Obama promised further job creation and hoped for bipartisan participation as he addressed a joint session of congress and the nation.
In his usual rhetorical style, he found a phrase to repeat Thursday night. “Pass this jobs bill,” he said over and over referring to the American Jobs Act – the idea for which came from a Texas republican and a Massachusetts democrat.
The bill is nothing more than a drop in the bucket, though, according to Michael Walden, William Neal Reynolds distinguished professor & extension economist.
If the bill passes, unemployment insurance will be extended for another year.
“[The proposed program] will not solve the unemployment problem,” Walden said.
The biggest problem facing the American economy housing, and although the bill addresses the problem of fallen home prices and underwater loans, it did little, Walden said.
A mortgage is underwater when the home is worth less than the amount owed on the mortgage. Many homeowners since the bursting of the housing bubble chose strategic default – they walked away from their mortgages and their homes despite financial consequences and creditworthiness effects.
Amidst heavy congressional infighting, federal legislators reached an agreement in July to “cut government spending by about $1 trillion over the next ten years,” according to Obama’s speech. The agreement also called for $1.5 trillion more in cuts to be passed by Christmas.
As he said in his speech, Obama wants to use all of those funds to pay for the proposed jobs bill. He is also releasing a “more ambitious debt plan” Sept. 19. With all of the cuts, “[the jobs bill] will be paid for.”
According to a fact sheet sent out by the White House press service, the bill would cost a total of $447 billion. The reason why Obama wanted to go with a “more ambitious” spending cut plan could not be readily determined, but the idea would appease republicans.
However, Americans lost $8 trillion when the housing bubble popped, according to Walden.
“Homeowners have lost $8 trillion collectively; that’s trillion with a T,” Walden said.
Obama addressed the problem of lost value – allow homeowners to refinance their mortgages. Rates are historically low. The actions of the Federal Reserve, as well fiscal efforts by the federal government since 2007-08 have propped up the economy and kept rates on all credit low.
“And to help responsible homeowners, we’re going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% — a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices,” Obama said in his speech.
Walden suggested an alternative Obama did not mention.
“If there were something that I would liked to have seen that would have been very dramatic,” Walden said, “I don’t think Obama tapped into the resources, but some economists have talked a public partnership in ownership.
“For example, if your house is worth 20 percent less than your mortgage, this public entity will come in, and in essence take ownership in that 20 percent so you are no longer underwater.”
However, the program would cost a lot of money, and would probably require the help of the Federal Reserve, Walden said.
Obama lost his battle with GOP representatives over the summer. He wanted to raise taxes on the wealthiest individuals and the most successful businesses. He again called on congress and republicans to raise taxes on those most fortunate.
The majority of republicans, however, especially the Tea Party freshmen, were elected on the platform of never raising taxes on anyone – ever.
Aaron Dancy , a senior in chemistry and chairman of the North Carolina State University College Republicans, said although he would have to do more research, tax breaks to businesses proposed by the bill were a good idea.
The bill proposes a $4,000 tax credit to businesses that hire workers who have been unemployed for more than six months.
“If the person were out of work for more than six or nine months, then they are not paying taxes. It may be a good deal to take a couple grand loss and get them to pay something than not collect anything,” Dancy said.
