President Obama pledges $450bn for jobs and to cut payroll taxes in half

Friday, 09 September 2011 10:22

President Barack Obama has delivered details of a $450 billion stimulus package of spending initiatives and tax cuts aimed at reducing unemployment and strengthening the US economy.

The President gave the speech to US Congress yesterday afternoon and the centrepiece was a pledge to reduce payroll taxes. This involves a cut in the Federal Insurance Contributions Tax, a tax on employees and employers that is used to pay for health care and welfare benefits for workers who have retired.

It is an extension of a tax cut that has already been implemented but is due to expire in December. Last year the tax rate was cut from 6.2 per cent to 4.2 per cent, President Obama wants to cut it even further, so that workers pay just 3.1 per cent and extend the cut to employers, at a cost of $240 billion.

He also gave details of more support to teachers and fire-fighters and tax cuts to support employment. Disappointing jobs data released last week showed that 9.1 per cent of Americans are unemployed and the issue is expected to be a central part of the next campaign to get into the White House.

President Obama peppered his speech with calls for Congress to act quickly and pass the bill. The strategy behind his speech is to position himself as the creator of jobs. If the Republicans support the reforms, all well and good, if they vote against them, the President can say that they are voting against jobs for Americans and economic recovery.

Earlier in the summer, the two sides, Democrats and Republicans were unable to agree on a policy to help reduce the US deficit. This resulted in a respected credit agency, Moody’s, stripping the US of its triple-A credit rating.

The details behind yesterday’s announcement will be revealed on Monday 19th. In his speech President Obama said: “A week from Monday, I'll be releasing a more ambitious deficit plan - a plan that will not only cover the cost of this jobs bill, but stabilise our debt in the long run."

It is unlikely that the Republicans, who control the House of Representatives, will pass the bill. However, Republican Congressman John Boehner, whose support is seen as crucial, said that the plans “merit consideration.”

In the speech the President urged politicians to “stop the political circus”. He said that the proposals contained in the job plan included nothing that wasn’t already supported in principle by both Democrats and Republicans.

He said: "The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working."

"The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy."

"It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed."

The proposed bill also aims to give $85 billion in federal government aid to local and state governments to be spent on key workers. A further $50 billion has been earmarked to be spent on infrastructure, to upgrade schools and airports.

According to the President, every US working family will see a tax cut of $1,500 if the bill is passed and employers would receive a $4,000 tax credit if they gave a job to someone who has been out of work for six months or longer.

The President would like to submit the bill to Congress next week. However, he needs to gauge the likely support. Mr Boehner, the Republican speaker of the House of Representatives said that he hopes the two sides can work together. Some Republicans have said that they would support part of the plan, but others have said they will oppose the whole package.

Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.

Follow Myfinances.co.uk on Twitter: @news_myfinances

• Tags:
• jobs
,
• news
,
• president obama
,
• taxes
,
• us debt crisis
,
• us economy