New jobs at heart of Obama fightback

In a highly anticipated address, he is expected to outline a package of payroll tax relief and infrastructure spending that will pump hundreds of billions of dollars into the economy.

Supporters hope it will be enough to lower the unemployment rate to something more acceptable amongst voters and, as such, increase his chances of being returned to the White House in 2012.

But the president will have his work cut out.

No serving president since Franklin D Roosevelt has been elected to a second term with the unemployment rate above 7.2 per cent. It is currently at 9.1 per cent. And even the White House’s own budget office doesn’t see that figure dropping significantly any time soon.

As a result, many Democrats are pinning their hopes on measures included in tonight’s address to kick-start a jobs drive in the United States.

The White House has been tight-lipped on specifics ahead of the address. But it has been suggested the total plan will equate to $300 billion (£188bn) in measures to stimulate job growth.

The president has hinted that it will include an extension of a payroll tax credit, which would put an additional $1,000 annually in the hands of the average household.

This two percentage point cut in the normal 6.2 per cent social security take may be expanded to give relief to employers as well, it has been suggested.

Such a move would increase the spending capacity of Americans while encouraging further hires, it is hoped.

Moreover, tax relief has a greater chance of being passed through Congress, given the Republicans’ reluctance to approve further spending projects.

Earlier this week, Mr Obama hinted at the tax move and threw down the gauntlet to conservatives in the process.

“You say you are the party of tax cuts? Well then, prove you’ll fight just as hard for tax cuts for middle-class families as you do for oil companies and most affluent Americans,” he challenged Republicans, during a Labour Day rally in Detroit.

But few suggest that an extension to payroll tax relief alone will be enough to significantly reduce the high rate of joblessness. At present, some 16 million Americans are unemployed – nearly half of them for more than six months. And the latest jobs report brought little comfort for the president.

Released last Friday, it showed the unemployment rate stuck on 9.1 per cent.

And that does not bode at all well for Mr Obama’s re-election chances.

Since 1976, only Ronald Reagan has been returned to office with an unemployment rate above 7 per cent.

Presidents Gerald Ford, Jimmy Carter and George Bush snr were all turfed out by the electorate at a time when the unemployment rate was higher but still below 8 per cent.

Stephen Hess, a veteran White House staffer during the Nixon and Eisenhower administrations and an adviser to presidents Ford and Carter, believes that, unless the job environment sees a significant upturn, Mr Obama could face defeat in next year’s election.

The veteran White House insider, now an analyst at the Brookings Institution in Washington, said: “The re-election is going to be all about jobs – that is the only issue people care about at the moment.

“It will be very, very difficult for Obama to be re-elected if unemployment doesn’t come down.”

Mr Hess said results, not words, would determine how Americans voted next year. “The speech will be of zero importance if the unemployment rate continues at the same pace as it is now,” he said.

If job creation fails to take off, it could be the opposition’s election to lose next year. But such an outcome isn’t beyond the Republican Party.

The current race to provide a viable contender for the White House has failed to throw forward a candidate to set America alight.

Moreover, the influence of the socially conservative Tea Party faction could result in a Republican challenger deemed too conservative to steal crucial independent votes away from Mr Obama.