President Obama focused on promoting small businesses and spurring entrepreneurship Tuesday during the opening remarks of his first Cabinet meeting since his State of the Union address.
"One of the top priorities that I mentioned during the State of the Union was the need for us to promote small business. And I’m very pleased that we’ve got Karen Mills here, who has participated in our meetings before, but is now an official member of the Cabinet," Obama said.
This was the first meeting that Mills, the head of the Small Business Administration, has attended since being recently elevated to a Cabinet-level position.
"It is a symbol of how important it is for us to spur entrepreneurship, to help start-ups, to move aggressively," added Obama.
The president pressed Congress on both sides of the aisle to present a bill on his initiative to accelerate financing for start-ups and provide tax breaks for small businesses that want to hire more workers or increase wages.
"My expectation and hope is, is that they will get a bill together quickly, that they will pass it and get it on my desk. I will sign it right away, and I would like to see that bill signed this year," he said.
Sources: Small Business Solutions, The Hill, Whitehouse.gov, Youtube
With Income Tax rates set to go up on Dec. 31, Congress is hotly debating what to do next. But most economists agree: Keep them where they are.
One option, to let the tax cuts passed during the Bush administration expire for only the richest 3% of taxpayers while renewing them for everyone else, is popular among Democrats and the choice of the Obama administration.
But a majority of a panel of leading economists surveyed by CNNMoney.com said that the tax cuts should be renewed for everyone.
The first in a series of economic surveys revealed that extending the tax cuts for all taxpayers is the most important thing Congress can do to help the economy. Of the 31 economists surveyed, 18 chose that from a list of options now being debated on Capitol Hill.
"Extend tax cuts for all income levels and do nothing else," said Sean Snaith, economics professor at the University of Central Florida. "More of the same piecemeal, patchwork policies put forth by this administration will undermine confidence and do little to change the path the economy is on."
Three economists surveyed endorsed the Obama administration's plan to extend the tax cuts only for the lower- and middle-income taxpayers, but allow it to go up on those in the top two brackets -- individuals making more than $200,000 a year or couples earning $250,000 or more. That limited increase in taxes would raise an estimated $700 billion over the next 10 years.
Some experts, such as former Federal Reserve chairman Alan Greenspan, argue that with the size of U.S. budget deficit, the government can't afford to extend anyone's tax break.
But economists surveyed were in broad agreement that the recovery is still too fragile to allow taxes to go up for the 97% of taxpayers not in the top brackets.
"If those tax cuts expire for everybody, we go into a double-dip recession," said Mark Zandi, chief economist of Moody's Analytics.
Zandi and some of the economists calling for an extension of cuts for the wealthy want to phase out the lower rates for those taxpayers after a couple of years to limit the cost to the Treasury.
Higher taxes are generally believed to be a drag on the economy since it leaves consumers and businesses with less money to spend. Those who argue for extending the tax cuts for the wealthy say that raising those tax rates would hit many small businesses and could put a crimp in hiring.
Those who want to allow the rates to rise for the top earners argue they are more likely to save the money rather than spend it, and thus the tax cut would have less of an economic impact than would lowering the taxes for most other taxpayers.
"I would prefer that the tax cuts for the two upper brackets would also be extended, but there is much more spending [that needs to be done] and much more of an economic impact from extending the tax cuts for everybody else," said Dana Johnson of Comerica Bank, one of those who endorsed the Obama plan to let taxes rise on the top earners.
Four of the economists surveyed backed the plan that passed the Senate Thursday to provide funding and other incentives to spur more lending to small businesses.
Another five suggested other choices of their own, including taking more steps to stop home foreclosures, reforming the overall tax system, resuming drilling for oil in the Gulf of Mexico and having the Federal Reserve do more to provide credit directly to businesses and consumers.
Only two cited additional help for long-term unemployed and more help to cash-strapped state and local governments as their top priorities.
Buoyed by good news on the jobs front, the White House claimed credit Sunday for reversing the downward economic spiral while bracing out-of-work Americans for a slow recovery.
The Obama administration also eased away from confrontation with China over its artificially low currency. The U.S. wants to encourage Beijing's help on nuclear proliferation and new penalties against Iran for its perceived attempts to build a bomb.
Given the depth and length of the recession, the White House wants to cool expectations of a rapid economic recovery before the November elections that will determine whether Democrats retain control of the House and Senate.
The administration's line is that there's steady, if slow, progress in repairing the economic ruin President Barack Obama repeatedly blames on his predecessor, Republican George W. Bush.
The economy added about 162,000 jobs in March, the most in nearly three years. A large percentage of the gains were temporary census workers hired by the federal government, and the unemployment rate held firm at 9.7 percent. The additional 123,000 private-sector jobs were the most since May 2007.
The economy is growing again, but at a pace unlikely to quickly replace the 8.4 million jobs erased in the recession that began in late 2007. More than 11 million people are drawing unemployment insurance benefits.
"We've got a long way to go," said Lawrence Summers, director of the National Economic Council. "We've inherited a terrible situation, the most pressing economic problems since the Great Depression in our country."
Christina Romer, head of the White House Council of Economic Advisers, said consumers still face "a lot of head winds" from the financial crisis. For example, debt and credit difficulties are hampering stronger job growth.
They were echoing the words of Treasury Secretary Timothy Geithner, who said last week the administration was "very worried" about returning to a more normal jobless rate of around 5 percent.
Summers said Obama was preoccupied with creating jobs. "The trend has turned, but to get back to the surface, we've got a long way to go," Summers said.
As Obama moves on with his legislative agenda after victory on health care, Summers said he believed Congress would pass new oversight rules for the financial industry. The Wall Street meltdown was largely blamed for the recession and the near collapse of the global financial system.
"I expect that reform is going to pass," Summers said. Obama wants it on his desk within two weeks.
Arizona Sen. John Kyl, the No. 2 Senate GOP leader, accused Democrats of pulling out of bipartisan negotiations on the bill. Nonetheless, he said he thought there was "a substantial opportunity" for a bipartisan solution.
On the issue of Chinese currency manipulation, Summers denied that a delayed report to Congress amounted to a trade-off for Beijing's support for new penalties against Iran.
The report was due April 15 — just as China's president comes to Washington for a nuclear security summit. Geithner said Saturday it would come out after several high-level international meetings in the months ahead, when Washington would have the opportunity to continue pushing its position.
China keeps the value of its currency at an artificially low level, making its goods less expensive in the U.S. market and causing American exports to be too expensive for Chinese consumers. They result is an exploding U.S. trade deficit
The White House is pressing China and Russia, which normally oppose Iranian sanctions, to join the effort to punish Tehran. Iran is enriching uranium in violation of international agreements against nuclear proliferation; the Iranian government says its nuclear ambitions are limited to developing nuclear power for peaceful purposes.
The West, led by the United States, contends Iran is trying to build a nuclear bomb, an outcome that Washington contends would launch an arms race in the Middle East.
As China began showing a readiness to join discussions on punishing Iran and President Hu Jintao committed to participating in Obama's nuclear proliferation conference this month, the administration eased back on the threat to label China as a currency manipulator and the imposition of trade restrictions.
Even as the report was delayed, Romer acknowledged the currency issue remained important.
"We think it (the value of the yuan) needs to be more influenced by market forces," she said. "I think there's no question of that. ... We're going to be working to, to get the kind of result that we want, which is something more in alignment."
Summers spoke on ABC's "This Week" and CNN's "State of the Union." Romer appeared on NBC's "Meet the Press," and Kyl was on "Fox News Sunday."
The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.
The Commerce Department said on Friday its first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.
"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."
U.S. stock index futures extended gains on the data, while Treasury debt prices deepened losses. The dollar rose against the yen.
Getting the economy on a sustainable growth track remains one of the key challenges facing President Barack Obama, who on Wednesday outlined a raft of measures to create jobs and nurture the recovery.
Growth was boosted by a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.
But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.
Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.
For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II.
In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government's "cash for clunkers" program.
In the fourth quarter, consumer spending contributed 1.44 percentage points to GDP.
Consumer spending, which normally accounts for about 70 percent of economic activity, has been held back by the worst labor market in a quarter century.
Business investment in the fourth quarter grew for the first time since the second quarter of 2008 as the drag from the troubled commercial real estate was offset by robust spending on equipment and software.
Business investment rose at a 2.9 percent rate after falling 5.9 percent over the previous three-month period.
The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.
Export growth outpaced imports, leaving a trade gap that contributed half a percentage point to GDP growth in the last quarter.
Separately, employment costs in the United States rose 0.5 percent in the fourth quarter, Labor Department data showed.
Analysts polled by Reuters had expected the Employment Cost Index to increase 0.4 percent in the three months ending in December 2009, after it inched up an unrevised 0.4 percent in the prior quarter.
Wages and salaries, which make up about 70 percent of compensation, and benefits were both up 0.5 percent, the Labor Department said.
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