy costs for consumers and lessening U.S. dependence on foreign sources of oil.

The administration also wants to boost funding to repair and modernize the nation’s transportation and communications networks. White House officials who briefed reporters estimated an additional $50 billion would be sought for those projects, following on $48 billion put toward transportation in the stimulus legislation.

Obama and his advisers are trying to come up with new programs that won’t increase the size of the budget deficit, which last year was a record $1.4 trillion and is forecast to be about the same size this year. He repeated his pledge to cut the deficit in half by the end of his first term.

Administration officials said the proposals don’t amount to a second economic stimulus like the $787 billion package of spending and tax cuts enacted in February. They refused to provide cost estimates for the initiatives.

Congressional Fight

Obama’s proposals are subject to approval by Congress, which is unlikely to take up the measures before January. Republicans and majority Democrats were gearing up for a fight.

House Majority Leader Steny Hoyer, a Maryland Democrat, said lawmakers may seek to finance $75 billion to $150 billion in highway construction and other job creating measures with unused TARP funds.

“It makes sense to use some of those resources that were try to stabilize Wall Street to now trying to invest them in growing Main Street,” Hoyer told reporters at the Capitol.

Congressional Republicans are rallying in opposition to any plan that would tap the financial bailout fund.

“There are plenty of ways to stimulate small businesses, including three quarters of the stimulus money we have not spent yet without adding billions and billions in debt through TARP, which is basically a line of credit,” Republican Senator John McCain of Arizona, Obama’s opponent in the 2008 presidential election, said at a news conference. He accused the Democrats of wanting to use the bailout program as a “slush fund.”

TARP Rules

White House press secretary Robert Gibbs said the law is “fairly strict” on what TARP can be used for. “If there are things that can be done to help lending, particularly with small businesses, that would likely fall under the ability for TARP to finance,” he told reporters before the president spoke.

The program is set to expire at the end of the year, and Obama said the administration would allow it to “wind down.”

The lower-than-projected cost of TARP “gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street,” Obama said.

In his speech, Obama criticized Republican opposition to his economic policies.

The administration has taken a series of “difficult steps” to right the economy “largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it over to others to solve,” Obama said.

He called it a “false choice” to argue that the government must either pay down the deficit or spend on job creation.

Obama also said more jobs would be created as more money from the $787 billion February stimulus is doled out. Of that amount, about 30 percent, or $238 billion, had been spent so far, according to the White House.

An analysis by the nonpartisan Congressional Budget Office said the legislation has created between 600,000 and 1.6 million jobs and its analysis determined that three-quarters of the money had not been spent by the end of September.

“We’re going to see even more work, and workers, on recovery projects in the next six months than we saw in the last six months,” Obama said today.