Washington: In a move that could shake the foundations of India’s IT services industry, US President Barack Obama on Wednesday said he will end tax breaks to American firms that ship out jobs abroad.
“To encourage ... businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America,” he said in his first State of Union address.
“Now, the House has passed a jobs bill that includes some of these steps. As the first order of business this year, I urge the Senate to do the same... People are out of work. They’re hurting. They need our help. And I want a jobs bill on my desk without delay,” he said.
“But the truth is, these steps won’t make up for the seven million jobs that we’ve lost over the last two years,” Obama said.
India, which has earned the name ‘world’s back-office’, could suffer the most by this move.
According to software services industry body Nasscom, IT sector’s revenue accounted for 5.8% of India’s gross domestic product (GDP) in 2008-09, up from 1.2% in 1997-98.
American companies primarily move jobs abroad to save costs, with no dent on services as countries like India boast of an English-educated workforce - be it IT engineers or for jobs that had to be done over phone.
US President Barack Obama delivers his State of the Union address, as vice president Joe Biden and house speaker Nancy Pelosi listen, in Washington on Wednesday. Molly Riley / Reuters
Obama, who delivered his first State of the Union address against a backdrop of an American public worried about the fallout of the meltdown, said the “worst of the storm has passed. But the devastation remains.”
He also said one in 10 Americans still could not find work, many businesses have shuttered and small towns and rural communities have been hit especially hard. The recession has also compounded the burdens of American families, he added.
“So, I know the anxieties that are out there right now. They’re not new,” he said, adding “Some are frustrated; some are angry”.
“Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed,” Obama said.
He said job creation would be the country’s number-one focus in 2010, and called for a new jobs bill.
The bill will provide for taking $30 billion of the money Wall Street banks repay and use it to help community banks give small businesses the credit they need.
“Now, the true engine of job creation in this country will always be America’s businesses. But government can create the conditions necessary for businesses to expand and hire more workers,” he said.
He also announced that US would invest massively in skills and education of its people.
“Still, in this economy, a high school diploma no longer guarantees a good job...To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans,” he said.
“Because in the United States of America, no one should go broke because they chose to go to college.
The US President also announced that he intends to double US exports in the next five years, sending an indirect message to China and other export-reliant economies that they are not the only ones aggressively seeking new markets.
“We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores,” Obama said.
Won’t accept ’second place’ for US
Citing India and China as countries that are going ahead with economic revamp, Obama said the US cannot accept “second place” and should get serious about fixing its problems since the worst of the financial crisis is over.
“Washington has been telling us to wait for decades, even as the problems have grown worse. Meanwhile, China’s not waiting to revamp its economy. Germany’s not waiting. India’s not waiting,” Obama said.
“These nations aren’t standing still. These nations aren’t playing for second place. They’re putting more emphasis on maths and science. They’re rebuilding their infrastructure. They are making serious investments in clean energy because they want those jobs,” he said in his 69-minute-long prime-time speech.
Obama, who took over as the first black-American President on 20 January last year, said he will not accept a second place of America, the only superpower.
“Well, I do not accept second-place for the United States of America. As hard as it may be, as uncomfortable and contentious as the debates may be, it’s time to get serious about fixing the problems that are hampering our growth,” he said.
On Afghanistan, he said US is increasing troops and training for Afghan security forces so they can begin to take the lead in July of 2011 and American troops can return home.
On Iraq, Obama said the US will support the Iraqi government will continue to partner with the Iraqi people to promote regional peace and prosperity. “This war is ending, and all of our troops are coming home.”
“We are working through the G-20 to sustain a lasting global recovery. We are working with Muslim communities around the world to promote science, education and innovation,” he said pointing out his country’s pledge to reach out to the Islamic world.
India, China emphasize more on maths & science
Noting that nations like India, China and Germany emphasize more on maths and science and fast catching up with America, Obama said: “These nations aren’t standing still. These nations aren’t playing for second place. They’re putting more emphasis on maths and science. They’re rebuilding their infrastructure. They are making serious investments in clean energy because they want those jobs”.
“Well I do not accept second-place for the United States of America. As hard as it may be, as uncomfortable and contentious as the debates may be, it’s time to get serious about fixing the problems that are hampering our growth,” said the US President.