The plan is one of several economic initiatives that Obama is due to unveil this week aimed at generating some desperately needed US job growth and limiting predicted Democratic losses in November 2 congressional elections.
Administration officials say Obama will ask the US Congress on Wednesday to increase and permanently extend a tax credit for business research as a way of boosting job growth. The proposal would cost US$100 billion over 10 years.
But economists are skeptical any measures Obama takes now will make a significant difference in the US$13.2 trillion US economy and point out that investments in infrastructure typically do not stimulate the economy quickly.
A senior administration official acknowledged the infrastructure plan will not immediately stimulate the economy and that the first jobs it creates will be in 2011.
The plan would mean jobs “over the course of 2011 ... This is a six-year reauthorisation (of transportation projects) that is front-loaded,” the official said.
The White House also stressed that the plan would not add to the record government deficit, a key issue for voters, but Obama is likely to face strong skepticism from deficit hawks among opposition Republicans, who are hoping to take control of the House of Representatives in November.
Asked how the administration planned to pay for the infrastructure overhaul, a senior administration official said one option was to close tax breaks for oil and gas companies.
“One thing (Obama) is willing to put on the table is closing some of the tax loopholes for big oil and gas companies that currently get subsidies from taxpayers that they certainly don’t need. He thinks that is a perfectly good ‘pay-for’ to get this up and running,” the official said.
Struggling to persuade Americans that his economic policies are working, Obama will use appearances at a Labour rally in Milwaukee today and Cleveland on Wednesday to set the tone for the fall campaign. Today’s Labour Day holiday marks the informal start of the election campaign season.
The argument he will make on the trips and a rare White House news conference on Friday is this: Democratic policies have stopped the bleeding and produced some economic growth. Yes, more needs to be done, but Republicans would bring back ideas, he will argue, that propelled the country into the deepest recession in 70 years.
Under the infrastructure plan, Obama is proposing to:
- Rebuild 240,000km of roads;
- Construct and maintain 6,400km of rail;
- Rehabilitate or reconstruct 240km of runway and modernise the air traffic control system and;
- Set up an infrastructure bank to leverage private, state and local capital to invest in projects.
The White House said the bank would end the existing system of spending on infrastructure projects that was based more on “geography and politics than demonstrated value”.
Obama’s visit to Cleveland on Wednesday promises to be more strategic. It is the same city where the top Republican in the House, John Boehner, recently urged the president to fire his economic team.
Other items that could also be talked about by Obama are a payroll tax holiday, extending tax cuts for the middle class and increasing money for clean energy.
The Obama administration is scrambling for solutions to a stubbornly high 9.6 per cent unemployment rate and invigorate an economy whose recovery from the recession is in danger of stalling.
Democrats are facing an angry electorate that could end their one-party rule in Washington. Many experts believe Democrats could lose control of the House on November 2 and perhaps even the Senate, which would make it harder for Obama to advance his domestic agenda on issues like climate legislation. – Reuters
