Though he didn’t call it a second stimulus, President Obama this weekend asked Congress to pass legislation that amounts to much the same thing: extending some of the first stimulus bill’s programs and adding some of the White House’s new priorities such as small-business lending and a tax on big banks.
Five months from congressional elections and with the job picture still gloomy, Mr. Obama said the country is “at a critical juncture” economically. He asked lawmakers to pass a bill that would fund state and local government jobs and encourage small businesses to hire.
It’s a tall order for a Congress already feeling spending fatigue and uncertain what it has to show for last year’s $862 billion Recovery Act.
“If we allow these layoffs to go forward, it will not only mean hundreds of thousands fewer teachers in our classrooms, firefighters on call and police officers on the beat, it will also mean more costs helping these Americans look for new work,” Mr. Obama said in a letter to Congress late Saturday.
House Minority Leader John A. Boehner, Ohio Republican, said he found the late-night weekend letter odd, especially because he and other congressional leaders met with the president last week and the topic didn’t arise.
“Steny and I and other leaders were at the White House on Thursday and this subject never came up. There was no indication this was going to happen, and I’m asking myself, why is this happening on a Saturday night?” he said on ABC’s “This Week” program, where he appeared with House Majority Leader Steny H. Hoyer, Maryland Democrat, to spar over the direction of Congress.
During the past year, Congress extended benefits for the unemployed and renewed some stimulus programs such as “cash for clunkers,” but asking for additional aid to states and more business-boosting spending is a major step.
Democrats have been walking a tightrope by defending last year’s stimulus bill while the jobs picture remains grim. They have fought back every attempt Republicans made to cut Recovery Act spending and redirect the money elsewhere.
But now, cracks are beginning to appear.
On “This Week,” Mr. Hoyer suggested tapping unspent money from the stimulus fund to pay for the new spending.
“Money that has already been appropriated in the Recovery and Reinvestment Act that has not yet been spent could be spent now on these priority items,” he said. “Nobody wants to see 300,000 teachers laid off, or firemen and police laid off. That’s not good for the economy; it’s not good for our kids; it’s not good for the safety of our communities.”
Mr. Obama did not say where he wanted to find the money to fund state and local government jobs.
The federal government typically runs deep deficits - including a record $1.4 trillion in fiscal 2009 and projections nearing that figure for 2010. But most states cannot run operating deficits to cover regular yearly spending, so the federal government has stepped in to borrow against U.S. taxpayers and siphon money to states.
Still, state revenues have not picked up fast enough and tens of thousands of state and local jobs were lost in May, according to Labor Department statistics.
Since the beginning of 2008, the government has committed $1.1 trillion to direct spending and more than $800 billion in tax breaks, according to figures compiled on Stimulus.org, a website run by the Committee for a Responsible Federal Budget.
Mr. Obama wants the new package to contain $30 billion for small-business lending, and to fund the program with bailout money paid back by Wall Street firms. The fund, he said in a speech Friday in the White House Rose Garden, would help free up credit so that firms can expand and hire.
The president also wants to eliminate the capital gains tax on small-business investments and impose a new fee on big banks, which the administration calculates could raise nearly $100 billion.
Peter Morici, a business professor at the University of Maryland and former chief economist at the U.S. International Trade Commission, said Mr. Obama’s proposed small-business lending fund is “a drop in the bucket” compared with what is needed. With the estate tax scheduled to be reimposed at the end of this year, he said, small businesses will suffer even more.
“I can’t imagine a president with a more anti-small-business agenda than Barack Obama,” Mr. Morici said. “What you saw in the Rose Garden was the cynical enterprise of a cynical man. He simply doesn’t believe in the private sector, and it shows in his actions.”
The White House was reluctant to label the proposed new spending an extra stimulus, instead calling it part of a “transition” from the economic slump. Advisers are keen to focus on the small-business side of the equation.
David Axelrod, the president’s chief political adviser, rejected the notion that the first round of stimulus has been a failure. He said the economy has taken hits from the financial crisis in Greece but that a recovery is coming.
“I mean, there are mixed signals, and that’s what generally happens in recovery,” he said on NBC’s “Meet the Press” program. “But we don’t take anything for granted. We have to keep pushing forward, and we should not be careless about pulling out of our stimulative efforts too quickly.”