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The President proposes 'mobilizing' financial bailout money to pay for more small business credit and investments in infrastructure
By Roger Runningen and Nicholas Johnston
(Bloomberg) — President Barack Obama today proposed new spending on the nation's transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of initiatives aimed at cutting the jobless rate.
Obama also called for "mobilizing" money from the financial-system bailout fund to open up more credit to small businesses.
The price tag for the proposals, which Obama didn't specify, 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.
The unemployment rate in November was 10 percent, down from a 26-year high of 10.2 percent the month before.
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. He repeated his pledge to cutting 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.
Even before Obama spoke, congressional Republicans criticized 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.
"Now they want to use that $200 billion as another slush fund," McCain 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.
The president focused his remarks on steps to help small businesses, which he said create 65 percent of new jobs. Among them, his proposal to eliminate the capital gains tax on small businesses for a year is left over from his presidential campaign. Two other proposals, enhanced expense allowances and an accelerated depreciation tax incentives, are extensions of provisions in the current stimulus legislation.
To create new jobs, Obama said he's asking Congress to "provide incentives for consumers who retrofit their homes to become more energy efficient."
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 (HD) and Lowe's (LOW), based in Mooresville, North Carolina.
Obama said it also would have the added benefit of lowering energy costs for consumers and lessen U.S. dependence on foreign sources of oil.
The lower 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," he said.
To contact the reporters on this story: Nicholas Johnston in Washington at firstname.lastname@example.org; Roger Runningen in Washington at email@example.com