Dissecting Obama's job plan

Dissecting Obama's job plan

September 18th, 2011 by Ellis Smith in Business Around the Region


One-year payroll tax cut for employers:

• Federal plan - cut the payroll tax in half to 3.1% for employers on the first $5 million in wages

• In Tenessee, 100,000 firms will receive a payroll tax cut

• In Georgia, 180,000 firms will receive a payroll tax cut

One-year payroll tax cut for workers:

• Federal plan - cutting workers payroll taxes in half next year

• In Tennessee, a typical household with a median income of around $41,000, will receive a tax cut of around $1,270

• In Georgia, a typical household household with a median income of $43,000 will receive a tax cut of around $1,330

Transportation spending:

• Feds spend - $50 billion for highways, transit, rail and aviation

• Tennessee gets $619 million that could support about 8,000 jobs

• Georgia gets $1.04 billion that could support 13,600 jobs

Government employee retention:

• Feds spend $35 billion to prevent layoffs of up to 280,000 teachers, and tens of thousands of police and firefighters

• Tennessee gets $596 million in funds to Tennessee to retain up to 9,400 educator and first-responder jobs

• Georgia gets $956.7 million to retain up to 12,800 educator and first responder jobs

Modernize public schools:

• Feds spend $25 billion in school infrastructure spending for at least 35,000 public schools

• Tennessee gets $474 million to support as many as 6,200 jobs

• Georgia gets $909.5 million to support as many as 11,800 jobs

Rebuild empty neighborhoods:

• Feds spend $15 billion to rehab and refurbish hundreds of thousands of vacant and foreclosed homes and businesses

• Tennessee gets $56.8 million to refurbish local communities, in addition to funds that would be available through a competitive application

• Georgia gets $543 million to refurbish local communities, in addition to funds through competitive application

Community colleges:

• Feds spend $5 billion for facilities modernization at community colleges

• Tennessee gets $61.8 million in the next fiscal year for its community colleges

• Georgia gets $140.6 million in the next fiscal year for its community colleges

The jobless:

• Federal plan extend unemployment insurance, train low-income youth and adults

• In Tennessee - 34,600 people retain their benefits, 2,700 adults and 15,600 youths placed back in jobs

• In Georgia - 77,700 peole retain their benefits, 4,000 adults and 16,100 ouths placed back in jobs


• $405 billion - Eliminates itemized deductions for individuals making more than $200,000 or families making more than $250,000, such as home mortgage interest, state and local property taxes and charitable donations

• $41 billion - Increases taxes paid by oil and gas companies

• $18 billion - Raises taxes on investments, taxing capital gains as regular income for professional investors

• $3 billion - depreciates corporate jets at the same rate as commercial airliners, in seven years instead of five

Source: The White House

Whether officials call the newest economic Band-Aid a "jobs bill," a "growth plan" or "stimulus," Chattanooga-area businessmen say they've grown weary of new government programs and doubt that this one will have much effect on job growth.

"It's all just a temporary measure, so if anything it's going to give temporary results," said James Richards, who co-owns several Five Guys Burgers and Fries restaurants in the area.

The White House says that the proposal will add $447 billion in temporary federal outlays, including a $70 billion one-year payroll tax cut for both workers and employers, as well as $202 billion in new spending for infrastructure, education and the unemployed.

But the bill is arguably this recession's third "stimulus," and is smaller than previous spending bills under Presidents Bush and Obama that left unemployment above 9 percent. Unlike previous measures, the year of spending will be paid for by increased taxes on investments, higher taxes for oil and gas companies and sharply lower tax deductions for families earning more than $250,000 per year - tax increases would be permanent after they take effect in 2013, according to the White House.

Richards said the entire bill misses the point. He's not interested in new changes to the tax code, because he still doesn't know how the last batch of new rules voted in by legislators will affect his Five Guys franchises.

"We're still waiting for the regulations to be written, on Obamacare specifically," he said. "I'm in the position where I could add another manager, but I don't want to add one and then in 12 to 18 months have to let him go because I can't afford him, so we're just adding the absolute minimum that we need."

Bruce Hutchinson, an economist at the University of Tennessee at Chattanooga, said that while short-term measures encouraging hiring will have some effect, it will be "minimal in terms of stimulating the economy."

"When a business hires someone, they're not thinking one or two years, they're thinking do we need this person long-term," Hutchinson said.

That's the same position taken by Chattanooga's largest employer, BlueCross BlueShield of Tennessee, where the new law would have no effect on hiring, said spokeswoman Mary Danielson.

Nor would the law affect small businesses like Insane Paintball, said owner Jared Powell, or fast-growing startups like the Lamp Post Group, according to partner Jack Studer.

Michael Fillauer, president of prosthesis manufacturer Fillauer LLC, said that "any cut to the payroll tax is welcome," but he's more concerned with the corporate tax rate and Tennessee's high sales tax, he said.

"I can't say that it's a bad thing to cut the payroll tax, but there are more ways to stimulate the economy," he said.

One of those would be to reduce the legal cost of doing business, through the simplification of regulations and tort reform, he said.

"People don't see that the amount of money we spend on lawyers and legal fees is part of the cost of doing business," Fillauer said.

Pay Raises, Road Projects

But the new law will put more money in workers' pockets next year and it does have a chance to help companies in the infrastructure and real estate sectors.

The average family will see $11 more a week in paychecks if President Barack Obama's jobs bill passes. Obama wants to further reduce Social Security taxes another 1.1 percent for 2012. For the average family that would mean an extra $572 a year.

As consumers spend their extra money, White House economists hope that will boost overall economic activity and hiring to support the extra sales.

Stephen Anderson, vice president of asphalt giant Astec Industries, said road building companies also should benefit by the increase investment infrastructure.

"When our customers have more confidence about what is going to be funded, they are going to be more prone to invest in capital equipment, but when there is an unknown, customers only buy what they have to have at the time," Anderson said.

Any additional capital investments would translate into sales for Astec, he said. But the overall change in revenue will be a drop in the bucket for the international company, even if the new infrastructure spending takes place immediately.

"Of the 4 million miles of roads, only 165,000 are federal highway systems," he said. "While highway bills get a lot of attention because the numbers are very tangible, when you look at the actual lane miles that it comprises, it's not that big."

The real favor to businesses big and small, Anderson said, would be to "take the uncertainty out of the equation for our customers."

Businessman Albert Waterhouse, who runs a public relations firm in town and plans to hire another employee anyway, is certain of one thing - he knows what he would do if the bill passed.

"What I would do is probably tell my new employee that I'm gonna hire you in, but these incentives are going to allow me to to hire you for less, so I'm going to turn this into a bonus for the year."