President Obama hailed today's report that the US economy grew at 5.7% in the 4th quarter of 2009, calling it "a stark improvement" over a year ago and validation of his "swift and aggressive" economic policies.
"This morning, we received a report that affirms our progress and the swift and aggressive actions that made it possible," Obama said after touring Chesapeake Machine Company in Baltimore. "It's a stark improvement over the rapid and terrible decline that we were experiencing one year ago."
Obama also began the push for job-creation tax cut, one he said would be structured to guard against fraud and reward small businesses that accelerate job creation. In an interview with Fox,top White House economist Christina Romer called the tax break a "cash for clunkers" mechanism to spur job creation.
Obama is asking Congress for a $5,000 tax credit for each job created in 2010, retroactive to Jan. 1. He will also seek a payroll tax refund for each dollar a business increases the salary of employees earning less than $100,000.
"This is a simple, easy-to-understand mechanism that will cut taxes for more than 1 million small businesses," Obama said. "It'll give them an incentive to hire more people and a little bit of extra money to pay higher wages, to expand work hours or invest in their company."
Obama said the tax credit will guard against shifting payrolls to receive federal funds without actually increasing the size of a workforce.
"You won't get a tax credit for doubling your work force while cutting the hours of each worker in half," Obama said. "We're not going to let you game the system and take advantage of the tax credit unless you're doing right by your workers."
Romer told Fox the 4th-quarter boost in Gross Domestic Product (GDP) was driven by increased business inventories and that activity may prove "transitory." Even so, Romer called the inventory moves a harbinger of future economic growth.
"Firms have been nervous, they've been running down their inventories and exactly what you see with that inventory bounce is that process stopping," Romer said. "That is a vote of confidence. It's firms saying, 'we see the demand coming, we're no longer trying to just hunker down'. It is naturally going to be transitory. Right? That is something that gets you a bounce for a while."
Romer also repeated Obama's intention to cancel the Bush-era tax breaks for the wealthiest Americans in 2011, while allowing tax cuts from middle- and low-income earners to remain in place. Obama has vowed to end tax breaks for individuals earning more than $200,000 and families earning more than $250,000.
Some Democrats have begun a push to preserve all of the Bush tax cuts.
"The president has been very clear that at a time when we're having to make tough choices, a tax cut for the highest income earners is not something we can afford," Romer said. "You will see that expiring as anticipated."
Romer also predicted "positive job growth by spring," but acknowledging millions of Americans have grown so discouraged by the meager job climate that they've stopped looking for work. She said this could limit the impact on reducing the unemployment rate, which currently stands at 10%.
"We've had a lot of workers that have become discouraged and dropped out of the labor force," Romer said. "So that's certainly something else that can affect the unemployment rate . The key answer is America's businesses, getting the confidence again to translate that demand into jobs. We're going to work to do that."