Perhaps showing concern about the softening economic forecasts of recent months, President Obama has provided a to-do list for Congress that would, in his words, “create jobs and help restore middle class security.” The to-do list includes several ideas from the American Jobs Act and subsequent legislation proposals announced in recent months. They include:
1) Eliminating tax incentives to ship US jobs overseas. This is a familiar legislative priority of the Democratic establishment that was at the forefront of John Kerry’s Presidential campaign in 2004. It never managed to get done when the Democrats held Congress and the Presidency, however. This legislation would create a 20% tax credit for companies that insourced their operations, paid for by eliminating those outsourcing incentives.
2) Mortgage refinancing. This legislation would allow all underwater borrowers to refinance into lower interest rates. Of course, this would only impact a small sliver of the housing market; Fannie Mae and Freddie Mac can already do this through the new HARP program. And anyway, this would only create incentives for refinancing for underwater borrowers; ultimately, the decisions would be up to the banks that own these properties, and lately they’ve shown an affinity for using refinancing programs to trap borrowers into higher rates by stifling competition.
Refinancing is a recovery/stimulus policy, to deleverage debt and free up more funds for current borrowers to spend. It will do little for , because it’s not targeted at the most vulnerable borrowers. And as for what would help, Ed DeMarco just postponed any decision on using Fannie and Freddie for the purposes of principal reduction, so the Administration might want to get their own house in order.
3) New hiring tax credit: We already had a job creation tax credit in 2011, and the results on it were mixed at best. This legislation would basically extend that tax credit for hiring for small businesses. It would also extend the 100% expensing tax break, which was in place in 2011, into 2012. Again, these things were already tried.
4) Clean energy investment: This calls for an extension of the production tax credit for renewable energy, and a separate tax credit for clean energy manufacturing known as 48C. Again, we’re talking about extensions, and it’s the third out of four items on the to-do list that are basically along the lines of tax breaks for businesses. This comes from the Administration that wants to “clean up the corporate tax code” so they can lower rates. But they keep adding to that tax code with more and more presents.
5) Veterans job corps: One of the few parts of the American Jobs Act that passed was a veterans hiring tax credit, but this is an additional piece of legislation that creates a “Veterans Job Corps” to boost veterans hiring.
I’m not really seeing why there should be a lot of excitement over this to-do list. First, the House GOP isn’t likely to listen. Second, these are a collection of business tax credits and half-measures, without anything on the order of direct job creation. As long as this is posturing, you could actually posture with something that would work. A new study shows that without government cutbacks, the unemployment rate would fall to as low as 7.1%. In the past, the Administration has cited support for fiscal aid to states to restore government jobs. Since this would have the benefit of actually working, I’m baffled as to why it would not be included here.
More from the New York Times.