Tuesday, October 13, 2009

Stimulus jobs: Is the recovery act working?

In the October 13, 2009 CNNMoney article "Stimulus jobs: Is the recovery act working?," Tami Luhby says new reports quantify how government stimulus funds are creating and saving jobs:
Is the largest one-time economic recovery effort in U.S. history creating jobs?

According to new reports from governors across the country, it is. Republicans in Congress say it's not, and the debate is getting louder.

States and other recipients of stimulus funding have handed in their first assessments of the $787 billion recovery act in recent days. While the Obama administration plans to make these reports public by month's end, some governors have released their initial evaluations.

In California, stimulus funds have created or saved more than 100,000 jobs through the end of September, according to Gov. Arnold Schwarzenegger. The nation's most populous state -- the world's eighth largest economy -- has been awarded $12.7 billion in recovery money and has spent $5.3 billion so far.

"The funding will not only save and create jobs, but it will also help stimulate our overall economy, improve our transportation infrastructure and help us reach our environmental goals," said Schwarzenegger, adding that the state submitted 5,747 reports from agencies and others who received funds from the state.

Minnesota said that 11,800 jobs -- including 5,900 in education, 1,200 in public safety and 900 in transportation -- were created or saved. The state has spent more than $1.6 billion in stimulus funds so far.

In Tennessee, which has spent $215 million, the tally is more than 7,700 jobs.

And in Oregon, more than 8,000 jobs have been saved or created. The recovery act provided the state "a much needed parachute for what was a free falling economy," said Gov. Ted Kulongoski, adding that the state has spent $1 billion of its stimulus funds.

Overall, the federal government has so far made available $256.3 billion, while $110.7 billion has been spent.

Exact job creation numbers elusive

Exactly how many jobs are being created or saved with stimulus funds is a difficult figure to pin down, however.

The White House last month said the recovery act is responsible for more than 1 million jobs. This estimate includes jobs funded directly with stimulus money, as well as those that exist indirectly, such as the deli workers who supply lunch to contractors on stimulus construction jobs.

The states' reports, however, include only direct jobs, so the figures are likely to be even smaller.

On top of that, governors are required to report jobs by hours of employment rather than by the number of people working. So someone hired for a short-term gig might only be counted as a fraction of a job.

Pennsylvania officials, meanwhile, say that more than 7,000 people are working on transportation and water infrastructure projects funded by stimulus dollars. But under the federal rules, the state will report that 1,000 jobs were created, said Gov. Edward Rendell.

Also, the impact of tax incentives, increased unemployment benefits and funding for programs such as Medicaid are not included in the assessments.

Still, the recently filed reports -- which also include data from companies, organizations, cities and counties -- will offer the first hard figures of jobs created. They will likely be scrutinized by both sides of the political aisle.

'Where are the jobs?'

House Republican leaders last week stepped up their attacks on the administration, claiming its stimulus initiative has been a failure. Instead of creating jobs, they contend, the nation has lost nearly 3 million private-sector positions and the unemployment rate is nearing 10%.

"It is now evident that the massive 'stimulus' spending bill enacted months ago has been unsuccessful," GOP leaders wrote to the White House. "The American people are right to ask: Where are the jobs?"

The rising unemployment rate has prompted calls for the Obama administration to do more to encourage businesses to step up their hiring. The Republicans want to stimulate small business job creation with a variety of measures, including allowing firms to take a tax deduction equal to 20% of their income.

Republicans are not alone in their call to do more to promote job creation. The Economic Policy Institute, a labor-oriented research group, last week called on the administration to institute a refundable tax credit for employers of up to 15% of wages for each new hire over the next two years. The organization also called for pumping more money into states to create jobs.

The White House, however, maintains that the stimulus package has stopped the hemorrhaging of jobs and has turned around the economy's direction.

Last month, the president's top economic advisers said the recovery act helped turn around the economy. They pointed to the fact that the number of jobs lost in the third quarter averaged 256,000 per month, two-thirds less than the country sustained at the beginning of the year.

"Thanks largely to the Recovery Act ... we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery," Larry Summers, director of the National Economic Council, wrote Monday in response to the Republican leaders' letter. "Most importantly, we have seen a substantial change in the trend of job loss."

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