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Praise for, doubt over Obama jobs plan

Some say it could give economy lift; but few expect Congress to agree

By Erin Ailworth
Globe Staff / September 10, 2011

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Massachusetts businesses say the temporary tax cuts and other aid in President Obama’s proposed jobs plan could give a much needed lift to unemployed, struggling workers, and the sputtering economy, but it misses the mark on several fronts, such as helping more firms get access to the capital they need to grow.

“It seems to be an obvious omission,’’ said Bob Baker, president of the Smaller Business Association of New England. “If they really want to gear this toward small business, there should really be capital incentives there.’’

Reaction to Obama’s plan - unveiled Thursday in a prime time speech punctuated with his exhortation, “Pass this jobs bill’’ - remained mixed yesterday. Stocks plunged over new fears of a financial crisis in Europe and the possibility it could spread to the United States - a signal of the limits of national economic policy in a global economy. The Dow Jones industrial average lost more than 300 points, or about 3 percent. Other indexes shed at least 2 percent of their value.

The $447 billion plan aims to be a boost to an economy that is sorely in need of one. Last month, job creation ground to halt - US employers added no net new jobs - and the national unemployment rate remains stuck above 9 percent.

Obama’s jobs bill includes proposals to extend the payroll tax cut for workers approved at the end of 2010 for at least another year, while broadening it to reduce the share paid by businesses. It would include additional incentives for businesses to add or increase wages; an extension of unemployment benefits; and $140 billion for public works projects, aimed at creating jobs in the construction industry and revamping schools and roadways.

Some said the plan reminded them a little too much of the American Recovery and Reinvestment Act, widely known as the stimulus bill, that Congress enacted in 2009. While most economists believe the $800 billion initiative helped pull the economy out of recession, its impact on job growth is widely viewed as disappointing.

“It’s just kind of ARRA lite,’’ said Brian Bethune, an economics professor at Amherst College. “While the ARRA probably helped the economy, it didn’t really have the amount of punch that everybody thought it would. To come back with ARRA lite doesn’t make any sense.’’

Still, those who work in construction applauded the latest jobs plan for its focus on the hard-hit industry, which makes up about 4.5 percent of the US workforce, but accounted for roughly 20 percent of jobs lost in the downturn, according to The Associated General Contractors of America, a trade association based in Virginia.

“When you spend on investment in construction, you’re helping the local economy,’’ said Mark Erlich, executive secretary-treasurer of the New England Regional Council of Carpenters. “You’re putting money in the hands of local workers and local employers who spend their money in local restaurants and local stores.’’

Obama’s proposal to reduce the payroll tax, as well as a Republican plan to lower corporate taxes more broadly, could also lead to more job creation by small businesses, said Safi Bahcall, chief executive of Synta Pharmaceuticals Corp., a Lexington biotechnology firm with about 120 workers in Massachusetts.

“It could reduce the cost of hiring,’’ he said. “If you want to create jobs, you have to reduce taxes on small businesses.’’

Beth Williams, chief executive of Roxbury Technology Corp. in Hyde Park, was also hopeful that Obama’s proposed payroll tax cut would aid businesses like her firm, which has 65 employees. But she wanted more details about how incentives would offset some of the costs of hiring.

“There needs to be more clarity,’’ she said, but “I think it’s a great start.’’

Baker, of the Smaller Business Association of New England, said he thinks any jobs plan should include new funding for the Small Business Administration to buttress its loan guarantee program, which helps many small business get the bank financing they need to expand and hire.

“Out of a $450 billion package, why would you not recapitalize the SBA?’’ Baker asked.

Those in the hospital sector, a leading employer in many Massachusetts cities and towns, also had concerns. By signaling he would be open to revamping Medicare, the federal health insurance program for senior citizens, the president raised fears among health care providers of further payment cuts that could threaten jobs.

Reimbursements for Medicare account for nearly a third of all revenue at many Boston teaching hospitals and even more at some community hospitals. Dianne J. Anderson, chief executive at Lawrence General Hospital, the largest employer in Lawrence with 1,400 workers, said further Medicare cuts could hurt safety net hospitals like hers.

“There’s so much that we don’t know yet’’ about the budget talks playing out in Washington, she said. “But when you think about hospitals like us that are already low cost, we have to be adequately reimbursed.’’

Gus Faucher, director of macroeconomics at Moody’s Analytics, a forecasting firm in West Chester, Pa., said that while Obama’s plan identifies many of the weaknesses in the economy and has correctly focused on revitalizing hiring and consumer spending, he still had doubts about the plan’s ability to pass a contentious Congress.

“I think in a normal political environment, this could be something that both parties agree on, but [now] who knows?’’

Robert Weisman, Jenifer B. McKim, and Taryn Luna of the Globe staff contributed to this report. Erin Ailworth can be reached at eailworth@globe.com. Follow her on Twitter @ailworth.