It is the first of several such measures Democrats have promised this election year to address the public's top worry: jobs. The measure includes about $18 billion in tax breaks and pumps $20 billion into highway and transit programs.
At a ceremony at the White House, Obama said the bill is necessary "but by no means enough." "There is a lot more we need to do to spur hiring in the private sector and bring about full economic recovery," he said.
There is plenty of skepticism that the new law will do much to foster hiring. Optimistic estimates are that the tax break could generate perhaps 250,000 jobs through the end of the year; some 8.4 million jobs have been lost since the start of the recession.
Small businesses in particular will benefit, the president said.
"Many of them are on the fence right now about whether to bring on that extra worker or two, or whether to hire anyone at all," Obama said. "This jobs bill should help make their decision that much easier." Under the new law, businesses that hire anyone unemployed for at least 60 days would be exempt from paying the 6.2 percent payroll tax through December. Employers also would get an additional $1,000 credit if new workers remain on the job a full year. Taxpayers will have to reimburse Social Security for the lost revenue.
The new law also extends a tax break for small businesses buying new equipment and modestly expands an initiative that helps state and local government pay for transportation and infrastructure projects.
It is paid for over the coming decade in part by cracking down on offshore tax havens, though it would add $13 billion to the debt in the coming three years.
Meanwhile, the current account trade deficit widened in the fourth quarter, reflecting an improving economy, but the imbalance for all of 2009 fell to the lowest point in eight years. Economists believe the deficit will increase in 2010 but not return to the record heights seen before the recession.
The Commerce Department said Thursday the deficit in the October-December quarter jumped 12.9 percent to $115.6 billion, as imports of oil, autos and other foreign products outpaced the gains in US exports.
For the year, the deficit in the current account plunged 40.5 percent to $419.9 billion, the smallest imbalance since 2001. Last year's deficit represented 2.9 percent of the total US economy, the smallest percentage in 11 years.
The current account is the broadest measure of trade because it includes not only trade in goods and services, which are tracked by the government on a monthly basis, but also investment flows between countries. The figure is closely watched by economists because it is a measure of how much the country must borrow from foreigners to finance its balance of payments imbalance.
As America's current account deficit soared to an all-time high of $803.5 billion in 2006, which represented 6 percent of total GDP. That raised alarm bells over whether foreigners would continue to be willing to finance America's huge trade deficits. Now the bigger concern is over foreigners' willingness to purchase US Treasury securities to finance America's soaring budget deficits.
Economists predict that the current account deficit will continue to widen this year but will not climb back to the previous record levels. They think that a weaker dollar will continue to boost US exports. A weaker dollar makes US goods more competitive in overseas markets and foreign goods more expensive for US consumers.
For the fourth quarter, US goods exports rose 8.8 percent to $263.6 billion with increases in shipments of autos, industrial supplies and farm products increases as an improving global economy boosted demand in key foreign markets.
But the rebound in the US economy increased demand for imports as well. Goods imports rose in the fourth quarter by 9.2 percent to $432.4 billion, led by big gains in petroleum, capital goods, autos and auto parts and consumer goods.
The deficit in goods of $145.5 billion in the fourth quarter was offset somewhat by a $36.5 billion surplus in services trade, items such as transportation and financial services. The United States had a $25.1 billion surplus on investment flows and a deficit of $31.8 billion in a category known as unilateral transfers, which covers such things as foreign aid.
The country's largest deficit with an individual country is the imbalance with China, which stood at $226.8 billion last year.
