Experts evaluate details President Obama's jobs plan

Deb Price / The Detroit News

The Detroit News asked three experts to evaluate whether key elements of the president's jobs agenda would help businesses create more jobs in troubled Michigan: Rob Fowler, president of the Small Business Association of Michigan, Mark Gaffney, president of the Michigan State AFL-CIO, and Charles Ballard, an economics professor at Michigan State University.

1. Unfreeze credit to small and other businesses by setting aside $30 billion to "help community banks give small businesses the credit they need to stay afloat."

Gaffney: This is critical, especially here in Michigan. We hear of many small companies, both in the auto supplying business and in non-autos, who are being refused loans or are being forced to rewrite or re-pay loans.

Fowler: Today's entrepreneurs are severely limited in their ability to finance new businesses through their historical avenues: leveraging the value of their home, borrowing from friends and family or getting a traditional loan. We would encourage the president to look not only at community banks but also the role of credit unions and their leadership in small business lending.

Ballard: This one should be at the top of everyone's list. Small businesses play a huge role in recovery from most recessions, and this recovery is likely to be no exception. However, many small businesses are still facing terrible problems in getting credit.

2. Extend tax credits to spur hiring and pay raises in 2010, giving $5,000 tax credit for each net new worker and reimbursement for added Social Security payroll taxes incurred by hiring or raising wages.

Gaffney: When granting tax breaks, two concerns must be addressed. First, that adds to the deficit. Second, are these really new jobs that deserve a tax break, or are businesses simply re-hiring former employees?

Fowler: The idea to make hiring easier for small businesses is a good one. Unfortunately, we believe that a hiring tax credit -- which would likely be temporary -- would not be incentive enough to take on new employees, particularly given costly benefits.

Ballard: When employment is down so far, policies like these are probably worth a try. However, there need to be safeguards against fraudulent claims, and there needs to be a clear plan to phase these out as the recovery gathers strength.

3. Eliminate "all capital gains taxes on small business investment."

Gaffney: (This) will add to the deficit. This should be temporary and only used for investments in "brick and mortar," buildings, etc., and not for additional investments in mortgage-backed securities or credit default swaps.

Fowler: The proposed one-year elimination of the tax on capital gains, up from the current -- but temporary -- 75 percent exclusion would provide added incentive to invest in small businesses. However it only applies to a handful of small businesses.

Ballard: Where do we draw the line between small businesses and large businesses? Will this be temporary or permanent?

4. Provide "a tax incentive for all businesses, large and small, to invest in new plants and equipment."

Gaffney: Any future tax incentives should be targeted to only direct job creation, because each tax break adds to the deficit.

Fowler : This tax incentive strategy has been effective in the past -- so, why not make it permanent policy rather than a temporary fix?

Ballard: As with all of these tax incentives, however, we need to think carefully about how long we want to use them. The president's plans place a lot of emphasis on tax breaks. We need to avoid putting large tax cuts into law on a permanent basis.

5. Invest more in infrastructure, such as high-speed rail.

Gaffney: A better plan is to grant funds to businesses and municipalities who will retrofit their buildings to save energy, but only if they do so in 2010. A great high-speed rail system that doesn't begin building until 2012 doesn't help with this recession. We need jobs this year.

Fowler: (This) doesn't really seem to belong in the same category as other initiatives that could more directly benefit the economy.

Ballard: We also need investment in roads and bridges and not just in high-speed rail.

6. Eliminate tax breaks "for companies that ship our jobs overseas and give those tax breaks to companies that create jobs" in the United States.

Gaffney : Yes, an idea well past its time.

Fowler: Small companies that start and grow in our state are not the kinds of companies sending jobs overseas, so helping those firms would be a good strategy for creating jobs here.

Ballard: I understand the surface appeal of this. I just hope people understand that it's especially hard to administer tax laws of this type.

7. Invest in a new generation of nuclear power plants and advanced biofuels and clean coal technologies, and pass the climate change bill.

Gaffney: Michigan needs to build one, two or three new electrical production plants. Work must begin this year. Passing the climate bill will encourage future jobs and investment in solar and wind energy.

Fowler: To the extent that "investing in a new generation of nuclear power plants and advanced biofuels and clean coal technologies" will advance that goal, we would be in favor of such efforts. But it's hard to square that with the mammoth, job-killing costs that would result from the ... climate change bill.

Ballard: Yes to advanced biofuels, yes to clean coal, yes to the climate-change bill.

8. Double our exports during the next five years, and to help achieve this goal, create a National Export Initiative to help farmers and small businesses "increase their exports, and reform export controls consistent with national security."

Gaffney: Increasing exports will make the U.S. dollar stronger, will provide jobs, and brings our technological advances to the world.

Fowler: As the U.S. economy faces a jobless recovery and consumer spending continues to lag, exporting may be one of the few areas where small businesses can grow.

Ballard: Our success (at growing exports) will depend on the health of the entire world economy, so we should be careful not to place too much emphasis on doubling our exports in a particular period of time.

9. Invest more in education, stressing math and science, by doing such things as give families a $10,000 tax credit for four years of college and increasing Pell grants.

Gaffney: Investment in education is always ... wise. In Michigan the unemployment rate for college grads is one-third the rate of other workers.

Fowler: We would be a little cautious about an over emphasis on investment in just math and science. Successful entrepreneurs come from all fields of education. It's a great idea to support education but that support has to be fiscally responsible.

Ballard: For the long-run health of our economy, investments in education are more important than anything else.

10. Reduce the deficit by freezing discretionary, non-military spending for three years, with the threat of presidential veto to enforce it.

Gaffney: Freezing spending to reduce the deficit must not get in the way of ending high unemployment caused by the recession. More government spending is needed to create jobs, including a direct hire program for 1 million workers (100,000 in Michigan) like the WPA.

Fowler: I fear this is a bogus promise and an empty threat, especially in light of the fact that the president's fiscal 2011 budget proposes federal outlays that will reach a post-WWII record of 25.4 percent as a share of the national economy. And how does this square with the president's proposals to invest more in education and fund numerous other program proposals?

Ballard: An "across-the-board" freeze may be good politics, but it is almost never a sensible policy, from an economic standpoint. Some of the programs that will be frozen can probably be cut, but some should probably be increased.

11. Overhaul the nation's health care system to reduce costs and expand coverage.

Gaffney: We must address this uncompetitive weight on businesses and job creation by passing the health care bill.

Fowler: Just because federal health insurance reform looks dead does not mean the main problem for small businesses -- the high cost of health insurance -- has gone away. We believe what the president and Congress ultimately came up with did little to reduce costs and get to the ultimate goal of providing coverage for everyone.

Ballard: In the last half century, the proportion of GDP devoted to health care has grown from 4 percent to 17 percent. Projections suggest that this may run up to 25 percent, or 30 percent, or more, in our lifetimes. Of course we need to take stronger measures to control costs.