The U.S. unemployment rate has hovered around 10% for months – with no real signs of improvement. As American workers grow increasingly impatient, the U.S. government is running out of options to help the job market.
But with midterm elections approaching, U.S. President Barack Obama is trying to show voters there's hope in resolving the stubbornly high unemployment rate. On Monday, he unveiled a six-year infrastructure plan that would invest billions in transportation projects and create a "substantial" number of jobs.
The government would supply $50 billion off the bat to rebuild 150,000 miles of roads, 4,000 miles of rail and 150 miles of runway, plus modernize the air traffic control system. The plan also sets up a government-run infrastructure bank to finance the projects, combining tax dollars with private investment for funding.
"[The bank] will change the way Washington spends your tax dollars, reforming the haphazard and patchwork way we fund and maintain our infrastructure to focus less on wasteful earmarks and outdated formulas, and more on competition and innovation that gives us the best bang for the buck," President Obama said.
Experts estimate the total six-year cost could run from $350 billion to $500 billion, but President Obama promised the expenses would not be tacked on to the record-high U.S. deficit. To pay for the plan he proposed eliminating business tax cuts and subsidies for the oil-and-gas industry, saving $200 billion over two years.
But wary voters are likely to question any program that could increase government spending, despite President Obama's pledge to find the money.
Republicans, eager to shoot down anything that could garner support for Democrats before midterm elections, have been quick to attack the plan. Senate Republican leader Mitch McConnell, R-KY, referred to it as a "last-minute, cobbled-together stimulus bill."
"We don't need more government 'stimulus' spending – we need to end Washington Democrats' out-of-control spending spree, stop their tax hikes, and create jobs by eliminating the job-killing uncertainty that is hampering our small businesses," said Republican House of Representatives leader John Boehner, R-OH.
Republicans are poised to gain a substantial number of seats in Congress in November's elections, and have been loudly criticizing President Obama's unsuccessful stimulus spending and failed attempts to lower unemployment.
Transportation experts say 35,000 jobs are created for every $1 billion that's invested in transportation construction. That means that this plan could offer a significant boost to employment, although not until 2011.
U.S. unemployment remains at 9.6% – a rate that some economists fear could continue to grow. Bank of America Merrill Lynch (NYSE: BAC) analysts expect unemployment to peak at 10.1% next year.
Many experts agree that President Obama has few options to choose from to lift the weak job market.
President Obama will announce some additional measures on Wednesday, including one that will permanently extend a tax credit for business research and development, costing $100 billion over 10 years. He also is considering tax cuts for some businesses to encourage hiring, and extending long-term unemployment insurance again to protect those having trouble finding work.
But without Republican and voter support, it could be too late for President Obama to get very far with any of his proposals.
"After the administration pledged that a trillion dollars in borrowed stimulus money would create 4 million jobs and keep the unemployment rate under 8%, their latest plan for another stimulus should be met with justifiable skepticism," said Rep. Mitch McConnell.
This brings us to next week's Money Morning "Question of the Week How do you feel about the U.S. government's proposals to boost hiring? Do you like the proposed transportation plan? Which measures are most likely to fall short of the government's promises and which do you think can succeed? What else would you like to see the government do to lower the unemployment rate?
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News and Related Story Links:
- The New York Times:
Obama Offers a Transit Plan to Create Jobs
- Money Morning:
Slight Job Gains Won't Shrink the High Unemployment Rate
- Money Morning News Archive:
Question of the Week Feature