It will only be paid for if a committee he can’t control does his bidding, if Congress puts that into law and if leaders in the future — the ones who will feel the fiscal pinch of his proposals — don’t roll it back.
Underscoring the gravity of the nation’s high employment rate, Obama chose a joint session of Congress, normally reserved for a State of the Union speech, to lay out his proposals. But if the moment was extraordinary, the plan he presented was conventional Washington rhetoric in one respect: It employs sleight-of-hand accounting.
A look at some of Obama’s claims and how they compare with the facts:
OBAMA: “Everything in this bill will be paid for. Everything.”
THE FACTS: Obama did not spell out exactly how he would pay for the measures contained in his nearly $450 billion American Jobs Act but said he would send his proposed specifics in a week to the new congressional supercommittee charged with finding budget savings. White House aides suggested that new deficit spending in the near-term to try to promote job creation would be paid for in the future — the “out years,” in legislative jargon — but they did not specify what would be cut or what revenues they would use.
Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today’s Congress cannot bind a later one for future spending. A future Congress could simply reverse it.
Currently, roughly all federal taxes and other revenues are consumed in spending on various federal benefit programs, including Social Security, Medicare, Medicaid, veterans’ benefits, food stamps, farm subsidies and other social-assistance programs and payments on the national debt. Pretty much everything else is done on credit with borrowed money.
So there is no guarantee that programs that clearly will increase annual deficits in the near term will be paid for in the long term.
OBAMA: “Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans, including many who sit here tonight.”
THE FACTS: Obama’s proposed cut in the Social Security payroll tax does seem likely to garner significant GOP support. But Obama proposes paying for the plan in part with tax increases that have already generated stiff Republican opposition.
For instance, Obama makes a pitch anew to end Bush-era tax cuts for the wealthiest Americans, which he has defined as couples earning over $250,000 a year or individuals earning over $200,000 a year. Republicans have adamantly blocked what they view as new taxes. As recently as last month, House Republicans refused to go along with any deal to raise the government’s borrowing authority that included new revenues, or taxes.
Details of President Barack Obama’s economic proposals, which would take effect next year if passed by Congress:
• The payroll tax would be cut in half on the first $5 million of businesses’ payrolls. The measure would cover 98 percent of U.S. businesses.
• Payroll taxes for businesses firms that increase their payrolls by adding new workers or increasing average wages would be eliminated. (The benefit would be capped at the first $50 million in payroll increases.)
• Payroll taxes would be cut in half for 160 million workers.
• New tax credits of $5,600 to $9,600 to encourage the hiring of unemployed veterans.
• Renovation of 35,000 public schools with new science labs, Internet-ready classrooms and other upgrades.
• Increased spending on roads, rail, airports and waterways.
• A “Project Rebuild” program to people to work rehabilitating homes, businesses and communities.
• An extension of unemployment insurance for 5 million more Americans.
• A $4,000 tax credit for companies that hire long-term unemployed workers.
• A new government fund to expand job opportunities for low-income youth and adults.
Source: the White House
OBAMA: “It will not add to the deficit.”
THE FACTS: It’s hard to see how the program would not raise the deficit over the next year or two because most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery. Deficits are calculated for individual years. The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion. Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.
OBAMA: “The American Jobs Act answers the urgent need to create jobs right away.”
THE FACTS: Not all of the president’s major proposals are likely to yield quick job growth if adopted. One is to set up a national infrastructure bank to raise private capital for roads, rail, bridges, airports and waterways. Even supporters of such a bank doubt it could have much impact on jobs in the next two years because it takes time to set up. The idea is likely to run into opposition from some Republicans who say such a bank would give the federal government too much power. They’d rather divide money among existing state infrastructure banks.