(From the Wall St Journal)
WASHINGTON -- Increasingly alarmed over bleak employment forecasts, the Obama administration is searching for ways to boost job growth without adding to the federal budget deficit.
White House economist Christina Romer, in remarks that ratcheted up the administration's pessimism, told a congressional panel Thursday that "labor market conditions will remain painfully weak through 2010." She said that the jobless rate, which hit 9.8% last month, would likely remain "at its severely elevated level" for at least another year.
In testimony before the congressional Joint Economic Committee, Ms. Romer said the federal stimulus package will have its greatest effects this year and "will likely be contributing little to growth" by the middle of next year. She also warned that the growing clamor to address the high unemployment rate had to be balanced against the rising tide of red ink.
Obama aides and Democratic lawmakers face sharp restraints as they weigh new options for job creation heading into an election year. They are loath to take steps that would suggest their $787 billion stimulus package isn't sufficiently effective. And they are wary of adding to the budget deficit, which for the fiscal year ended Sept. 30 topped $1.4 trillion, a level not seen since World War II.
Most of the proposals being considered would extend programs already under way. The White House now appears ready to back the extension of an $8,000 tax credit for first-time home buyers. Many Democratic lawmakers support the idea, though the program's credibility has been undermined by reports of thousands of fraudulent and erroneous claims.
Obama aides have also embraced extending enhanced unemployment-insurance benefits, which Congress is likely to approve over the next few days, and subsidies for the unemployed to purchase health insurance.
The White House is also moving to inject capital into small businesses. President Barack Obama proposed legislation Wednesday to raise the ceiling on certain Small Business Administration loans. The White House also wants Congress to approve steps to provide lower-cost capital to community banks. Both would use existing funds from the Troubled Asset Relief Program.
Another White House proposal would redeploy TARP funds to help struggling rural and urban communities by offering small-businesses loans at 2% interest for up to eight years.
Members of the White House economic team are now meeting twice a week, on average, to discuss job creation, according to a senior administration official who participates. The discussions are "lively," with sharp differences over what will work quickly and effectively, this person said. The administration plans to eschew any larger package of jobs measures in favor of a series of smaller programs.
But skepticism remains high over whether any of the measures under consideration would spur significant job creation. Business executives are calling for more dramatic moves, including passage of a proposed six-year, $500 billion highway infrastructure bill, which some Democrats want to see funded through an increase in gasoline taxes.
"The reality for our industry is that the stimulus bill has not been a jobs bill," Ron DeFeo, chief executive of Terex Corp., said in an interview. With construction down sharply across the U.S., Terex, one of the world's largest construction-equipment makers by sales, has laid off 4,000 U.S. employees since the summer of 2008. Mr. DeFeo, who says he plans to be "very judicious" in rehiring, has been lobbying lawmakers to move ahead quickly on the highway bill.
The Obama administration has called for holding off on a big highway bill until next year, partly to avoid Republican portrayal of the bill as another stimulus package.
The White House, meanwhile, has been seeking ideas recently from the private sector, including from a group of high-level CEOs who are in frequent contact with Mr. Obama's top economic advisers.
Dan DiMicco, chief executive of steelmaker Nucor Corp., was part of a private CEO lunch with Mr. Obama in late July. He and his staff have since advised the White House to redirect federal stimulus money into more immediate infrastructure projects.
"The reality is that we have to find ways to create millions and millions of new jobs over the next five years," Mr. DiMicco said.
Other CEOs have called for corporate tax cuts to spur job growth, an avenue the administration appears unlikely to take.
In Congress, many Democrats are reluctant to take on more costly initiatives, preferring to wait a month or two before deciding whether to push through bigger-ticket ideas. Rep. Chris Van Hollen (D., Md.) said lawmakers increasingly agree that some intermediate steps must be taken, including the unemployment-insurance extension, the health-coverage subsidy and the home buyers' tax credit. "As for additional bigger-ticket items, that will depend on how the economy develops," Mr. Van Hollen said.
But Democrats worry about heading into an election year with joblessness so high. House Speaker Nancy Pelosi -- who said Wednesday that "the No. 1 subject on the minds of the American people" was "jobs, jobs, jobs" -- has asked the chairs of committees controlling spending for ideas on quick job creation.
