WASHINGTON — Limited in his ability to create jobs through direct spending, President Barack Obama is considering measures to encourage the private sector to free up its cash reserves and hire more workers to ease the nation's unemployment crush.
As Obama prepares to unveil a new jobs agenda next week, his aides are reviewing options that would provide tax incentives to employers who expand their payrolls. That approach is a more indirect effort to spur the economy and relies less on government intervention and massive public works projects.
Among the proposals circulating in the White House is a $33 billion tax credit that Obama first proposed early last year but that Congress whittled into a smaller one-year package.
Under one version of the plan, employers would receive a tax credit of up to $5,000, subtracted from their share of federal payroll taxes, for every net new hire. White House officials caution that the overall jobs plan is still subject to change.
The tax credit, however, is a relatively untested idea. Congress passed a version in March 2010, known as the HIRE Act, which provided $13 billion in tax credits to qualified employers who hired new workers. But there is no government data to track its success.
"The HIRE Act was very small," said Mark Zandi, chief economist at Moody's Analytics and an occasional adviser to Democrats and Republicans. "It really didn't add to payrolls."
"It would have to be bigger," he added. "Something more along the lines that the Obama administration proposed in 2010."
While promising a major jobs package, Obama is hamstrung by budget cuts and a tight debt ceiling that he had a hand in negotiating.
As a result, economists predict that while the president's initiatives could eliminate some drag on the economy and maintain the status quo, they won't be enough to propel it to new heights
Still, Obama predicted his plan could push the economy to grow 1 percent to 1.5 percent faster.
"That could mean half a million to a million additional jobs," he said Tuesday in an interview with radio talk show host Tom Joyner.
Obama's jobs package is designed to supplement other proposals already in the pipeline, including free trade agreements with South Korea, Colombia and Panama and the renewal of a highway construction bill.
At a minimum, the president's jobs plan will call on Congress to extend current payroll tax cuts and jobless benefits, spend money for new construction projects and offer incentives to businesses to hire more workers.
"We don't have magic bullets, but what we do have, I think, is the capacity to do some things right now that would make a big difference," Obama told Joyner.
Among other measures under consideration:
- A major school construction initiative of up to $50 billion.
- Encouraging corporations to bring into the United States some of their foreign sources of income at preferential tax rates in exchange for job creation measures.
- Tying unemployment insurance payments to on-the-job training. Obama has applauded a program under way in Georgia in which jobless benefits go to employers who hire the unemployed as trainees.