WASHINGTON — For a lot of small businesses, there
didn’t seem to be much President Obama could have said to sway them that
Washington was able to help foster new jobs, but some liked his
proposed $447 billion package of tax cuts and infrastructure spending —
with reservations.
Primarily, they doubted that he
stood a realistic chance of getting the program through Republican
opposition in Congress. They also worried about what the stimulus he
unveiled Thursday would mean for the nation’s deficit.
“I
love it from my standpoint, but looking at it from the government’s
standpoint, can they afford to do that?” said Kim Megonigal, chairman of
Kimco Staffing Services in Irvine, Calif., which operates 40 offices in
California.
Under Obama’s plan, Megonigal stands
to save $155,000 from the 50 percent payroll tax cuts of his existing
employees. Additionally he would save as much as about $6,600 in payroll
taxes for every new employee he adds as long as that represents overall
growth in payroll up to $50 million from the prior year.
Obama’s
package prompted comparisons to the $787 billion American Recovery and
Reinvestment Act passed in early 2009. That stimulus package, analysts
said, helped pull the economy out of recession, but was seen as too
complicated and producing too little bang for buck — a perception
fostered in part by the administration’s inaccurate forecasts about how
high unemployment would go.
Obama’s new plan was designed to be much simpler.
“I
think they’ve learned from the Recovery Act and tried to make it easier
to implement it and to be more effective,” said Mark Zandi, chief
economist at Moody’s Analytics, a research and forecasting firm.
Zandi
estimates that Obama’s new ideas, if adopted in their entirety, would
add 2 million additional net jobs in 2012 and bring the unemployment
rate to about 8 percent by election time next year, down from 9 percent
if there was no policy change.
“It’s a bold effort to provide more support to the economy, certainly bigger than widely anticipated,” he said.
The
plan offers about $245 billion in tax relief for individuals and
businesses, going well beyond the payroll tax holiday Congress enacted
last year. Obama would expand that cut for workers, providing a $1,500
tax savings to the typical American family that saw a cut of $1,000 in
the first round.
The proposal would also slash the
payroll tax in half for businesses with payrolls of up to $5 million,
and declare a complete payroll tax “holiday” for employers who hire new
workers or give wage increases to current employees. All companies would
be eligible, but the break would be limited to the first $50 million in
new payroll spending.
But the package is
conspicuously absent of any measures to provide direct relief to
distressed homeowners and the depressed housing market, a problem many
experts believe is central to the sluggish recovery.
The
president’s plan also holds another potentially big risk down the road:
The economic benefits in the short term will turn into drags in 2013
and the following year as the stimulus fades. And if the private-sector
economy hasn’t gathered enough steam by then, the government could be
looking at the possibility of another recession or left with the tough
choice of having to renew or increase fiscal spending.
Business trade groups were far less enthusiastic about Obama’s plan.
Marty
Regalia, chief economist for the U.S. Chamber of Commerce, said the
proposed payroll tax cut fell short of broader tax reform needed.
“If
you are trying to stimulate the economy and create jobs, there are
better ways to do it, starting with a complete restructuring of the tax
code for individuals and businesses,” he said.
William
Dunkelberg, chief economist for the National Federation of Independent
Business, a small-employer lobbying group, doubts it will push many more
small companies to add workers.
Small firms
usually have led the hiring coming out of recessions, but this time
they’ve been on the sidelines. Dunkelberg said that was mainly because
they were not generating enough sales and don’t have confidence in the
future.
Obama also didn’t change Kurt Lustig’s mind.
“As
a manufacturer, we create jobs when we are able to create or fill
demand for our guitars,” said the co-founder of Taylor Guitars in El
Cajon. “If demand is not there, we’re not going to be hiring.”
And
what would create demand, he said, would be a “higher confidence on the
part of the electorate and a willingness to spend money” — things now
lacking, he said, largely because of bad government policies.
At
Kimco Staffing, Megonigal hired workers in the first half of this year,
but like many other companies, that stopped in early summer as the
economy and outlook turned increasingly worse. Still, he liked what he
heard from the president.
“It’s a wonderful way to
incentivize business (to hire) because you can invest at a lower cost,”
Megonigal said. “That’s amazing. I wasn’t expecting anything like this.
It just seems too rich. I don’t get how you do it. I mean you have to
balance the budget.”
Russell Goldsmith, chief
executive of City National Bank in Los Angeles, didn’t hear anything in
Obama’s plan that he figures would help his bank specifically.
Nonetheless, he praised the tone and the substance of Obama’s speech.
“I’m
particularly enthused about the president’s focus on infrastructure and
rebuilding America,” he said. Obama’s plan calls for spending tens of
billions to modernize schools and improve transportation, among other
projects.
“I was very pleased to see the president
very energetically focus on the growth of jobs and the economy,” he
added. “I see it as a shot in the arm to jump-start the U.S. economy.”
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©2011 the Los Angeles Times
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