Combating $14.8 trillion in debt and a sluggish economy, Obama is learning he cannot afford everything

By: Ellie Chan, Staff Writer

Via Joe Crimmings, flickr

Obama’s recently proposed $447 billion jobs plan is targeted to grow the economy by as much as 2 percentage points and create 1.9 million jobs, without adding more public debt. It would impose a payroll tax cut for workers and employers, infrastructure improvement projects, benefit extension for the long-term unemployed, and aids to safeguard jobs for teachers, police officers and firefighters.

The US unemployment rate is still hovering at 9.1 percent, and shows no signs of decline despite actions taken by the government and the central bank over the past two years. The problem stems from a lack of growth and investment from small companies, which account for 99 percent of all American businesses and two-thirds of private-sector employment.

The American Jobs Act, if passed, will benefit 98 percent of businesses by slashing payroll taxes in half starting in 2012, and completely eliminate taxes for firms that increase employee salaries or hire new workers. The president is also active in lessening business regulations and red tape that is hindering capital access for small-sized firms and entrepreneurs. As loans become less restricted, these companies would have more breathing room to expand and create new jobs.

The second largest portion of the jobs plan goes to infrastructure investments, including public school upgrades in both rural and urban areas. At least 35,000 schools will get a total funding of $30 billion for the latest computer technology, science labs, and building renovations. The school repairs will also save 280,000 teaching jobs and increase teacher rehires. Another $65 billion will go into improving transport infrastructure and rehabilitating vacant property while creating jobs for hundreds of thousands of workers.

Other reforms plan to help long-term unemployed workers in their transition between jobs and guide them back into the workforce. This consists of giving the states greater flexibility to use Unemployment Insurance (UI) funds to support job-seekers. For example, workers whose company chooses work-sharing over layoffs are entitled to benefit from UI. Other initiatives include a new “Bridge to Work” program that provides temporary, voluntary work or on-the-job training for the unemployed.

Obama plans to finance the proposed jobs plan by closing corporate loopholes and increasing taxes on wealthier Americans with incomes of $1 million or more. The last thing the president wants to do is deepen the budget deficit that is nearing 100 percent of GDP. He is calling on the Joint Committee to find additional deficit reduction to finance his plan while meeting his budget target. Sadly, as the government tightens its wallet, public access to justice is threatened.

Since 2009, the state governments have continually cut funds to their local court system, and the grave consequences are slowly surfacing. California, for example, has cut court funding by $350 million. A report by the American Bar Association stated that most states have cut court funding by 10 to 15 percent in the past three years. This translated into wage freeze, worker layoffs, and resignations of judges. Services slowed down, waiting times grew, and the backlog of cases continue to pile up at an incredulous pace. A simple divorce now takes about half a year in California, and a typical lawsuit takes around two years before it goes to trial, and that may soon be stretched to five years.

The situation is so desperate that one municipal court in Ohio has refused to accept new cases because it could not afford to buy paper while courts in 14 states have decreased their hours of operation. To counter the funding shortfall, some courts have raised filing fees, and many more will follow or risk closing down.

As the court system becomes increasingly inaccessible and expensive, it jeopardizes people’s equal right to justice, but with $14.8 trillion in the red, Obama and his administration are finding less and less room to manoeuvre. It is exceedingly difficult to choose between a country’s economic health and people’s justice, but it is just one of the many similar choices facing the president now. He needs to make sure what is being proposed is a good trade-off for what is being sacrificed.

ARB Team
Arbitrage Magazine
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