Thursday, August 25, 2011

Obama to Unveil Jobs Plan but Payroll Tax Holiday Will Provide Little Help for Unemployed Blacks

As Obama vacations in Martha’s Vineyard, he is purported working on a new job plan in addition to other issues that confront the United States. With 14 million Americans looking for employment and African Americans uncertain as to the Presidents strategy to deal with the disproportionate level of unemployment in the African American community, the issue remains as what should be done to specifically deal with the dire economic predicament facing African Americans.

One incessant part of his plan involves extending the payroll tax cuts he pushed through in 2009 and more infrastructure construction projects nationally.

What is unknown is whether the President will end the estate tax provision and the Bush-era tax cuts which disproportionately hurt the poor and low income communities already the hardest hit by the economic quandary of the past six years.

Another concern is how much of his policy will actually address job creation versus economic growth. As it stands, all indications tend to point towards measures that stimulate demand and growing the economy over job creation.

If the president increased tax cuts for those making under $250,000, he would stimulate demand but likely not impact job growth. Thus any successful policy should target job growth as a separate issue. Some things that the President should consider are to make it illegal for employers to use credit reports and histories in their job screening procedures. Typically this hurt those that have been unemployed for extended period of times such as African Americans. It may also be wise for Obama to consider revising payroll tax cuts and make them only for the low and middle income workers since a tax rebate would likely be more significant for this parameter of the population.

Also, an extension of the Child Tax Credit - help for low- and moderate-income families with children - with a $3,000 minimum threshold in the agreement will benefit nearly 3 million African-American children.

African-Americans, especially the young face extremely high unemployment rates, with nearly 40 percent of those ages 16 to 24 in unemployment. African Americans also have longer durations of unemployment. For example, 47 percent of unemployed African Americans have been unemployed for 27 weeks or more meaning the median African- American unemployed worker has been unemployed for almost a month longer than the median unemployed worker.

Lastly, Obama should take a page out of Franklin D. Roosevelt book and develop a plan to protect homeowners from foreclosure and embracing a national policy to preserve homeownership. FDR understood that the solution was not with the creditors or banks, but with direct assistance to homeowners. Consequently he was able to establish the Home Owners' Loan Corporation, which was authorized to issue new loans to replace the existing liens of homeowners in default. Instead of a short-term, interest-only loan, the HOLC loans would be fully amortizing over 15 years, meaning that when the last payment was made, the borrower owed nothing further to the bank and owned the home free of any debt. Roosevelt established the Home Owner's Loan Corporation in 1933 to assist in the refinancing of homes. Between 1933 and 1935 one million people received long term loans through the agency that saved their homes from foreclosure.

Whatever Obama decides, it is evident that it should be more than a speech. Although the Obama Administration signed the "The Tax Relief, Unemployment Insurance Reauth­orization, and Job Creation Act of 2010," into law last December, unemployment rate among African-Americans has continued to increase..

If Obama is serious about a jobs plan, he must be creative and do more than just give a speech, it will have to involve something other than a Payroll Tax Holiday, for such provides no support for people who are not working or receiving a paycheck.

Whatever Obama proposes unemployment benefit extensions will help but will not produce jobs. He should seriously consider advancing a mortgage relief program with teeth to assist families and keep them in their homes. This will add greatly to stimulate consumer spending and encourage some job creation. Never the less, giving a major speech is good, but in itself will replace the actual implementation of a policy that will reduce unemployment and grow the economy.


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