Bloomberg News

Obama Will Call on Republicans to Act on Jobs or Share Blame

September 08, 2011

(Adds details on Obama’s proposal in first paragraph.)

Sept. 8 (Bloomberg) -- President Barack Obama will propose a reduction in payroll taxes for small businesses when he heads to the home turf of his Republican congressional adversaries tonight for a nationally televised address.

The payroll-tax reduction for employers will apply only to small businesses, according to administration talking points obtained by Bloomberg News. The president will also call for a payroll tax cut for employees, as well as aid for the long-term unemployed, funds for infrastructure spending and money for laid-off teachers and veterans, according to the document.

Obama will pay for the additional spending by closing corporate tax loopholes and raising taxes on high-income earners. Next week, he’ll send a plan on how to offset the spending to the special 12-member congressional committee charged with coming up with $1.5 trillion in deficit cuts.

His address tonight to a rare joint session of Congress on jobs, the top concern of voters as the 2012 election campaign gets under way, will frame the government’s response as one of either action or delay on reviving the economy. On taxes, the signature Republican issue, he will cast himself as a champion of relief for the middle class rather than for the wealthy.

Obama will propose a more than $300 billion stimulus plan in the Republican-controlled House’s chamber as job growth stalls and the unemployment rate hovers above 9 percent. His job-approval ratings are scraping new lows as public doubts about his stewardship of the economy rise.

‘Difficult Summer’

“The president has had a difficult summer,” said Democratic political consultant Tad Devine, a senior strategist for the Al Gore and John Kerry presidential campaigns. “All of the polling is heading in the wrong direction. He needs a circuit breaker.”

White House spokesman Jay Carney said today the American Jobs Act would be a White House-written bill that will be introduced in Congress “early next week.” He said he didn’t know immediately who would file the measure on behalf of the administration. The bill will contain sections to boost the economy and jobs and include “the mechanism to pay for it,” Carney said.

Republican Resistance

White House officials anticipate that congressional Republicans will resist much of the president’s jobs package, which also includes money to build roads and renovate schools, and direct aid to state and local governments to stem layoffs of teachers and emergency workers. They expect the tax-cut proposals to have the best chance of passage.

The speech will offer Obama a chance to both make a case to the public for his proposals and prepare the way to blame Republicans for inaction.

“He can later say they weren’t passed because of obstruction,” Devine said. “That’s an easy case for people to understand. You’ve got to put the benchmark down so they can remember it.”

Republican leaders criticized early reports of the jobs plan, saying it resembled Obama’s $830 billion economic-stimulus package of 2009. That legislation also combined tax cuts, infrastructure spending and aid to state and local governments, and Republicans say it didn’t work.

“If government spending were the answer, we’d be in the middle of a boom by now,” said Senate Republican Leader Mitch McConnell of Kentucky. “We’ve been on a spending spree for the last two years.”

Republican Plan

Republican presidential candidate Mitt Romney laid out an economic-recovery proposal in a Sept. 6 speech that included many ideas favored by his party: a reduction in U.S. corporate taxes, fewer federal regulations, opposition to the president’s health-care overhaul, and the passage of new trade agreements.

Still, in the run-up to the speech Obama and his aides laid the groundwork for their case that Republicans are also accountable for the economy, arguing that the measures he will offer have had bipartisan support in the past. “The only reason some of these people may not support it now is because of the politics that’s going on,” Daley said on “Good Morning America.”

Carney predicted yesterday that members of Congress would “get an earful” from constituents if they don’t act on the package before the lawmakers’ end-of-year recess. He said today that he was “pretty sure” Obama would be consulting lawmakers, whom he didn’t identify, by telephone before tonight’s speech.

Shared Responsibility

The decision to deliver the address to a joint session underscores the shared responsibility for the economy held by congressional Republicans, whose standing in opinion polls is lower than Obama’s. The cutaway video of Republican lawmakers’ reactions during the speech is likely to provide hints of tension, and the air of confrontation adds drama to the event.

Presidents traditionally reserve the forum for State of the Union addresses and for national crises. Besides his annual State of the Union speeches and an address delivered just after he took office, Obama spoke to a joint session only once before, in September 2009, when he was prodding lawmakers to act on his proposal to revamp U.S. health insurance.

A centerpiece of his new jobs plan is extending a temporary two-percentage-point cut in the portion of payroll taxes paid by workers that’s set to expire on Dec. 31. Obama has signaled he will challenge Republicans to show the same commitment to preserving a tax reduction that benefits middle-class families as they have to ones that go to higher-income households.

“You say you’re the party of tax cuts?” Obama said in a Sept. 5 speech in Detroit. “Well then, prove you’ll fight just as hard for tax cuts for middle-class families as you do for oil companies and the most affluent Americans.”

Cantor Open

House Majority Leader Eric Cantor yesterday left open the possibility he might accept Obama’s proposal to maintain the payroll-tax cut.

“It is something I supported in the past” and “will be part of the discussions ongoing,” the Virginia Republican told reporters in Washington.

Other Republicans expressed reservations.

Alabama Senator Jeff Sessions, the top Republican on the Senate Budget Committee, said extending the payroll-tax cut would be “a difficult thing” because “you don’t pay it if you’re not working.”

Public opinion of Obama as well as Congress has plummeted to new lows since a partisan fight in July and August over raising the government’s debt limit that took the country to the edge of default.

Falling Poll Numbers

Obama’s monthly job-approval rating in a Gallup Poll dropped to the lowest of his presidency, with 41 percent of U.S. adults saying they approved of his overall performance.

Concern over the economy also has increased as growth weakened during the first half of the year to its slowest pace since the recovery began, and market pessimism has risen over the European debt crisis. In August, U.S. employers added no new net jobs, the worst monthly results for payroll growth since September 2010.

Recent signs of economic weakness have led private economists to raise forecasts for the unemployment rate next year. The median forecast for unemployment during next year’s fourth quarter, when the presidential election will be held, is 8.5 percent, according to 51 economists surveyed by Bloomberg News Aug. 2 through Aug. 10.

Since World War II, no U.S. president has won re-election with a jobless rate above 6 percent, with the exception of Ronald Reagan, who faced 7.2 percent unemployment on Election Day in 1984. The jobless rate under Reagan had come down more than 3 percentage points during the prior two years.

Credit Downgrade

After partisan disputes dragged out negotiations over the debt limit, Standard & Poor’s lowered the U.S.’s credit rating to AA+ from AAA on Aug. 5. The rating firm said the government is becoming “less stable, less effective and less predictable.”

Even so, the government’s borrowing costs fell to record lows as Treasuries rallied. Moody’s Investors Service and Fitch Ratings have affirmed their top rankings on the U.S.

--With assistance from Peter Cook, James Rowley, Heidi Przybyla, Roger Runningen, Jeff Bliss and Hans Nichols in Washington. Editors: Mark McQuillan, Mark Silva

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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