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Amid dismal jobs report, Obama withdraws clean air rules

The smog regulations would have compelled states and communities to reduce local air pollution. They're yanked away in the face of figures showing zero jobs growth for August.

September 02, 2011|By Neela Banerjee and Don Lee, Washington Bureau
  • A demonstrator is arrested in front of the White House on Friday during a protest against the Keystone XL oil pipeline. Environmentalists are outraged at President Obama's withdrawal of proposed clean-air rules.
A demonstrator is arrested in front of the White House on Friday during a… (Luis Alvarez / Associated…)

Reporting from Washington — The stalled economy's growing political cost to President Obama came into sharp relief as new employment figures raised fears of another recession and he abruptly withdrew proposed stiffer clean-air rules that Republicans and the business community have insisted would kill jobs.

The Labor Department's August jobs report, the first to show zero growth in about a year, intensified pressure on Obama as he prepares to address a joint session of Congress next Thursday night about the nation's stagnant employment picture.

The report also raises the stakes for congressional Republicans, who remain adamantly opposed to new stimulus measures, and for the Federal Reserve, which has been squeezing every monetary tool at its disposal to spur business activity.

But by far the greatest political risk is at Obama's door, as evidenced by his unexpected announcement on the smog rules, which would have compelled states and communities to reduce local air pollution or face federal penalties.

Obama explained the move in part by stating that "reducing regulatory burdens and regulatory uncertainty" was important for economic recovery, essentially echoing the argument of his GOP adversaries.

The move infuriated environmentalists, a core Democratic constituency, who have already complained about Obama's failure to deliver on campaign promises to pass legislation to reduce global warming and promote renewable energy.

The shift reflected the president's inability to jump-start a weak economy. The evidence landed on his desk Friday morning in a government report showing that employers cut back hiring and trimmed work hours of existing employees last month.

"The stagnation in U.S. payroll employment is an ominous sign," said Paul Ashworth, an economist at Capital Economics. "The broad message is that even if the U.S. economy doesn't start to contract again, any expansion is going to be very, very modest and fall well short of what would be needed to drive the still-elevated unemployment rate lower."

Making matters worse, the Labor Department's report revised job-growth figures for July, to 85,000 from the 117,000 previously reported. It said employers added just 20,000 net new jobs in June, not 46,000.

In all, Americans gained about 35,000 jobs a month in the last three months, a relatively low number. The nation added an average of nearly 180,000 jobs a month early this year, raising hope that the labor market was recovering.

Unemployment stayed flat at 9.1% in August as more people reported finding part-time work, many of them saying that was all that was available.

When he unveils his jobs package next week, Obama is expected to propose continuing federally funded extended unemployment benefits that are set to expire this year. The president also is likely to announce a job-training plan and other initiatives.

Analysts think Obama's jobs plan also will include infrastructure investment, continued Social Security payroll tax cuts, and some help for struggling homeowners.

But given the likely push-back from GOP deficit hawks, many worry that Obama's proposal won't be big enough to turn the economic tide or will become mired in another political brawl in Congress.

The situation left Obama looking for moves he could make unilaterally that might improve the climate for business, and by extension hiring. One result was the decision to withdraw the ozone standard.

The agency has worked with environmental and public health groups for the last two years to develop rules to curtail ozone, the main ingredient in smog and a considerable irritant for millions of people with respiratory ailments.

Opponents claimed the proposed regulations were costly to industry, and lobbied to postpone or cancel them. Obama said he asked EPA Administrator Lisa P. Jackson to withdraw the draft standards until 2013, after the next election, when he said they would be reconsidered.

California will not be affected by the ozone delay because it has its own stringent state standards, said a spokesman for the California Air Resources Board.

On his 2008 campaign website, Obama promised to "fight for continued reductions in smog and soot, and continue his leadership in combating toxins that contribute to air pollution."

The administration launched a review in 2009 to develop new ozone standards after the Bush administration set a standard that industry favored. The Obama EPA has delayed issuing the rules at least four times since then before the president ordered them to drop the process entirely.

Some business leaders praised the about-face, and quickly called on Obama to curtail other environmental regulations.

"He recognized that the precarious condition of the U.S. economy made expensive new clean-air rules very dangerous to the well-being of the American people," said energy lobbyist Scott Segal of Bracewell & Giuliani.

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