By Sam Youngman - 12/08/09 05:01 PM EST
President Barack Obama announced his support for a new jobs program funded by money left over from the Wall Street bailout.
Obama on Monday said he would press Congress to pass legislation to pay for additional infrastructure works, tax breaks for small businesses and incentives for consumers who weatherize their homes.
Obama cast his proposals and the use of the bailout funds as fiscally conscious decisions, saying that the budget deficit demands that the government be prudent in passing new jobs legislation.
“Given the challenge of accelerating the pace of hiring in the private sector, these targeted initiatives are right and they are needed,” he said in a speech at the left-leaning Brookings Institution.
“But with a fiscal crisis to match our economic crisis, we also must be prudent about how we fund it. So to help support these efforts, we’re going to wind down the Troubled Asset Relief Program, or TARP — the fund created to stabilize the financial system so banks would lend again.”
Administration officials on Monday said the TARP was expected to cost at least $200 billion less than anticipated over the summer. The new estimates suggest it could cost $141 billion.
“This 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.
Obama said he would work with Congress to approve
legislation that would allow the use of TARP funds for other purposes.
The TARP statute said funds repaid by banks should go to deficit reduction, and Republicans have criticized Obama and Democrats for saying they’ll use leftover funds to create jobs. House Minority Leader John Boehner (R-Ohio) on Tuesday called the idea “repulsive.”
Obama and White House officials acknowledged there are legal limits on how they spend TARP money, but they said helping small businesses create jobs does fall under that area. Obama said he would direct the Treasury Department to use TARP on small-business loans.
One senior administration official, however, said flatly that TARP money could not be used on what the administration envisions to be about $50 billion in new infrastructure spending.
“Tim Geithner cannot spend TARP dollars on highways,” the official said.
While Obama's plan includes some specific proposals, he left many of the details to Congress.
Obama specifically called for a one-year elimination of the capital gains tax on small businesses and extending tax write-offs that would allow small businesses to hire more workers. A White House fact sheet said the president was calling for extending two provisions in the $787 billion stimulus approved earlier this year that allow small businesses to expense equipment and to accelerate the rate at which they may deduct capital expenditures.
Obama also said it would be worth creating a tax incentive for small businesses to hire workers, but did not offer specifics.
On infrastructure spending, Obama is proposing additional investments in highways, transit, rail, aviation and water. But the White House did not provide additional specifics, such as its preference for the amount of infrastructure spending.
Parts of Obama’s speech were partisan, as the president fought back against GOP arguments that TARP funds should only be used for deficit reduction.
He criticized “an opposition party which, unfortunately, after having presided over the decisionmaking that led to the [financial] crisis, decided to hand it over to others to solve.”
“There are those who claim we have to choose between paying down our deficits on the one hand and investing in job creation and economic growth on the other. But this is a false choice,” Obama said.
Politicians and members of the public have expressed unhappiness with the TARP, especially as Wall Street firms have announced record bonuses while unemployment jumped above 10 percent.
The president decried the TARP program, calling it a “flawed” proposal that his administration was able to improve upon. Yet he also said it had indisputably staved off a worse financial crisis.
“There has rarely been a less loved or more necessary emergency program than TARP, which as galling as the assistance to banks may have been, indisputably helped prevent a collapse of the entire financial system,” Obama said.