In his first three months in office, President Barack Obama has transformed government into an activist tool that seeks to help American citizens recapture their share of the American dream. Not since Franklin D. Roosevelt’s New Deal or Lyndon B. Johnson’s Great Society has an administration acted so boldly and swiftly to rebuild a nation. The result has been a mix of programs——the centerpiece of which is the $787 billion American Recovery and Reinvestment Act of 2009, commonly referred to as the stimulus package or bill, which intends to kick-start the economy by providing new jobs, tax breaks, and help for small businesses in addition to extending unemployment and health benefits. According to Recovery.gov, billions have already been dispersed to state and local agencies to engage in projects such as infrastructure repair, environmental cleanup, educational reform, and emergency assistance to disadvantaged families. In a conference call in March, White House Chief of Staff Rahm Emanuel and Senior Advisor and Assistant to the President Valerie Jarrett asserted that citizens must be participants in the process and actively seek out programs and services that offer relief as well as opportunities. That’s why our editors developed this package. We want to provide a breakdown of initiatives for job seekers, homeowners and buyers, taxpayers, and small business owners.
JOB SEEKERS
These days, with roughly 13 million unemployed Americans, most job seekers are looking for any type of employment——even a series of odd jobs and part-time gigs——to make ends meet. President Obama’s Recovery Act promises to save or create more than 3 million jobs in areas such as healthcare, technology, renewable energy, education, and construction. But what can the unemployed do until those jobs become available? Gay Gilbert, administrator for the U.S. Department of Labor’s Office of Workforce Investment, Employment and Training Administration, says the agency received approximately $4 billion from the stimulus bill as an infusion for such programs——double the amount it spends annually. Although the Labor Department funds national programs, it’s up to state agencies to implement them. Gilbert explains that money flows directly from the federal government to the states. Local workforce investment boards decide how to allocate money and are responsible for implementing One-Stop Career Centers using Department of Labor program funding. “The stimulus has helped ramp up a new capacity to serve. Before the stimulus, our One-Stop Career Centers were really overflowing,†she says. “There was desperation for services because states were so overwhelmed. But I think states are starting to solve these challenges.â€
Funded through the Recovery Act, the programs that directly benefit job seekers include:
Adult Employment and Training Activities: This $500 million program provides training services to eligible individuals through local One-Stop Career Centers (www.careeronestop.org). With more than 3,000 local centers nationwide, job seekers can benefit from three levels of services:
1. Core services that offer outreach, job search and placement assistance, and labor market information.
2. Intensive services that provide comprehensive assessments, development counseling, and career planning.
3. Training services that give job seekers workplace opportunities within their communities as well as basic skills and individual occupational tutorials from qualified instructors.
Dislocated Worker Employment and Training Activities: This $1.25 billion program assists workers who have been terminated or laid off from employment due to a permanent closure or substantial layoffs. Other eligible workers include individuals who have exhausted unemployment insurance; self-employed workers who can’t find work because of an economic downturn or a natural disaster; and homemakers who no longer receive support from another family member. An additional $2 million in funds have been allocated for National Emergency Grants related to plant closings, mass layoffs or other worker dislocations.
Program of Competitive Grants for Worker Training and Placement in High Growth and Emerging Industry Sectors: This $750 million program provides grants for worker training and placement in projected high-growth industries. Of the total, $500 million supports research, labor exchange, and job training projects for careers in energy efficiency and the renewable industry. The remaining $250 million supports projects in the healthcare sector.
Community Service Employment for Older Americans: This $120 million program provides part-time employment for low-income seniors nationwide. The Department of Labor’s Senior Community Service Employment Program (SCSEP) promotes high-quality job training and employment assistance to workers age 55 and older with a family income of no more than 25% over the federal poverty level, which is an annual income of $22,050 for a family of four in 48 states and Washington, D.C. Senior workers can benefit from community and participant services, which include Individual Employment Plans (IEP).
Employment Service Grants to States: The $400 million program provides career information and job-matching services for job seekers.
Unemployment Insurance: The Emergency Unemployment Compensation Act of 2008, which was scheduled to expire on March 31, 2009, was extended through Dec. 31, 2009. This program provides 20 weeks of unemployment insurance and an additional 13 weeks for individuals in states with high unemployment rates.
Additionally, benefit payments are increased by $25 per week through Dec. 31, 2009.
Temporary Suspension of Taxation of Unemployment Benefits: Federal income tax on the first $2,400 of unemployment benefits is suspended for 2009.
COBRA Continuation Coverage: This program provides premium reductions for health benefits. Eligible individuals pay only 35% of their COBRA premiums and the remaining 65% is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after Feb. 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning Sept. 1, 2008 and ending Dec. 31, 2009.
For more information about these programs and others, visit www.dol.gov/Recovery and www.recovery.gov.
HOMEOWNERS/HOME BUYERS
To put it simply, the White House wants to make your house more valuable. To that end, its Making Home Affordable Program is part of an extensive plan to restore the housing industry and help up to 9 million American families, including: homeowners approaching foreclosure; those who are current on their mortgage payments, but hold loans now higher than the present value of their property; and individuals considered first-time home buyers.
Foreclosure Relief: If you’re having trouble making monthly mortgage payments (due to a recent increase in your monthly mortgage bill, job loss, or unforeseen medical bills), the administration has worked out a plan to allow you to modify your loan. The adjustment should make your monthly obligation less burdensome.
To qualify for Home Affordable Modification, you should be able to answer “yes†to these four questions:
1. Is the home in question your primary residence?
2. Is the amount you owe on your mortgage less than or equal to $729,750?
3. Did you receive your mortgage loan before Jan. 1, 2009?
4. Is the payment on your loan (including taxes, insurance, and home- owner’s association fees, etc.) more than 31% of your monthly gross income?
If you answered yes to each of these questions, you should immediately contact your current mortgage service provider–the financial institution to which you send monthly payments. Their contact number should be on the mortgage coupon booklet or your monthly statement. A customer service representative should be able to give you details about applying for a loan modification.
Mortgage Refinancing: If you’re a homeowner whose home is worth less than the amount of your mortgage loan, you may be eligible for the new Homeowner Affordability and Stability Plan. You qualify for Home Affordable Refinance if:
1. You own a home that contains one to four units.
2. You hold a mortgage owned or guaranteed by government-sponsored Fannie Mae or Freddie Mac. (If you’re not sure, ask your lender).
3. You are current on your mortgage payments.
4. You believe the amount you owe on your first mortgage is less than or equal to the current market value of your home.
This refinancing plan is open to borrowers whose first mortgage is no larger than 105% of the home’s present market value. If, for example, you suspect the house is worth $300,000, but you owe the bank $315,000 or less, you could qualify. The actual market value of your home will be determined after you apply to refinance. It is possible that borrowers with interest-only “teaser†rates could refinance through the Making Home Affordable program. Fannie Mae and Freddie Mac purchased some of these types of loans in 2006 and 2007. In the end though, you will save more money over the life of the loan. Interest rates on refinanced loans will be pegged to market rates at the time you apply. And, of course, the new loans won’t carry any prepayment penalties or balloon payments. For more information about loan modifications or refinancing, you can call a federally approved housing counselor at 888-995-HOPE (4673) or visit http://makinghomeaffordable.gov.
First-time Home Buyer Tax Credit: If you’re about to purchase a house for the first time or you haven’t owned a primary residence in at least three years prior to the date of purchase, you may be eligible for a tax credit of 10% of the purchase price of your home. The maximum tax savings is $8,000, which can clear your tax bill (if you owe) and/or result in a refund. To get the credit you must earn less than $75,000 per year in gross income (or, for married couples, $150,000)–and you need to act quickly. The tax savings will only go to those home buyers who close the sale of their new home by Dec. 1 of this year. A few final words of caution: Beware of con artists posing as reputable brokers, lenders, or aid agencies.
Many business owners and advocates applaud the Obama administration’s efforts to revitalize American business, large and small, through its economic stimulus and financial stabilization initiatives. The administration’s focus has been in three key areas: financing, tax breaks, and industry-specific projects.
Financing: Most notable is the plan to unfreeze credit for business owners through the U.S. Department of the Treasury’s Consumer and Business Lending Initiative——a program under its Financial Stabilization Plan——in which it will inject $15 billion into the small business loan market by purchasing securities backed by Small Business Administration-guaranteed loans in secondary markets. The White House believes the process will get old loans off the balance sheets of lending institutions and, in turn, free up capital for them to grant additional financing for small businesses. Moreover, the government has agreed to increase the guarantee it provides on SBA-backed loans from 75% to 90% for 7(a) and 504 community development loans. It has also waived fees for businesses. Minority and women-owned businesses are three to five times more likely to receive an SBA-backed loan than a conventional bank loan, according to a recent study by the Urban Institute, a research organization that examines social and economic issues.
The administration will deploy another $30 million in funding to SBA’s micro-loan program. Of that amount, $24 million will support technical assistance and training programs for entrepreneurs. The remaining $6 million will subsidize loans. Additionally, the stimulus package will provide $100 million to more than 1,000 Community Development Financial Institutions across the country which, in turn, finance a battery of micro-lenders. The $6 million commitment to micro-loan programs is very significant, says Gina Harman, president and CEO of ACCION USA, one of the nation’s largest micro-lenders, whose clients range from home-based ventures to metropolitan restaurants. Over the past six months to a year, a lot of organizations that have supported the smallest of enterprises found it very difficult to find capital to lend to their clients. ACCION awarded loans can be as little as $500 or as much as $50,000, although the typical loan amount is $10,000. Harman urges entrepreneurs to go to their local banks and ask about micro-lenders in their community.
Tax Breaks: Through the Recovery Act, business owners can take advantage of the legislation’s tax provisions, including a tax credit up to $2,400 for employing disadvantaged workers such as veterans and unemployed students who have been out of work for six months; carry back net operating losses over five years instead of two years for any company with less than $15 million in gross receipts; and an increased expensing limit of $250,000 (up from $128,000) for new equipment purchased in 2009.
Tax experts say that these measures can give small companies a much-needed boost. Allowing companies to use current losses to offset profits made in the previous five years, instead of two, makes them eligible for tax refunds.
Industry-specific Projects: Manufacturers and contractors will see a benefit of $120 billion in set-asides for infrastructure projects, namely construction and repair of roads, highways, bridges, railways, sewers, and public transportation systems. So-called “green†businesses that produce solar panels, wind turbines, and advanced batteries can take advantage of $37.5 billion in stimulus funds for clean, efficient, and renewable energy. Another $6 billion in loan guarantees is for renewable energy projects, plus a 30% tax break for investments in wind and solar energy. The president has also set-aside grants for Internet broadband improvements, eco-friendly renovations, and technology research and development.
The government has allocated up to $5 billion in financing to auto suppliers through its Trouble Asset Relief Program (TARP), enabling them to continue shipping parts, paying employees, and producing diverse products essential to the auto industry. Additionally, some $300 million in stimulus funds to acquire electric vehicles for the federal fleet, plus tax breaks intended to spur demand for fuel-efficient vehicles could give a boost to auto makers.
Certain businesses, including manufacturers, will benefit from the government’s increased funding for highway projects, aviation, and infrastructure repair. “As the money works through the pipeline you will see various companies and industries benefit from it,†says Dorothy Coleman, vice president of tax and domestic economic policy with the National Association of Manufacturers. “But it is not going to happen overnight.â€
Much of the stimulus money will be distributed through state departments and funnel down to local or city governments, says be Board of Economists member Thomas Boston, who is also CEO of EuQuant, an Atlanta-based consulting firm, and a professor of economics at Georgia Tech. So, it will be up to individual municipalities to make sure that minority business owners get their fair share. Minority businesses need to act fast, he adds.
Some funding expires within 120 days so there may be a limited window of opportunity. For weekly updates on how minority suppliers are accessing the stimulus money, go to blackenterprise.com.
OBAMA’S ALPHABET SOUP
As part of his New Deal in the 1930s, FDR created a series of agencies to help move the country out of the Great Depression. Some of these regulatory bodies and programs such as the Federal Housing Administration (FHA), Securities and Exchange Commission (SEC), and Tennessee Valley Authority (TVA) have become long-standing institutions within the federal government. Collectively, pundits of the time called them the “alphabet agencies.†More than 65 years later, President Obama has created his own group of initiatives for today’s tough economic times. Here’s a glossary of some programs his administration has modified, enacted, or proposed thus far:
ARRA (American Recovery and Reinvestment Act of 2009), also referred to as the economic stimulus bill or package, is federal legislation that includes a mixed bag of tax cuts, benefits for the unemployed and disadvantaged families, and government spending on education, healthcare, infrastructure, science, and energy to push the nation toward recovery.
CBLI (Consumer and Business Lending Initiative) is a program designed by the U.S. Department of the Treasury and the Federal Reserve to provide an initial $200 billion in financing to private investors to help unfreeze credit markets and lower interest rates for students, small businesses, and consumers. The program is expected to have the potential to unlock $1 trillion of new lending.
EESA (Emergency Economic Stabilization Act of 2008) referred to as the financial bailout and spearheaded by the Bush administration, is a law authorizing the U.S. Treasury to spend $700 billion to purchase distressed assets, namely mortgaged-backed securities–bond collateralized by home loans–and to fund both domestic and foreign banks. The act established the TARP, Troubled Asset Relief Program which provided funds to weakened financial institutions and domestic automakers. The Obama administration gained oversight of the remaining $350 billion in funds when it came into power.
FSOB (Federal Stability Oversight Board) is a regulatory body comprised of the treasury secretary, chairman of the Board of Governors of the Federal Reserve System, Housing and Urban Development secretary, SEC chair, and Federal Housing Finance Agency director to oversee TARP policies and financial commitments and EESA’s broader goals and objectives.
MHA (Making Home Affordable) program is designed by the Obama administration to help 5 million “responsible†homeowners gain refinancing to keep their mortgages affordable as well as create a $75 billion loan modification program to enable up to 4 million families to avoid foreclosure.
PPIP (Public-Private Investment Program) was the apparatus created by the Treasury, FDIC, and the Fed to give government help to buy loans and “legacy securities‖mortgage- and asset-backed securities that were originally rated AAA–as part of an effort to repair the balance sheets of financial institutions and ensure credit is available to households and businesses.
TALF (Term Asset-Backed Securities Loan Facility), is a program created by the Federal Reserve Board in November 2008 to support the issuance of asset-backed securities collateralized by student loans, auto loans, credit card loans, and SBA-guaranteed loans.
TARP (Troubled Asset Relief Program) is a vehicle created to strengthen the financial sector by giving the U.S. Treasury $700 billion in purchasing power to buy mortgage-backed securities from financial institutions. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis. be
Carolyn M. Brown and John Simons co-authored this article.