Economic news this week was not positive. Ongoing economic woes in Europe are hitting the headlines and fears are rising about the impact of the crisis in Europe on the American economy. The president spoke to reporters and the American people today about these issues. The president called for Congress to pass the American Jobs Act. He said that Congress passed a few parts of the bill last year, but urged them to pass the remainder of the bill to ensure continued economic recovery in the United States.
The president said he has already sent proposals to Congress to improve short-term issues that will lead to long-term recovery. His jobs plan calls for an investment in infrastructure and public sector hiring. The increase in construction for roads and bridges will put unemployed construction workers to work. The increase in public sector jobs would mean hiring firefighters, teachers and police. He has called for ways to cover these expenses to be created so the deficit will not increase.
The American Jobs Act also calls for tax breaks for small business. Currently, job creation in the private sector is steady and strong. These jobs are coming from small businesses. He wants to see a tax break for small businesses to help this growth continue.
Currently employers are not hiring employees that have been unemployed long term. The president has proposed a $4,000 tax break for employers that are willing to hire employees that have been unemployed long-term. He has also asked for legislation preventing employers from discriminating against failing to hire employees that have been unemployed long-term.
The president says this plan will address the short-term issues of unemployment, stabilizing the economy and reducing the costs of unemployment and social programs. By putting construction workers, firefighters, police and teachers to work the current cost of unemployment will go down. The costs for social programs, such as food stamps and Medicaid, will also be decreased when the unemployed are no longer depending on these resources. This will also put additional cash flow into the economy when these newly hired employees begin spending their earnings, which will help stabilize the economy. This investment will in turn help take the steps toward long-term recovery by reducing government spending and increasing tax revenues.
If austerity measures are implemented too early, the economy heads into a “downward spiral." This means that if government spending is reduced too soon by cutting social programs and unemployment, the market loses faith in the current financial situation. This leads to higher costs for borrowing to cover expenses. Consumers stop spending because they are afraid of further economic woes, employers do not hire because of the same fears and the economy becomes constricted. This leads to a recession.
The president said this applies in the U.S. as well as Europe. This is the advice he has offered to the leaders in Europe.
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