Democrats have pushed for public infrastructure programs such as building roads, fixing schools and extending unemployment benefits while Republicans say they want to unshackle businesses from onerous regulations and taxes that are a drag on the economy.
"I am glad to see the president is finally shifting his focus to America's economy and helping foster job growth, but I'm disappointed the president's emphasis is just more spending for programs that haven't worked. If spending is the answer to the economy, we should already be in a major boom," said Sen. Michael Enzi, R-Wyo.
The main proposals from both sides include:
Continuing the payroll tax break. This year, workers are paying 2 percentage points less in FICA taxes, but that deal runs out at the end of the year.
That tax break saved an average family with two workers about $1,000 this year. If it expires, "that's a bunch of spending that gets pulled out of the economy," said Chad Stone, chief economist at the Center on Budget and Policy Priorities. "What we're scheduled to do is take our foot off the accelerator. The fragile economic recovery can't afford to have that." Obama proposed temporarily cutting the payroll tax even further — by 3.1 percentage points next year. That would save a family earning $50,000 about $1,500, according to the White House. Economist Alan D. Viard, a resident scholar at the American Enterprise Institute, said Republicans seem to be warming to the payroll tax cut, which could boost consumer demand.
Continuing extended federal unemployment and compensation benefits. They expire at the end of the year. The average length of unemployment for workers 55 and older is 52.4 weeks, according to the BLS, well beyond the 26 weeks of unemployment compensation that many states offer. Workers under 55 were out of work on average 37.4 weeks. Stone said the extra benefits have never been discontinued during a period of such high unemployment.
Tax breaks for businesses. Businesses would see their payroll taxes for current employees cut in half for the first $5 million in payroll next year. The first $5 million in pay for new workers or raises for employees would not be taxed at all next year. Companies would get tax credits for hiring veterans and people who have been unemployed for six months or longer. Viard said the payroll tax breaks wouldn't make a difference for big companies but could spur hiring at small businesses.