By Mike Dorning and Nicholas Johnston
Oct. 6 (Bloomberg) -- President Barack Obama is considering a mix of spending programs and tax cuts to respond to widening job losses that would amount to an additional economic stimulus without carrying that label.
The discussion of the initiatives, including a boost in transportation spending and an extension of an expiring tax credit for first-time homebuyers, comes as the White House is balancing rising concern about unemployment and a budget deficit the Congressional Budget Office estimates will total $1.6 trillion for 2009, and $1.4 trillion in 2010.
Administration officials have told allies in Congress that a broader transportation bill, and extensions of a homebuyer tax credit and unemployment benefits are all on the table, a Senate aide said.
Representative Chris Van Hollen of Maryland, who chairs the Democratic Congressional Campaign Committee that is tasked with holding the party’s House majority in next year’s midterm elections, said additional transportation funding would be popular among Democratic lawmakers.
“If there was to be another round of stimulus, additional infrastructure would be at the top of the list,” Van Hollen said in an interview. Money for roads, transit and bridges would be a priority.
Contradictory Missions
In considering the measures, the administration has to reconcile two potentially contradictory missions: combating rising unemployment through government intervention and the need to hold deficits down.
White House Press Secretary Robert Gibbs yesterday highlighted those political sensitivities, saying there “were no plans” for a second stimulus like the $787 billion package passed earlier this year. Instead, he said, the administration is looking at “extensions” of existing programs.
“The economic team is certainly looking at and working on any way that we can create more jobs,” Gibbs said.
The items under consideration include an increase in infrastructure spending through expiring transportation legislation that Congress must reauthorize in the coming months, the Senate aide said, speaking on condition of anonymity.
Other steps being weighed include an extension of a tax credit of up to $8,000 for first-time homebuyers that is due to expire later this year, and a renewal of a tax benefit for net operating losses that would benefit small businesses, the aide said.
‘A Stimulus’
“Clearly these things are a stimulus,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, who has called for more stimulus spending. “There’s no two ways about it.”
The Obama administration isn’t near a final decision on additional measures, said Jen Psaki, a White House spokeswoman.
“As they continue to explore the best options, any notion that we are any farther along than preliminary discussions about new proposals is wildly inaccurate,” she said.
The Labor Department reported last week that unemployment reached 9.8 percent in September, the highest level since 1983. Nonfarm payrolls dropped by 263,000, a steeper drop than economic forecasters had expected.
At the same time, the federal deficit has risen sharply because of this year’s stimulus package and bailouts for the banking industry, auto industry and Fannie Mae and Freddie Mac. While the Obama administration has pledged that a health-care overhaul it is pushing through Congress won’t widen the deficit, it has stirred concerns among fiscal conservatives.
‘More Difficult’
“More of a stimulus package is much more difficult at this point than it was in February,” said Julian Zelizer, a professor of public affairs at Princeton University in New Jersey. “The deficit can become a political straitjacket to the Democrats.”
Obama and his aides have stressed that they expect employment growth to lag in an economic recovery. They now confront rising joblessness as they move toward midterm elections in November 2010.
Since 1945, the party that controls the White House has lost an average of 16 House seats in a president’s first midterm election, according to the Cook Political Report, a nonpartisan publication in Washington. The Democrats have 256 seats in the chamber, compared with 178 for the Republicans.
30-Day Extension
The federal transportation funding program, which provides routine federal aid for highway construction and other transportation projects, expired Sept. 30 and is operating under a 30-day extension passed by Congress.
While the transportation funding law typically is renewed in multiyear increments, the Obama administration has instead proposed an 18-month extension, a move backed by the Senate public works panel. That time frame limits the scope of the bill to the period in which economic forecasters expect high unemployment.
Representative James Oberstar, a Minnesota Democrat who chairs the House Transportation and Infrastructure Committee, has proposed a six-year $500 billion highway and transit bill. Most of the measure is financed through federal gasoline taxes, which haven’t been raised since 1993. At the current level, the tax would only generate about $350 billion over six years.
A six-year bill would be “a better stimulus than a temporary, one-time, infusion of cash,” said Jim Berard, a spokesman for Oberstar.
Van Hollen said Congress’ first step would likely be to move forward with an extension of unemployment benefits.
“We don’t want to get ahead ourselves here,” he said.
To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net.
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