Shape of jobs creation bill unclear ahead of White House summit

Democrats have a slew of legislative proposals to pick from when they begin crafting a job creation bill in earnest this week.

Lawmakers, prompted into action by the double-digit unemployment rate, are considering business tax credits for new hires, state fiscal aid, extended unemployment and COBRA benefits, a $600 billion transportation reauthorization bill, a "work share" program, aid to homeowners facing foreclosure and increased loans for small businesses.

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Congress and the White House have yet to coalesce around one approach. But congressional leaders said that some measure is necessary now that the jobless rate has reached 10.2 percent, a 26-year high. House Speaker Nancy Pelosi (D-Calif.) warned of an even worse unemployment situation if lawmakers fail to act.

"If we pull our punch, as they did in the mid-'30s, we shouldn’t be surprised if history repeats itself," Pelosi said during a conference call with bloggers last week.

The direction of the plan will likely become more clear after Thursday, when President Barack Obama will host business leaders, union officials and economists at the White House for a jobs summit.

One proposal Obama is seriously considering is a tax credit for businesses that bring on new workers. Obama asked his economic team to examine the hiring tax credit several weeks ago, Jared Bernstein, the chief economist for Joe Biden, told reporters during a briefing last week.

Obama as a presidential candidate proposed a similar plan, one that would award a $3,000 credit to businesses for each new, full-time worker that they hired. But lawmakers opposed the plan when they were writing the stimulus in February, arguing that there were more direct ways of spurring economic action.

Both liberals and conservatives have been skeptical of the hiring tax credit.

Rep. Bobby Rush (D-Ill.), the chairman of the new bipartisan Congressional Jobs NOW! Caucus, said that passing the tax credit alone would be a "short-sighted" and "foolhardy" approach because it doesn't do much to help the unemployed and underemployed.

A hiring tax credit is "a way for getting businesses money for jobs they would have created anyway," said Robert Borosage, co-director of the left-leaning economic policy group, Campaign for America's Future, echoing an argument made by the Wall Street Journal editorial board.

Labor unions have instead been pushing instead for fiscal aid to help states stave off teacher and public employee layoffs, transportation and other infrastructure investments and increased loans for small businesses.

Plans for more infrastructure spending and expanding small businesses' access to credit have gained currency in Congress.

Pelosi last summer signaled support for the $600 billion, 6-year transportation reauthorization bill, which was reported out of committee by House Transportation and Infrastructure Chairman James Oberstar (D-Minn.) but has stalled in the Senate.

One of Oberstar's top lieutenants, Rep. Peter DeFazio (D-Ore.), has proposed paying for transportation investments, new job creation
legislation and deficit reduction with revenue from a new financial transaction tax, but Treasury Secretary Timothy Geithner has opposed the new levy.

Rush and other leaders of the Jobs NOW! Caucus, which includes 128 House members, said that they would be open to funding infrastructure and transportation projects using funds that remain in the $787 billion stimulus or the $700 billion bank bailout, the Troubled Asset Relief Program (TARP), for transportation projects.

Rush said that there's "enormous dissatisfaction" over the stimulus and the TARP because they haven't done enough to create jobs for Americans seeking work.

"The jobless American Recovery Act, that's what we're looking for," said Rush, playing a pun off of the official name of the stimulus.

In the upper chamber, Sen. Mark Warner (D-Va.) and a group of Democrats have proposed using TARP money to start a new $50 billion fund to provide small businesses with more loans. More than $300 billion in TARP remained as of October, according to the special inspector general examining the bailout fund.

Other proposals include a $2 billion plan by Rep. Barney Frank (D-Mass.) to provide credit to help homeowners avoid foreclosure and a $600 million program, championed by Sen. Jack Reed (D-R.I.), to provide unemployment benefits to employees who reduce their work hours to help their companies avoid cutting jobs.

The push for a new jobs bill comes as Democrats and the White House head into a mid-term election year with their poll numbers sliding. As unemployment has increased, Democrats have fallen behind Republicans in Gallup's generic congressional ballot. Gallup's November survey had Republicans ahead 48 percent to 44 percent, marking the first time Republicans have held a lead in the generic congressional survey this year. Obama's average approval rating has fallen to 48.6 percent, after staying above 50 percent in most surveys through most of this year, according to Pollster.com, which averages each presidential approval survey.

Obama has been playing defense on his past efforts to jumpstart the economy, and especially on the $787 billion stimulus. Republicans have repeatedly criticized the package for not doing what White House economists said it would do back in January. The Obama economic aides said a substantial stimulus package would keep the jobless rate around 8 percent or lower and that the absence of a package would allow the jobless rate to rise to around 9 percent.

Obama last week said that the package is responsible for most of the 2.8 percent growth rate in the third quarter, which is the first quarter that the U.S. economy expanded since late 2007. But he signaled that he plans to do more to create jobs, even as he shepherds a controversial healthcare reform bill and a troop surge in Afghanistan through a divided Congress.

"Our economy is growing for the first time in more than a year, and we know that economic growth is a prerequisite for job growth," Obama said. "But, having said that, what I emphasize today is we cannot sit back and be satisfied, given the extraordinarily high unemployment levels that we've seen. We have only taken the first step."

Republicans in Congress haven't opposed new measures to create jobs, but they suggested that Democrats could do more to help the economy by ending their push for healthcare reform, which GOP members argue would increase taxes and add to the $12 trillion federal debt.

"Pulling down the job-killing healthcare spending bill would be a good place to start," a Senate GOP aide said.