Bartiromo's Weekly Brief - September 13, 2011

Reactions to Obama’s Jobs Plan

In This Week’s Brief
•Wrapping up August
•Maria’s Most Popular
•Poll: Will Jobs Act Work?

President Obama had a significant challenge laid before him during his speech to Congress last Thursday: to find a plan that was bold enough to bring some confidence back to the country without unrealistic spending that would further hamstring the economy. At the same time, the plan could not be so austere that it would be mere half-measures that would not, in the end, accomplish much.

The President’s proposal was the American Jobs Act, a $447 billion combination of tax breaks and stimulus monies that is hoped will spark the U.S. economy in the short term and grow in the long term.

I spoke with General Electric CEO and head of the President's Economic Advisory Board Jeff Immelt after the speech, and he was generally pleased with the message he heard. I have been writing for many weeks now how business leaders I talk to have been very resistant to investing in new jobs or factories because Washington has not given them a clear understanding of how they planned to shape rules on key issues like taxes, healthcare costs and government regulation. Immelt thinks this plan could be the beginning of getting Americans’ confidence back in the markets.

But in Washington, the devil is in the details, and few plans by one party are accepted whole cloth without some input from the opposition party. And that will likely occur with this act, as well. The question will be if traders believe the act can actually get through this Congress or whether it will get torn to shreds on its way. The money managers and corporate leaders I talk to won't switch from trading to investing until these words become actions.

Two of the most popular aspects of the plan with some of the leaders I talked to were Obama’s proposal to cut payroll taxes for employees and employers, and a tax holiday for small businesses for hiring new employees beginning October 1. This is one of the biggest-ticket items of the plan and is meant to have a quick effect on the economy.

The other item was more broadly alluded to, but Obama spoke of tax reform, essentially eliminating loopholes in the tax laws so that corporations and individuals pay their share, without punishing any class of taxpayer. Many experts believe that would have the effect of lowering corporate taxes but increasing tax revenue, since many large corporations pay little or no taxes because of the subsidies, tax breaks and loopholes that have built up in the tax system.

To that end, on Thursday, I spoke with CIT Group Chairman and CEO John Thain about the economy. His firm is a leading lender to small- and mid-sized businesses, and he observed that his clients’ businesses that generate two-thirds of the jobs in the U.S. economy are being constrained by the issues that Obama addressed, particularly tax reform.

This is good news because from the impression the market got from Federal Reserve Chairman Ben Bernanke’s speech at the Economic Club of Minneapolis earlier Thursday, the Fed is out of bullets. Bernanke has been intimating for weeks now that monetary policy has done all it can do and it’s up to Washington to change the fiscal dynamics of the economy.

There were some on Wall Street who were hopeful that Bernanke was going to lean more toward language that kept the door open on a QE3 package to pump up the economy. When that message wasn’t communicated, the major indexes sold off.

Individual investors in the U.S. continue to move to the safety of dividend-paying stocks, while growth prospects here and abroad remain uncertain and the challenges to growth are more numerous than their solutions at this point.