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Obama Jobs Act Aims To Get Out The Bulk Of Cash By September 2013

Obama Biden

First Posted: 09/12/11 08:09 PM ET Updated: 11/12/11 05:12 AM ET

WASHINGTON -- The White House officially released its American Jobs Act on Monday, setting in motion a critical few months in which budget and spending battles will once again take center stage in American politics.

What sticks out most about the actual legislative language are two aspects. The first: that the administration has put specific requirements into the draft bill so that the money does not end up being used by states to simply fill budget shortfalls and that the vast majority of it is distributed as quickly as possible.

For example, the money authorized for rehiring and retaining teachers, employing first responders and modernizing schools all must be spent by Sept. 30, 2013. The bill prohibits states from using money set aside for preschool programs for a rainy-day fund or to "reduce debt obligations." It requires that states that receive grants for teacher retention submit reports on how those funds are being used. It requires that money set aside for community school modernization "be used to supplement, and not supplant," other public funding. It prohibits the money from being used "for the payment of routine maintenance costs."

The bill authorizes $27 billion for highway restoration, repair and construction projects, as well as passenger and freight rail transportation projects. To make sure the money heads out the door quicker, the projects that are funded will be backed 100 percent by the federal government (meaning less jurisdictional wrangling over who covers what).

The bill also provides $5 billion "to award grants on a competitive basis for projects across all surface transportation modes that will have a significant impact on the Nation." In allotting that money, the secretary of the Department of Transportation will "publish criteria on which to base competition for the grants within 90 days of enactment, with priority for distribution of funds given to projects expected to be completed within three years of the date of enactment of the Act."

With respect to the $15 billion that the act sets aside for the neighborhood revitalization program -- Project Rebuild -- the bill says that "all funding must be obligated by HUD within 150 days." Eligible entities will have "ambitious expenditure goals": 100 percent of funds expended within three years of receipt by the grantee. The secretary of the Department of Housing and Urban Development is also asked to establish "expenditure benchmarks at the one- and two-year milestones."

The underlying purpose, as administration officials admit, is to avoid some of the pitfalls that accompanied the Recovery Act: mainly, states using funds to close budget shortfalls and projects that weren't necessarily "shovel-ready" receiving money nonetheless.

"The structure of the bill is designed to do two things," explained one senior administration official. "One is to move dollars quickly, and two is to support incremental additional economic activity. So the reason for ... the requirement to only spend school construction money on new projects is that, while there is a whole set of discussion about how to address budget shortfalls associated with prior activities, the goal here is fundamentally to create jobs. And to create new jobs requires that you are not really backfilling to the greatest extent possible."

The second noteworthy aspect of the proposed American Jobs Act is how it will be paid for. On Monday, the White House unveiled a series of tax hikes and tax policy changes that are designed to raise $467 billion over the course of 10 years to cover the cost of the bill. Administration officials urged the congressional super committee tasked with deficit reduction to add that total to its tab. And, indeed, the end of the bill amends the language of the Budget Control Act of 2011 -- the debt ceiling law that created the super committee -- so that the target of deficit reduction is raised from $1.5 trillion to $1.95 trillion.

But $1.95 trillion is merely a target. In the final paragraph of the American Jobs Act, it says that if the super committee comes up with $1.65 trillion in deficit reduction, then that would suffice as an offset.

If a joint committee bill achieving an amount greater than “$1,650,000,000,000” in deficit reduction as provided in section 401(b)(3)(B)(i)(II) of this Act is enacted by January 15, 2012, then the amendments to the Internal Revenue Code of 1986 made by subtitles A through E of title IV of the American Jobs Act of 2011, shall not be in effect for any taxable year.”

Why the lower target? In actuality the super committee has to come up with only $1.2 trillion in deficit reduction if it wants to prevent the triggers on massive Medicare and defense cuts being pulled. The $1.5 trillion figure, while widely used as the baseline for savings, is an aspirational number.

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