In a speech later today, President Barack Obama will propose spending more on job creation efforts.
President Barack Obama, seeking to offer fresh economic proposals that could pass a gridlocked Congress, will call for a restructuring of business taxes so long as the initial revenue generated goes toward job creation.
Obama, in a speech later today in Chattanooga, Tennessee, will argue that years of budget fights have diverted attention from the need to help middle-income Americans recover from the recession, according to administration officials.
As an alternative to seeking quick passage of the deficit- reduction formula that has eluded lawmakers for two years --some combination of increased tax revenue and entitlement curbs -- Obama will propose spending more on job creation efforts. The initiatives would include help for manufacturing, worker training, and infrastructure improvements.
The programs would be funded with a one-time transition fee associated with the $2 trillion in foreign earnings that are currently held overseas, said an administration official who asked not to be identified to discuss details before the speech.
The officials declined to specify how much money would be generated and didn’t detail how it would be structured. The proposal marks a shift for Obama, who has previously called for rewriting individual and business income tax law together.
"The President will call on Washington to work on a grand bargain focused on middle class jobs by pairing reform of the business tax code with a significant investment in middle class jobs," said Dan Pfeiffer, a senior adviser to the president.
Obama, in February 2012, proposed reducing the top corporate rate for most companies to 28 percent from 35 percent. The plan would eliminate tax breaks and change core tax code features such as interest deductibility. He’s also proposed lowering the rate for manufacturers to 25 percent and expanding and making permanent the research-and-development tax credit.
Today’s speech, at an Amazon.com Inc. distribution center, is the latest in Obama’s campaign-style effort to turn attention back to the economy as he heads into fresh budget fights with Congress over funding the government and raising the debt ceiling.
While officials said Obama isn’t abandoning efforts for long-term deficit reduction, they said the new proposal is an acknowledgment that talks toward a long-term fiscal solution are at an impasse.
The idea of taxing approximately $2 trillion in accumulated overseas earnings as a transition to a new system resembles a proposal from Representative Dave Camp, chairman of the House Ways and Means Committee. Spending the proceeds on jobs programs, though, may run counter to the Michigan Republican’s goal of a revenue-neutral approach.
Camp’s 2011 draft would require companies to pay 5.25 percent on all offshore funds, regardless of whether they are brought home. He plans to include that in legislation he wants to move through his committee this year.
Under the current tax system, U.S.-based companies must pay the U.S. rate of 35 percent on all the income they earn around the world. They get tax credits for payments to foreign governments and don’t owe the U.S. unless they bring the profits home. Companies such as Caterpillar Inc. and United Technologies Corp. have called for the U.S. to switch to a so-called territorial system that wouldn’t tax most future offshore earnings.
Camp’s plan would use the one-time tax to finance the territorial system, which costs the government some revenue each year. He hasn’t released a detailed revenue estimate; the loss of the one-time money, which is payable over eight years, has the risk of creating a budget hole. Obama has opposed a pure territorial system.
Both Camp and Obama have resisted a one-time holiday for repatriation, which companies such as Cisco Systems Inc. and Google Inc. have preferred and lobbied for in 2011.
Obama will make a rare trip tomorrow to Capitol Hill where he’ll meet separately with Senate and House Democrats.
Former Commerce Secretary Carlos Gutierrez, who served under President George W. Bush, said today that Obama’s latest proposal is nothing more than a tax increase.
"They’re trying to raise revenues, which is the last thing I think the government needs," Gutierrez said on Bloomberg Television’s "Surveillance" program.
"There’s confusion in this administration regarding who creates jobs," the former chairman of Kellogg Co. said. "They think, they really do think, that the government’s role is to create jobs," he said, referring to plans for accelerated public works projects, including roads and bridges.
"There’s a fundamental misunderstanding on how the economy works," Gutierrez said.
Even as Obama argues that a rapidly decreasing deficit has pushed the issue of jobs to the forefront, the congressional calendar may dictate otherwise. When lawmakers return in September from their August recess, they and the president will confront a series of decisions affecting the economy, including determining federal spending levels and raising the government’s $16.7 trillion debt limit.
Republican lawmakers are demanding spending cuts in exchange for raising the debt limit while Obama has pushed for spending increases for infrastructure improvements, expanded educational opportunities and more support for research -- a recurring drama in fiscal negotiations since 2011.
Officials said Obama was looking to break that cycle to help Americans still reeling from the economic meltdown. Even as the economy continues to expand and add jobs four years into the nation’s recovery from its worst recession since the Great Depression, Americans at the middle of economic ladder haven’t regained lost prosperity.
The economy grew at a 1.8 percent rate during the first three months of the year, more slowly than its 2.5 percent average pace during the last two decades. The unemployment rate, at 7.6 percent in June, remains above its 6 percent average over the past 20 years.
While the benchmark Standard & Poor’s 500 stock index is up more than 18 percent this year and has almost doubled since Obama took office in 2009, the median household income of $51,500 in May remains 5 percent lower than in June 2009, the official end of the recession, according to estimates by Sentier Research.
Obama today will argue why it’s important for companies to invest in a higher-earning workforce. As Amazon boosts hiring, median pay at the company’s packaging centers is 30 percent higher than traditional retail jobs, according to the retailer.
Yesterday, Amazon announced that it was adding more than 5,000 full-time jobs at facilities like the one Obama is visiting. The company plans to open five more warehouses this year after adding 20 last year. Chief Executive Officer Jeff Bezos has sought to open centers full of products closer to consumers, to reduce shipping costs and speed delivery.
During a speech last week in Galesburg, Illinois that kicked-off his renewed focus on the economy, Obama foreshadowed today’s offer.
"If you’re interested in tax reform that closes corporate loopholes and gives working families a better deal, I’m ready to work," Obama said July 24. "But you should know that I will not accept deals that don’t meet the basic test of strengthening the prospects of hard-working families. This is the agenda we have to be working on."