UPDATE 6-Obama kicks off campaign with infrastructure plan

* Infrastructure overhaul would create jobs from 2011

* Obama eyes oil, gas firm tax breaks to pay for it

* Republicans skeptical about “cobbled-together” stimulus

* Analysts say plan would not help economy immediately (Recasts, adds details, reaction)

By Steve Holland

MILWAUKEE, Sept 6 (Reuters) - President Barack Obama, scrambling to jump-start job creation in a sluggish U.S. economy, proposed a six-year plan on Monday to rebuild aging roads, railways and runways with an initial $50 billion investment.

“We are going to rebuild 150,000 miles (240,000 km) of our roads -- that’s enough to circle the world six times. ... We’re going to lay and maintain 4,000 miles (6,400 km) of our railways -- enough to stretch coast-to-coast,” Obama told a labor rally in Milwaukee where several thousand supporters cheered his every line.

The infrastructure plan, one of several initiatives Obama is due to unveil this week, was immediately rejected by Republicans, who many analysts predict could win control of the House of Representatives in Nov. 2 congressional elections.

With fellow Democrats facing punishment from recession-weary voters in November, Obama is under pressure to do more to create jobs and bring down the stubbornly high 9.6 percent unemployment rate, even as economists agree he has few good options left.

Economists are skeptical any measures Obama takes now will make a significant difference in the $13.2 trillion U.S. economy and point out that investments in infrastructure typically do not stimulate the economy quickly.

A centerpiece of his new plan is a proposal for the U.S. Congress to increase and permanently extend a tax credit for business research and development.

The tax credit proposal, which was widely expected by investors, would cost $100 billion over 10 years. He is to lay out the plan on Wednesday in Cleveland.

While Obama declared some jobs would be created immediately by the infrastructure overhaul, a senior administration official told reporters the plan would not create jobs until 2011.

“This is not a stimulus, immediate-jobs plan,” the official said.


The White House stressed the plan would not add to the record U.S. deficit, a key issue for voters.

“One thing (Obama) is willing to put on the table is closing some of the tax loopholes for big oil and gas companies that currently get subsidies from taxpayers that they certainly don’t need. He thinks that is a perfectly good ‘pay-for’ to get this up and running,” the administration official said.

The American Petroleum Institute, which represents major U.S. oil and gas companies, said additional taxes would drive energy investment, including jobs, overseas. “Now is the time to create American jobs, not eliminate them,” API spokeswoman Cathy Landry said.

Obama told the Milwaukee rally he would work with Congress to make sure the plan was fully paid for.

He could face an uphill battle in getting Congress to approve the plan, especially if Republicans make big gains in November.

Senate Republican leader Mitch McConnell called it a “last-minute cobbled-together stimulus bill” and the Republican leader of the House, John Boehner, was equally dismissive.

“We don’t need more government ‘stimulus’ spending -- we need to end Washington Democrats’ out-of-control spending spree, stop their tax hikes, and create jobs by eliminating the job-killing uncertainty that is hampering our small businesses,” Boehner said.


Under the infrastructure plan, Obama is proposing to:

- Rebuild 150,000 miles (240,00 km) of roads;

- Construct and maintain 4,000 miles (6,400 km) of rail;

- Rehabilitate or reconstruct 150 miles (240 km) of runway and modernize the air traffic control system and;

- Set up an infrastructure bank to leverage private, state and local capital to invest in projects.

Transportation construction spending would likely help companies like equipment maker Caterpillar Inc CAT.N, privately held engineering firm Parsons Corp, and conglomerate General Electric Co GE.N.

The administration official said a “substantial number of jobs” would be created by the infrastructure projects. Transportation experts say 35,OOO jobs are created for every $1 billion in transportation construction investment.

The administration said the proposal unveiled on Monday would be part of a long-term transportation reauthorization that traditionally includes highway and rail funding. The $50 billion would represent a significant portion of the spending in the first year of any new transportation funding measure, an administration official said.

Congress has yet to comprehensively address new transportation legislation. The previous measure expired in 2009. One plan floated in the House would spend about $500 billion over six years.

Obama used his appearance in Milwaukee to set the tone for the fall campaign. Monday’s Labor Day holiday marks the informal start of the election campaign season.

He argued that Democratic policies had stopped the bleeding and produced some economic growth, while Republicans had opposed him every step of the way.

“If I say the sky is blue, they say no,” he said.

Obama’s visit to Cleveland promises to be more strategic. It is the city where Boehner, who would be House speaker if Republicans win the House, recently urged Obama to fire his economic team.

Other items that Obama could talk about this week are a payroll tax holiday, extending tax cuts for the middle class and increasing money for clean energy. (Writing by Steve Holland and Ross Colvin; Additional reporting by Lucia Mutikani, Ross Colvin, Charles Abbott, Alister Bull John Crawley and Tom Doggett; Editing by Peter Cooney)