State of the Union 101: Nine Obama proposals that might create jobs

A trade pact with the EU. Rebuilding roads and bridges. Innovation centers for manufacturing. Obama put forward a lot of proposals in his State of the Union address, but which ones will add the most jobs?

The goal of job growth and rising prosperity for the middle class formed the thematic core of President Obama's State of the Union speech Tuesday.

The economy very much needs that.

Not every idea Mr. Obama proposed on this front is a sure jobs gainer. In fact some, like raising the minimum wage, spark strong controversy among economists who champion the goals of employment and growth.

But some economists say Obama offered a collection of proposals that could have a positive effect on jobs and incomes. And they say the focus is warranted, even though signals from private-sector businesses and consumers have been improving. 

The official unemployment rate has fallen to 7.9 percent, but many forecasters worry it will linger at a higher-than-normal level even if the US economy keeps growing.

Household incomes have barely budged since 1988, according to inflation-adjusted Census data for the median American family.

Here are nine ideas Obama offered that center squarely on job creation.

•Refinancing more home loans: Obama said many borrowers have never missed a payment, and want to refinance at today’s low rates, but are unable to get approval. Through legislation, the idea is to expand “refi” opportunities that will leave more cash in consumer pockets each month, buoying the economy. Many economists like the idea, but it’s not clear if it can pass a divided Congress.

•Expanding global trade: Obama said he’ll launch talks on a trade agreement with the European Union, and take other steps aimed at boosting American exports. The Business Roundtable, a group of CEOs, praised the move toward an EU trade deal Wednesday.

•Boosting home-grown energy: Obama repeated his call for an “all-of-the-above” approach to expanding domestic energy production and reducing reliance on foreign oil. Economists say this effort has already been a successful job creator, although some say Obama’s focus is too tilted toward renewable and not enough toward oil and natural gas.

Energy experts say Obama set a realistic goal of doubling renewable electricity generation by 2020. (The president calls for a permanent tax credit to promote sources such as wind and solar.) The White House plan also calls for using some federal oil revenue to finance “shifting our cars and trucks off oil.” 

 •Another infrastructure push: With the Recovery Act stimulus spent, Obama called for $50 billion more in spending on things like roads and bridges – saying it will make the US a more attractive place for businesses while also creating construction jobs. Some economists say this “frontloading” of infrastructure work, at a time of jobs dearth, makes sense. But the idea also has critics who say it’s unnecessary and unlikely to do much for job growth.

•Immigration reform: This Obama priority isn’t all about jobs, but the White House plan says the goals include reforming the system for legal immigration to attract more “highly skilled entrepreneurs and engineers that will create jobs and grow our economy.” Many economists support this goal, calling it a way to boost entrepreneurship – benefiting native born Americans – without much cost.

•Honing innovation: Because of global competition and the technological changes that allow products to be made by ever-fewer people, factories, by themselves, can no longer supply middle-class jobs. So the president is calling for a “one-time $1 billion investment” to create a network of “manufacturing innovation institutes” to cultivate and spread best practices.

But manufacturing remains an important part of the overall economy, with relatively high wage jobs and the ability to spawn spin-off employment in surrounding communities.

•Improving worker skills: Obama pitched ideas for improving US education from preschool to high school, and for giving college students better information to judge how their chosen major will affect their job prospects. These moves, if they work, could help the US stay more competitive with other advanced nations by offering employers a richer talent pool.

•Corporate tax reform: Obama has called for lowering corporate tax rates, while eliminating many loopholes, as a way of luring more employers to America. Meanwhile, he’d add an “offshoring tax” – a minimum tax on offshore earnings by US-based firms. Some tax analysts say the offshoring tax could end up encouraging more companies with global operations to become foreign-owned to avoid extra taxation. But there’s bipartisan support for lowering corporate tax rates as a jobs stimulus.

•Achieving fiscal discipline: The president pledged to work with Congress for deficit reduction totaling $4 trillion over about a decade, which “economists say we need to stabilize our finances.”

This move, if successful, could help the US remain an attractive nation for investors over the long term. A political challenge is that Democrats want the solution to involve more tax revenue, while Republicans are generally focused on spending cuts. A further challenge is that the $4 trillion is probably just a down payment on additional fiscal reforms that will be needed down the road for the US Treasury to maintain the faith of global investors.

The White House said the president has been budget-conscious in his proposals. They’re designed not to add to deficits.

Obama also proposed a hike in the minimum wage, to $9 an hour. This is not so much a job creation idea as a way of ensuring that low-wage workers can maintain a decent standard of living.

Many employers say it will reduce the likelihood of hiring in an era of lean business operations.