$700 billion bank bailout legislation to be redirected towards small businesses

Barack Obama unveiled another huge government spending programme yesterday aimed at reversing America’s high unemployment rate — a recognition that the issue of job losses poses the greatest threat to his presidency. Mr Obama, speaking in Washington, proposed a series of measures intended to stimulate job creation and bring down the country’s 10 per cent unemployment rate, the highest for a quarter of a century.
It was the latest in a series of speeches focusing attention on America’s jobs crisis, and on what Mr Obama says his Administration has done in the past year to alleviate “the second Great Depression”. It reflects that the economy is the dominant issue among voters as Mr Obama and his Democratic Party head into 2010, a mid-term election year. Recent polls show that his approval rating has dropped below 50 per cent, with the jobless rate a significant factor.
Mr Obama proposed tax cuts for small businesses — the engineroom of the US economy — and a fresh round of infrastructure spending on roads, bridges and railways.
In a move decried by Republicans, he also proposed using as much as $200 billion (£122 billion) of unspent funds from last year’s $700 billion bank bailout legislation to be redirected towards small businesses, rather than using the money to reduce the enormous budget deficit.
Mr Obama declared it a “false choice” to suggest that the Government needed to begin paying down the deficit or spend money on job creation. He argued that investing in new jobs in the short term would help to reduce the deficit later.
“Even though we have reduced the deluge of job losses to a relative trickle we are not yet creating jobs at a pace to help all those families who’ve been swept up in the flood,” Mr Obama said at the Brookings Institution, a Washington think-tank. “There are more than seven million fewer Americans with jobs today than when this recession began. That’s a staggering figure and one that reflects not only the depths of the hole from which we must ascend but also a continuing human tragedy.”
Polls show that despite Mr Obama inheriting a $1.3 trillion deficit — something he reminded his audience of yesterday — blaming the previous Administration is no longer an effective tactic. In essence, America’s economic woes are now fully Mr Obama’s problem, though he lambasted Republicans for criticising his spending programmes, including his push for health insurance reform. He said that the huge deficit was produced by tax cuts and welfare programmes passed under George Bush but which were never paid for.
“These budget-busting tax cuts and spending programmes were approved by many of the same people who are now waxing political about fiscal responsibility while opposing our effort to reduce deficits by getting health care costs under control,” Mr Obama said. “It’s a sight to see.”
The White House did not put a figure on the package but Republicans described it as tantamount to a second stimulus, after the stimulus plan passed in February.