Obama’s 2012 Job Creation Stimulus and Tax Cuts – Can the New Economic Plan Really Boost The Economy and Lower Unemployment?

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[UpdateAmerican Jobs Act a.k.a 2012 Economic Stimulus] In what is essentially the 2012 stimulus package, President Obama has released details on the American Jobs Act which involves spending over $400 billion dollars to boost economic growth. The key provisions are:

- Extension of employee payroll tax cuts into 2012, which were due to expire this year, covering the first $106,800 in earnings. The proposal seeks to reduce the portion paid by employees in 2012 to 3.1% from 6.2%. The rate had been cut by 2% in 2011, under the bush tax cuts extension deal, and the increased extension in 2012 will provide about $1500 more in savings for the average family.

- The jobs plan also includes incentives for new hiring by small businesses via payroll social security tax exclusions. Businesses would get the same 3.1% reduction on payroll taxes as employees for the first $5 million of their payroll. The full 6.2 percent employer contribution would be waived on the first $50 million net increase in a company’s payroll.

- Spending $140 billion on infrastructure projects such as school modernization efforts, transportation projects and rehabilitation of vacant properties. More specifically $25 billion will go towards refurbishing at least 35,000 schools in 2012 and 2012, with an additional $5 billion going toward community colleges. These funds will be managed via a National Infrastructure Bank.

- 2012 Unemployment Benefits Extension – The President has called for more than $62 billion in spending to extend unemployment insurance benefits through 2012. He is also looking to fund state administered programs that will alleviate long-term joblessness millions of Americans. The proposals will also provide up to $4,000 in tax credit benefits for business’ that train people who have been out of work for 6 or more months, by covering costs to the employer for up to 8 weeks. States will also be able to use unemployment-insurance funds to make up for wages lost by workers whose hours were cut back in lieu of a layoff and for those 50 and older who took a lower-paying job after a layoff.

- Veteran employment tax credits: The proposal includes additional tax credits (Returning Heroes and Wounded Warrior tax credits) for hiring veterans and workers who have been unemployed more than six months. The value to these these tax credits to business’ hiring veterans ranges from $5,600 to $9,600.

- Small business will also continue to receive the benefits of accelerated depreciation via 100% expensing for new investments.

 - Refinance to lower rates. Through the FHA and Government owned entities, Fannie Mae and Freddie Mac, struggling home owners will be able to refinance their mortgages to the sub-4% rates available today. A one percent interest decrease can put more than $2,000 a year in an average family’s pocket.

I will provide a detailed update on the new initiatives and programs as they are updated and passed through Congress. You can subscribe (free) via RSS, Email, Facebook or Twitter to get notified of the latest updates.

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With the possibility of another global economic slowdown and poll numbers that need a boost, President Obama has committed to providing a blueprint for growth that will spur economic activity and hopefully enable job creation. But many fiscal conservatives and Obama administration detractors are already calling this a 2012 stimulus plan, which will fail like the ones he enacted in 2009 (Recovery act) and 2010 (bush tax cuts and unemployment extension). It is likely that whatever job creation package the Obama administration proposes will contain spending or tax cuts, which Congressional republicans and presidential hopefuls will oppose on ideological and political grounds.  This means America needs to get ready for another protracted fight on the hill; just as we witnessed during the debate to raise the debt ceiling.

“I’m going to propose ways to put America back to work that both parties can agree to, because I still believe both parties can work together to solve our problems,” said Obama. “We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if congressional Republicans will put country before party.”

Here are some of the items rumored to be in the proposed  jobs plan. Most are just a mix and match of long-time proposals but there will be a few fresh ideas on which bi-partisan support can more likely be garnered.

Tax cuts for companies that hire workers – Following his 2010 proposal for small business‘ to hire workers Obama is likely to renew his push for Congress to extend the “Bonus Deprecation” tax credit which allows a 100% deduction of capital investments in the current year. Businesses of all sizes will be allowed to keep more money now and would give large corporations, many of which are sitting on cash due to uncertainty about the economy, an incentive to spend and invest; thereby spurring economic growth and creating new jobs.

Private-public infrastructure projects where the government will partner (i.e support or finance) companies to build new infrastructure projects like roads, highways and airports. All this new building activity, it is argued, should lead to increased construction and infrastructure related jobs across the nation. This plan is similar to a past (failed) attempt by the administration to create an “infrastructure bank,” which would be run by the government but would pool tax dollars with private investment to focus on paying for national and regional infrastructure projects. Any new proposal will likely include corporate tax reforms as well.

Mortgage relief for struggling homeowners - The President’s plan is also likely to push for more or extended government sponsored housing relief programs where eligible homeowners can refinance to lower rates despite not having a job or strong credit history. This program is aimed at stabilizing the housing market and industry, which is one of the largest employers in the nation.

Extend unemployment benefits insurance – With nearly 6 million long term unemployed losing their federal and state unemployment benefits over the next year, the President wants to extend funding for this growing segment of Americans. Unemployment benefits have been increased or extended eight times since 2008 (including 4 times last year) and while it provides the most immediate consumer stimulus, it is also likely to be the most expensive and strongly opposed option out there. Particularly because it does not lead to any new job creation.

Extend payroll tax holiday for workers AND business’ - The payroll tax cut expires at the end of this year and the President will urge Congress to extend this tax break. The 2% payroll tax equates to a $1000 saving for the average American employee.  The president will also push to get the payroll tax (which is also paid by employers) suspended for small business’ and/or those that commit to hiring new workers.

Re-training credits – With a structural change underway in the types of jobs now available in America, many Americans are simply unemployable with their current skill-set. So the administration will propose tax breaks for individuals that undergo re-training in designated job families to make themselves more employable. Employers that hire these newly trained workers may also get a tax break.

Veteran unemployment benefit programs – These programs were announced earlier and are designed to encourage employers to hire the growing army of veterans, particularly those that have been unemployed for a considerable time.  Two new credits – the Returning Heroes Tax Credit and the Wounded Warrior Tax Credit (which extends the Work Opportunity Tax Credit) are being proposed for Congress to legislate on.

The President has indicated that his new jobs plan will be released after labor day and I will provide a detailed update on the new initiatives and programs that are proposed, and more importantly their passage through Congress. You can subscribe (free) via RSS, Email, Facebook or Twitter to get notified of the latest updates.

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{ 19 comments… read them below or add one }

Maryanne September 4, 2012 at 11:59 am

Most of the money from the last stimulus was sent to companies overseas. Brazil and several other countries received money to drill an oil pipeline, but Obama doesn’t want us to drill here. If we did, gas prices would come down and a lot of new jobs would be created.

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Jim November 1, 2012 at 3:56 am

False, 90% of stimulus was used for tax cuts for 95% of the country, saving teachers, police, firefighters jobs all over the country, retraining, …so on and so forth.

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Michael Babb Sr. December 20, 2011 at 4:22 pm

I think right now Americans need stimulas cash money in there pockets, instead of tax breaks. This amount I am about to purpose is large, but it would turn this economy around over night in many ways. First some could pay or catch up there home loans or go get a new car,boat or, camper or invest in a bussiness venture. We are going to throw away a trillion dollars anyway. Why not invest $50,000.00 in the economy in the form of economic stimulas check to each United States citizen to spend as they see fit. America lets push for this. Its the best way to get out of this slump and get us back on the road and giving some of us a chance to prosper generate new jobs. I need your input on this. Thank You.

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Antonio February 22, 2012 at 4:25 pm

I definitely agree ,America is spending amounts of money the most people has never even counted to if the money went directly to taxpayer’s instead of ideas it would be a lot more succesis stories in this country.

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Donna July 27, 2012 at 9:47 am

The US only gives “transplants” bonuses like that. American citizens are required to earn every penny we have. In Kuwait they pay their citizens each $50,000 a year and anyone who comes from other countries must work. I have worked since I was 13 yrs old….for what? We need an overhaul asap. Hey Mr. Politician let’s compare checkbooks. God Bless America

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Carol S September 12, 2011 at 2:02 pm

I believe that the Congress is to blame for the whole mess instead of Obama. The Congress doesn’t have any ideas about creating jobs. The common man has noticed that the elected officials have been wasting time and that the result of their politics has been the stopping of our economic growth. I expect that there will be a turn over of all the officials that have signed the ‘no new tax laws’ and even though we cannot stop the payments of retirement for the Congress at least we will have a new set of politicians. Signed – Just waiting for their terms to be up!

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Gail September 6, 2011 at 11:15 am

Obama’s Economic Speech – More rhetoric or will there be some real plans that can actually pass Congress. I fear it is the former.

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CallMeBC September 6, 2011 at 11:17 am

Actually polls have mostly shown that Americans seem to be more and more confused and misinformed about what’s going on. For every poll showing people’s dissatisfaction with Obama, you have ones showing them enormously confused and misinformed about pretty much every major news topic, however the amount of “coverage” it get from the US media — be it health care reform, the Iraq war, the cause(s)of the economic crisis, and even jaw-droppingly dumb things like whether Obama is even a citizen.

Less confused people, however, think Obama has been actually doing a pretty good job given the size and complexity of the problems he was left to deal with when Bush belatedly departed. Most of the frustration with Obama in this group has been with Obama’s tendency to want to compromise with Republicans, who are perceived to be collectively nothing but obstructive, willfully ignorant nuisances who will say or do anything to better position themselves political, regardless of the consequences to the country at large, and who are also a big part of the reason why so many Americans are so confused and misinformed.

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andys2i September 6, 2011 at 12:33 pm

Since all his other jobs speeches in recent months haven’t worked, maybe one more will.

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Cynthia Jones September 2, 2011 at 12:12 pm

This country does need jobs, its business owners could benefit from tax breaks if they gurantee equal jobs for tax credits and forced to only hire US workers and not be allowed to outsource any jobs to foreign labor.

That is one of the main problems with our country too much immigration, too many jobs outsourced and too much emphisis on global economy when our own is dying day by day. We also need to suggest that John Boehner shut up and stop trying to run the country he is not our President.

Regardless of errors that President Obama may make he still deserves respect and opportunity to do what he can to help ALL AMERICANS not just the rich such has been with all Republican officials over the years.

It is not because he is African American it is because he was the person elected by the people not John Beohner and the GOP who failed in the eyes of America.

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Gail September 6, 2011 at 11:21 am

Barack Obama is struggling because of his policies, not his skin color. He is the first president since 1945 to outline his ‘jobs and growth plan’ days after the US’s first month of zero net job growth. Hopefully he has some good idea’s, or we could be back in negative job growth territory. Scary times indeed.

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Ron August 30, 2011 at 3:24 pm

I think we may be looking at the job situation maybe a little in reverse. Has anyone noticed that you can’t purchase a new car worth having for under $25 thousand dollars. Or maybe the cost of gasoline for that weekend get-a-way. Or maybe working hard for that new home that no one can now afford. And the story of high prices goes on and on. Giving big business tax break incentives as called on by Bohner did nothing to improve hiring. If customers don’t come into the store because of outrageous prices, how long do we think a business will keep these extra employees employed. Job creation will happen when customers reappear, and that will happen when prices come down.

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Emily August 25, 2011 at 5:28 pm

Bruce – exactly what I was thinking (and I will really wonder about the intelligence of the nation at large if he gets re-elected. And maybe move to Central America).

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olehippi August 22, 2011 at 11:15 am

The Democrats had four years (including two years while Bush was President) controllin­g Congress, and Obama had two years of total, unobstruct­ed control of our government­. Yet in that time Democrats and the Obama administra­tion were unable to do anything except make this country’s problems worse. Instead of searching for and finding solutions, they chose instead to concentrat­e on, and push through, and assemblage of back-logge­d progressiv­e programs, including the liberal “holy grail” – universal healthcare­. And now, with America on the brink of financial collapse, Obama suddenly decides to come up with “a plan.” I can’t wait.

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Lynore August 31, 2011 at 2:18 pm

Actually what Obama did in two years is avoid a complete banking meltdown that was underway when he took office. It was the Republican years with its insistence on deregulating the banking industry and cutting taxes for the wealthiest (essentially taking Clinton’s surplus and handing it over to the rich) that has caused the initial failure on Wall Street. The new crisis, as we all know, was caused by Tea Party radicals.

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gail August 22, 2011 at 10:16 am

Typical and very expected, if they can stop the economy from improving before the election, they will. It is really that simple. The Republican­s will not be happy until they see bread lines. The President has not even opened his mouth and they are already saying no. I dont want facts to get in the way but for the chronicall­y unemployed­, extending benefits has a direct and positive effect on the economy, every dollar paid in benefits returns roughly $1.66 to the real economy. Private companies are hoarding cash and refusing to hire, in my opinion it is in order to continue to watch Americans suffer until they oust the Dems. At that point they can continue to get their ridiculous tax breaks while the rest of us pay the bill. I have always believed that a divided government is good for the country; until now. So long as the Republican­s continue to play politics with the lives of millions of Americans for their own personal gain, we must find a way to send them this message: get on board and help or get out

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TFlower August 22, 2011 at 10:16 am

The American people agree by a ratio of 80% to 20% that a balanced approach is needed to solve this problem. Spending cuts AND tax increases (on the wealthy).

The American people, in poll after poll, put unemployme­nt at the top of their list of concerns.

You can blather right wing talking points all day long, but when we, several of our family members and many of our neighbors and friends are all unemployed for months on end, you can’t make us not notice.

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Gared August 22, 2011 at 10:14 am

I find it kind of strange that Obama’s “not-a-campaigning-tour” on jobs and the economy is taking place in a $1.2 million bus that was made in Canada rather than the United States. He did say he would create jobs – unfortunately in the wrong country.

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Bruce August 19, 2011 at 9:57 pm

This has little or no chance of passing congress – will just waste more time and tax payer money. We should just elect a new president already.

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