Lawmakers leery of jobs bill price tag

Published 10:55 am Friday, September 9, 2011

In his address to Congress Thursday night, President Barack Obama challenged Congress to pass a $450 billion job creation bill, and local legislators say the government needs to explore options to push for an economic recovery.

The bill, meant to “jolt an economy that has stalled,” according to Obama, provides for a slash in Social Security payroll taxes, extends benefits for the long-term unemployed and creates labor jobs.

Rep. Jeanne Poppe, DFL-Austin, said the outcome of such a bill could be worth the $450 billion investment.

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“Everything needs to be put into context about what you input and what you expect in output,” Poppe said. “I don’t know that the (dollar amount) is too high or too low or too difficult, but we need to do what we can to try and turn around the economy.”

Rep. Rich Murray, R-Albert Lea, said the cost of the bill is much higher than he expected, and he’s not sure if it needs to be that high. While Murray said he supports specific parts of the bill, including payroll and small business tax cuts, but he will be skeptical until a payment plan is laid out.

Obama never estimated how many jobs would be created by his plan. Despite his promise that it would all be paid for, he has not yet released the details on how.

“Obama said he’s going to make deeper deficit reductions, and I’d like to see that in place before we agree to spend another $450 billion,” Murray said. “Many times government makes promises of spending money and offsetting it later, but later never comes.”

Republican House Speaker John Boehner said Obama’s ideas would be considered but the president should give heed to Republicans as well. “It’s my hope that we can work together,” Boehner said.

Poppe said it is the responsibility of the president and Congress to work together and make an attempt to boost the economy. She added that, unfortunately, there is “no one silver bullet that’s going to turn everything around.”

The newest and boldest element of Obama’s plan would cut the Social Security payroll tax both for tens of millions of workers and for employers, too.

For individuals, that tax has been shaved from 6.2 percent to 4.2 percent for this year but is to go back up again without action by Congress. Obama wants to deepen the cut to 3.1 percent for workers.

Obama would also apply the payroll tax cut to employers, halving their taxes to 3.1 percent on their first $5 million in payroll. Businesses that hire new workers or give raises to those they already employ would get an even bigger benefit: On payroll increases up to $50 million they would pay no Social Security tax.

“The people of this country work hard to meet their responsibilities. The question tonight is whether we’ll meet ours,” Obama said. “The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy.”

Obama proposed spending to fix schools and roads, hire local teachers and police and extend unemployment benefits. He proposed a tax credit for businesses that hire people out of work for six months or longer, plus other tax relief aimed as snaring bipartisan support in a time of divided government.

The White House put the price tag of Obama’s plan at $447 billion, with about $253 billion in tax cuts and $194 billion in federal spending.

Murray said the government, both state and federal, needs to quit overspending in an attempt to patch up finances. However, he said creating jobs is a necessary step to improving the economy.

“We can’t continue to overspend, that’s why we’re in this mess,” Murray said. “I definitely think $450 billion is a little much, especially when we’ll spend that today but reduce it later. That’s a huge burden.”

Mark Zandi, one of several economists asked by the White House to evaluate the president’s proposal ahead of his speech, said that if enacted it would add 1.9 million jobs and reduce the unemployment rate by one percentage point. Zandi, chief economist for Moody’s Analytics, said the expanded payroll tax cut would be responsible for the most increase in hiring, adding about 750,000 jobs. The tax cut for employers, he said, would add about 300,000 new jobs

As to paying for it, Obama will ask a special debt panel in Congress to find enough savings to cover the costs of his ideas. He says he’ll release specifics a week from Monday along with a proposal to stabilize the country’s long-term debt. Among them: raise taxes on the wealthy, an idea Republicans have already rejected.

Most of the $447 billion package would be spent in 2012. The White House says Obama’s as-yet-unrevealed plan for payment would spread the cost over the long term, likely over 10 years.

The president said deepening the payroll tax cut would save an average family making $50,000 a year about $1,500 compared to what they would if Congress did not extend the current tax cut.

“I know some of you have sworn oaths to never raise any taxes on anyone for as long as you live,” Obama said, a reference to the conservative tea party influence on many House Republicans. “Now is not the time to carve out an exception and raise-middle class taxes, which is why you should pass this bill right away.”

Obama’s jobs plan put a special emphasis on the long-term unemployed — those who have been out of work for six months or more. He repeated his calls for a one-year extension of unemployment insurance in order to prevent up to 6 million people from losing their benefits, and he proposed a $4,000 tax credit for businesses that hire workers who have been out of work for more than six months.

Sen. Dan Sparks, DFL-Austin, was unavailable for comment. Local 9 President Richard Morgan was also unavailable.

—The Associated Press contributed to this report.