Obama announces $US50 billion in new spending to kick-start US economy
The Obama administration will spend $US50 billion over six years to construct and maintain roads and railways in a massive infrastructure project designed to kick-start the country’s economy and lower unemployment, which still remains at a shocking 9.6%.
However, it may be too late for Obama. Although he promises the new project will be fully-funded and will not add to the already bloated national deficit, mid-term elections are just two months away and analysts predict heavy losses for the Democrats.
If the Republicans win a majority, it will be more difficult for Obama to pass any infrastructure spending legislation.
"I am announcing a new plan for rebuilding and modernising America's roads and rails and runways for the long-term," Obama said at a press conference.
"I want America to have the best infrastructure in the world. We used to have the best infrastructure in the world - we can have it again, we are going to make it happen.”
The Labor Day announcement came after new jobless figures revealed that although private sector jobs increased by 67,000 during August, the unemployment rate still remains at a disappointing 9.6%. Obama believes the new plan will create thousands of new jobs and bring that unemployment rate down over the long-term.
“All of this will not only create jobs now, but will make our economy run better over the long haul,” Obama said. “It’s a plan that history tells us can and should attract bipartisan support.”
"We are going to rebuild 150,000 miles of our roads - that's enough to circle the world six times. We're going to lay and maintain 4,000 miles of our railways - enough to stretch coast-to-coast.”
Obama promised to work with Congress to make the programs fully-funded through setting up an infrastructure bank and eliminating tax breaks for oil and gas companies. The spending would also help fix airport runways and modernise the air-traffic control system, although spending for this is tied up in a bill already stalled in Congress.
And although the administration believes many of the projects will be front-loaded in 2011, spokespeople told Bloomberg the scheme is not a stimulus program and the spending is designed to sustain construction over the long-term. Unemployment in the building sector remains at 17%.
It is a last-ditch effort by Obama to revive the economy before the mid-term elections. The Democrats are facing a backlash from voters, with GDP growth slowing to just 1.6% in the June quarter and a deficit breaching $US1.4 trillion – voters believe Obama has done little over the past two years to improve the economy.
The president’s personal approval rating, according to the latest Gallup poll, is at 44% compared with an unfavourable of 49%. Another Gallup poll predicts US voters are more likely to vote for new GOP candidates rather than Democrats.
Republicans are already out in force against the plan, labelling it as yet another attempt by Obama to drive up the deficit and national debt, which is already at 57% of GDP. His previous stimulus plans were met with the same criticism.
Senate Republican leader Mitch McConnell, of Kentucky, said in a statement the “latest plan for another stimulus should be met with justifiable scepticism,” and added that “Americans are rightly sceptical about Washington Democrats asking for more money.”
Representative Geoff Davis also said in a press conference the previous initiatives have failed, and there is no reason to believe the new plan will perform any better.
“The nation’s unemployment rate has now been above 9% for 16 consecutive months. This is despite the fact that the Obama administration promised that the trillion-dollar ‘stimulus’ would keep unemployment below 8%,” Davis said. “So the question remains: where are the jobs?”
Meanwhile, the Washington Post reports Obama will call for a $US100 billion business tax credit this week designed to bring investment forward, with research and development grants to be included.
Republicans have also called on Obama to extend tax cuts for the wealthy, introduced by previous president George W. Bush in his first term.
Congress is expected to reconvene later this month, when it will work for three weeks before adjourning. Lawmakers expect to be put to work on the new infrastructure spending plan, but Obama is light on precedent – the House Appropriations Committee rejected a $US4 billion infrastructure bank plan in July.