Show Me the Stimulus

Show Me the Stimulus provides links to news and commentary about the effects of federal government spending from the American Recovery and Reinvestment Act in the state of Maryland.

This nine-month Maryland Morning series is funded by The Joseph and Harvey Meyerhoff Family Charitable Funds, The Baltimore Community Foundation, Melnick-Newell and Associates, and Persels & Associates.

Why No Amount of Fiscal or Monetary Stimulus Will Be Enough, Given How Small A Share of Total Income the Middle Now Receives

Robert Reich explains "Why No Amount of Fiscal or Monetary Stimulus Will Be Enough, Given How Small A Share of Total Income the Middle Now Receives."

How the Stimulus Is Changing America

In the August 26, 2010 TIME magazine article "How the Stimulus Is Changing America," Michael Grunwald provides an analysis of its impact.

The American Recovery and Reinvestment Act of 2009 — President Obama's $787 billion stimulus — has been marketed as a jobs bill, and that's how it's been judged. The White House says it has saved or created about 3 million jobs, helping avoid a depression and end a recession. Republicans mock it as a Big Government boondoggle that has failed to prevent rampant unemployment despite a massive expansion of the deficit. Liberals complain that it wasn't massive enough.

It's an interesting debate. Politically, it's awkward to argue that things would have been even worse without the stimulus, even though that's what most nonpartisan economists believe. But the battle over the Recovery Act's short-term rescue has obscured its more enduring mission: a long-term push to change the country. It was about jobs, sure, but also about fighting oil addiction and global warming, transforming health care and education, and building a competitive 21st century economy. Some Republicans have called it an under-the-radar scramble to advance Obama's agenda — and they've got a point.

Yes, the stimulus has cut taxes for 95% of working Americans, bailed out every state, hustled record amounts of unemployment benefits and other aid to struggling families and funded more than 100,000 projects to upgrade roads, subways, schools, airports, military bases and much more. But in the words of Vice President Joe Biden, Obama's effusive Recovery Act point man, "Now the fun stuff starts!" The "fun stuff," about one-sixth of the total cost, is an all-out effort to exploit the crisis to make green energy, green building and green transportation real; launch green manufacturing industries; computerize a pen-and-paper health system; promote data-driven school reforms; and ramp up the research of the future. "This is a chance to do something big, man!" Biden said during a 90-minute interview with TIME.

For starters, the Recovery Act is the most ambitious energy legislation in history, converting the Energy Department into the world's largest venture-capital fund. It's pouring $90 billion into clean energy, including unprecedented investments in a smart grid; energy efficiency; electric cars; renewable power from the sun, wind and earth; cleaner coal; advanced biofuels; and factories to manufacture green stuff in the U.S. The act will also triple the number of smart electric meters in our homes, quadruple the number of hybrids in the federal auto fleet and finance far-out energy research through a new government incubator modeled after the Pentagon agency that fathered the Internet.

The only stimulus energy program that's gotten much attention so far — chiefly because it got off to a slow start — is a $5 billion effort to weatherize homes. But the Recovery Act's line items represent the first steps to a low-carbon economy. "It will leverage a very different energy future," says Kristin Mayes, the Republican chair of Arizona's utility commission. "It really moves us toward a tipping point."

The stimulus is also stocked with nonenergy game changers, like a tenfold increase in funding to expand access to broadband and an effort to sequence more than 2,300 complete human genomes — when only 34 were sequenced with all previous aid. There's $8 billion for a high-speed passenger rail network, the boldest federal transportation initiative since the interstate highways. There's $4.35 billion in Race to the Top grants to promote accountability in public schools, perhaps the most significant federal education initiative ever — it's already prompted 35 states and the District of Columbia to adopt reforms to qualify for the cash. There's $20 billion to move health records into the digital age, which should reduce redundant tests, dangerous drug interactions and errors caused by doctors with chicken-scratch handwriting. Health and Human Services Secretary Kathleen Sebelius calls that initiative the foundation for Obama's health care reform and "maybe the single biggest component in improving quality and lowering costs."

Any of those programs would have been a revolution in its own right. "We've seen more reform in the last year than we've seen in decades, and we haven't spent a dime yet," says Education Secretary Arne Duncan. "It's staggering how the Recovery Act is driving change."

That was the point. Critics have complained that while the New Deal left behind iconic monuments — courthouses, parks, the Lincoln Tunnel, the Grand Coulee Dam — this New New Deal will leave a mundane legacy of sewage plants, repaved roads, bus repairs and caulked windows. In fact, it will create new icons too: solar arrays, zero-energy border stations, an eco-friendly Coast Guard headquarters, an "advanced synchrotron light source" in a New York lab. But its main legacy will be change. The stimulus passed just a month after Obama's inauguration, but it may be his signature effort to reshape America — as well as its government.

"Let's Just Go Build It!"

After Obama's election, Depression scholar Christina Romer delivered a freak-out briefing to his transition team, warning that to avoid a 1930s-style collapse, Washington needed to pump at least $800 billion into the frozen economy — and fast. "We were in a tailspin," recalls Romer, who is about to step down as chair of Obama's Council of Economic Advisers. "I was completely sympathetic to the idea that we shouldn't just dig ditches and fill them in. But saving the economy had to be paramount." Obama's economists argued for tax cuts and income transfers to get cash circulating quickly, emergency aid to states to prevent layoffs of cops and teachers and off-the-shelf highway projects to put people to work. They wanted a textbook Keynesian response to an economy in cardiac arrest: adding money to existing programs via existing formulas or handing it to governors, seniors and first-time home buyers. They weren't keen to reinvent the wheel.

But Obama and Biden also saw a golden opportunity to address priorities; they emphasized shovel-worthy as well as shovel-ready. Biden recalls brainstorming with Obama about an all-in push for a smarter electrical grid that would reduce blackouts, promote renewables and give families more control over their energy diet: "We said, 'God, wouldn't it be wonderful? Why don't we invest $100 billion? Let's just go build it!' "

It wasn't that easy. Utilities control the grid, and new wires create thorny not-in-my-backyard zoning issues; there wasn't $100 billion worth of remotely shovel-ready grid projects. It's hard to transform on a timeline, and some congressional Democrats were less interested in transforming government than growing it. For instance, after securing $100 billion for traditional education programs, House Appropriations Committee chairman Dave Obey tried to stop any of it from going to Race to the Top, which is unpopular with teachers' unions.

Ultimately, even Obama's speed focused economists agreed that stimulus spending shouldn't dry up in 2010. And some Democrats were serious about investing wisely, not just spending more. So House Speaker Nancy Pelosi insisted on $17 billion for research. House Education and Labor Committee chairman George Miller fought to save Race to the Top. And while the grid didn't get a $100 billion reinvention, it did get $11 billion after decades of neglect, which could shape trillions of dollars in future utility investments.

It takes time to set up new programs, but now money is flowing to deliver high-speed Internet to rural areas, spread successful quit-smoking programs and design the first high-speed rail link from Tampa to Orlando. And deep in the Energy Department's basement — in a room dubbed the dungeon — a former McKinsey & Co. partner named Matt Rogers has created a government version of Silicon Valley's Sand Hill Road, blasting billions of dollars into clean-energy projects through a slew of oversubscribed grant programs. "The idea is to transform the entire energy sector," Rogers says. "What's exciting is the way it fits all together."

"They Won't All Succeed"

The green industrial revolution begins with gee-whiz companies like A123 Systems of Watertown, Mass. Founded in 2001 by MIT nanotechnology geeks who landed a $100,000 federal grant, A123 grew into a global player in the lithium-ion battery market, with 1,800 employees and five factories in China. It has won $249 million to build two plants in Michigan, where it will help supply the first generation of mass-market electric cars. At least four of A123's suppliers received stimulus money too. The Administration is also financing three of the world's first electric-car plants, including a $529 million loan to help Fisker Automotive reopen a shuttered General Motors factory in Delaware (Biden's home state) to build sedans powered by A123 batteries. Another A123 customer, Navistar, got cash to build electric trucks in Indiana. And since electric vehicles need juice, the stimulus will also boost the number of U.S. battery-charging stations by 3,200%.

"Without government, there's no way we would've done this in the U.S.," A123 chief technology officer Bart Riley told TIME. "But now you're going to see the industry reach critical mass here."

The Recovery Act's clean-energy push is designed not only to reduce our old economy dependence on fossil fuels that broil the planet, blacken the Gulf and strengthen foreign petro-thugs but also to avoid replacing it with a new economy that is just as dependent on foreign countries for technology and manufacturing. Last year, exactly two U.S. factories made advanced batteries for electric vehicles. The stimulus will create 30 new ones, expanding U.S. production capacity from 1% of the global market to 20%, supporting half a million plug-ins and hybrids. The idea is as old as land-grant colleges: to use tax dollars as an engine of innovation. It rejects free-market purism but also the old industrial-policy approach of dumping cash into a few favored firms. Instead, the Recovery Act floods the zone, targeting a variety of energy problems and providing seed money for firms with a variety of potential solutions. The winners must attract private capital to match public dollars — A123 held an IPO to raise the required cash — and after competing for grants, they still must compete in the marketplace. "They won't all succeed," Rogers says. "But some will, and they'll change the world."

The investments extend all along the food chain. A brave new world of electric cars powered by coal plants could be dirtier than the oil-soaked status quo, so the stimulus includes an unheard-of $3.4 billion for clean-coal projects aiming to sequester or reuse carbon. There are also lucrative loan guarantees for constructing the first American nuclear plants in three decades. And after the credit crunch froze financing for green energy, stimulus cash has fueled a comeback, putting the U.S. on track to exceed Obama's goal of doubling renewable power by 2012. The wind industry added a record 10,000 megawatts in 2009. The stimulus is also supporting the nation's largest photovoltaic solar plant, in Florida, and what will be the world's two largest solar thermal plants, in Arizona and California, plus thousands of solar installations on homes and buildings.

The stimulus is helping scores of manufacturers of wind turbines and solar products expand as well, but today's grid can only handle so much wind and solar. A key problem is connecting remote wind farms to population centers, so there are billions of dollars for new transmission lines. Then there is the need to find storage capacity for when it isn't windy or sunny outside. The current grid is like a phone system without voice mail, a just-in-time network where power is wasted if it doesn't reach a user the moment it's generated. That's why the Recovery Act is funding dozens of smart-grid approaches. For instance, A123 is providing truckloads of batteries for a grid-storage project in California and recycled electric-car batteries for a similar effort in Detroit. "If we can show the utilities this stuff works," says Riley, "it will take off on its own."

Today, grid-scale storage, solar energy and many other green technologies are too costly to compete without subsidies. That's why the stimulus launched the Advanced Research Projects Agency-Energy (ARPA-E), a blue-sky fund inspired by the Pentagon's Defense Advanced Research Projects Agency (DARPA), the incubator for GPS and the M-16 rifle as well as the Internet. Located in an office building a block from the rest of the Energy Department, ARPA-E will finance energy research too risky for private funders, focusing on speculative technologies that might dramatically cut the cost of, say, carbon capture — or not. "We're taking chances, because that's how you put a man on the moon," says director Arun Majumdar, a materials scientist from the University of California, Berkeley. "Our idea is it's O.K. to fail. You think America's pioneers never failed?"

ARPA-E is funding the new pioneers — mad scientists and engineers with ideas for wind turbines based on jet engines, bacteria to convert carbon dioxide into gasoline, and tiny molten-metal batteries to provide cheap high-voltage storage. That last idea is the brainchild of MIT's Donald Sadoway, who already has a prototype fuel cell the size of a shot glass. The stimulus will help him create a kind of reverse aluminum smelter to make prototypes the size of a hockey puck and a pizza box. The ultimate goal is a commercial scale battery the size of a tractor trailer that could power an entire neighborhood. "We need radical breakthroughs, so we need radical experiments," Sadoway says. "These projects send chills down the spine of the carbon world. If a few of them work, [Venezuela's Hugo] Chávez and [Iran's Mahmoud] Ahmadinejad are out of power."

Then again, the easiest way to blow up the energy world would be to stop wasting so much. That's the final link in the chain, a full-throttle push to make energy efficiency a national norm. The Recovery Act is weatherizing 250,000 homes this year. It gave homeowners rebates for energy-efficient appliances, much as the Cash for Clunkers program subsidized fuel-efficient cars. It's retrofitting juice-sucking server farms, factories and power plants; financing research into superefficient lighting, windows and machinery; and funneling billions into state and local efficiency efforts.

It will also retrofit 3 in 4 federal buildings. The U.S. government is the nation's largest energy consumer, so this will save big money while boosting demand for geothermal heat pumps, LED lighting and other energy-saving products. "We're so huge, we make markets," says Bob Peck, the General Services Administration's public-buildings commissioner. GSA's 93-year-old headquarters, now featuring clunky window air conditioners and wires duct-taped to ceilings, will get energy optimized heating, cooling and lighting systems, glass facades with solar membranes and a green roof; the makeover should cut its energy use 55%. It might even beta-test stimulus-funded windows that harvest sunlight. "We'll be the proving ground for innovation in the building industry," Peck says. "It all starts with renovating the government."

The New Venture Capitalists

The stimulus really is starting to change Washington — and not just the buildings. Every contract and lobbying contact is posted at Recovery.gov, with quarterly data detailing where the money went. A Recovery Board was created to scrutinize every dollar, with help from every major agency's independent watchdog. And Biden has promised state and local officials answers to all stimulus questions within 24 hours. It's a test-drive for a new approach to government: more transparent, more focused on results than compliance, not just bigger but better. Biden himself always saw the Recovery Act as a test — not only of the new Administration but of federal spending itself. He knew high-profile screwups could be fatal, stoking antigovernment anger about bureaucrats and two-car funerals. So he spends hours checking in, buttering up and banging heads to keep the stimulus on track, harassing Cabinet secretaries, governors and mayors about unspent broadband funds, weatherization delays and fishy projects. He has blocked some 260 skate parks, picnic tables and highway beautifications that flunked his what-would-your-mom-think test. "Imagine they could have proved we wasted a billion dollars," Biden says. "Gone, man. Gone!"

So far, despite furor over cash it supposedly funneled to contraception (deleted from the bill) and phantom congressional districts (simply typos), the earmark-free Recovery Act has produced surprisingly few scandals. Prosecutors are investigating a few fraud allegations, and critics have found some goofy expenditures, like $51,500 for water-safety-mascot costumes or a $50,000 arts grant to a kinky-film house. But those are minor warts, given that unprecedented scrutiny. Biden knows it's early — "I ain't saying mission accomplished!" — but he calls waste and fraud "the dogs that haven't barked."

The Recovery Act's deeper reform has been its focus on intense competition for grants instead of everybody-wins formulas, forcing public officials to consider not only whether applicants have submitted the required traffic studies and small-business hiring plans but also whether their projects make sense. Already staffed by top technologists from MIT, Duke and Intel, ARPA-E recruited 4,500 outside experts to winnow 3,700 applications down to 37 first-round grants. "We've taken the best and brightest from the tech world and created a venture fund — except we're looking for returns for the country," Majumdar says. These change agents didn't uproot their lives to fill out forms in triplicate and shovel money by formula. They want to reinvent the economy, not just stimulate it. Sadoway, the MIT battery scientist, is tired of reporting how many jobs he's created in his lab: "If this works, I'll create a million jobs!"

Obama has spent most of his first term trying to clean up messes — in the Gulf of Mexico, Iraq and Afghanistan, on Wall Street and Main Street — but the details in the stimulus plan are his real down payment on change. The question is which changes will last. Will electric cars disappear after the subsidies disappear? Will advanced battery factories migrate back to China? Will bullet trains ever get built? The President wants to extend transformative programs like ARPA-E. But would they be substitutes for the status quo or just additions to tack onto the deficit? And would they survive a Republican Congress?

Polls suggest the actual contents of the Recovery Act are popular. But the idea of the stimulus itself remains toxic — and probably will as long as the recovery remains tepid. "Today, it's judged by jobs," Rogers says of the act. "But in 10 years, it'll be judged by whether it transformed our economy."

New White House report claims more jobs from stimulus bill

According to the July 14, 2010 article "New WH report claims more jobs from stimulus bill," the Obama administration claims the federal government stimulus spending program prevented unemployment in the U.S. from being worse than it was. Claims such as this are impossible to prove (or disprove), however. The report is an attempt to deflect blame from the President for the condition of the economy and to inform the public that the Obama administration has been pursuing the standard remedies for fighting economic recession: expansionary fiscal policy (in the forms of increased government spending and tax cuts) and expansionary monetary policy (in the form of low interest rates).

According to the article:

WASHINGTON – A new White House report says last year's $862 billion stimulus law has now "saved or created" between 2.5 million and 3.6 million jobs.

That's up from 2.2 million to 2.8 million in the last quarterly report from the White House Council of Economic Advisers.

Christina Romer, head of the council, says in congressional testimony prepared for Wednesday that every $1 from the stimulus bill is matched by $3 in private money.

She says the law "appears to be stimulating private investment and job creation at a time when the economy needs it most."

President Barack Obama has traveled the country telling voters that as bad as things are, they'd be worse without the stimulus. He acknowledges the message is a tough sell. Obama travels Thursday to Michigan.

Road projects' disappointing effect on jobs

In the January 11, 2010 article "AP IMPACT: Road projects don't help unemployment," Associated Press writers Matt Apuzzo and Brett J. Blackledge report that recent road construction and maintenance projects have not generated the jobs many expected.

WASHINGTON – Ten months into President Barack Obama's first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found.

Spend a lot or spend nothing at all, it didn't matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama's argument that more road money would address an "urgent need to accelerate job growth."

Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president said are "at the heart of our effort to accelerate job growth."

Construction spending would be a key part of the Jobs for Main Street Act, a $75 billion second stimulus to revive the nation's lethargic unemployment rate and improve the dismal job market for construction workers. The House approved the bill 217-212 last month after House Speaker Nancy Pelosi, D-Calif., worked the floor for an hour; the Senate is expected to consider it later in January.

AP's analysis, which was reviewed by independent economists at five universities, showed that strategy hasn't affected unemployment rates so far. And there's concern it won't work the second time. For its analysis, the AP examined the effects of road and bridge spending in communities on local unemployment; it did not try to measure results of the broader aid that also was in the first stimulus like tax cuts, unemployment benefits or money for states.

"My bottom line is, I'd be skeptical about putting too much more money into a second stimulus until we've seen broader effects from the first stimulus," said Aaron Jackson, a Bentley University economist who reviewed AP's analysis.

Even within the construction industry, which stood to benefit most from transportation money, the AP's analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.

"As a policy tool for creating jobs, this doesn't seem to have much bite," said Emory University economist Thomas Smith, who supported the stimulus and reviewed AP's analysis. "In terms of creating jobs, it doesn't seem like it's created very many. It may well be employing lots of people but those two things are very different."

Transportation spending is too small of a pebble to quickly create waves in the nation's $14 trillion economy. And starting a road project, even one considered "shovel ready," can take many months, meaning any modest effects of a second burst of transportation spending are unlikely to be felt for some time.

"It would be unlikely that even $20 billion spent all at once would be enough to move the needle of the huge decline we've seen, even in construction, much less the economy. The job destruction is way too big," said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.

Few counties, for example, received more road money per capita than Marshall County, Tenn., about 90 minutes south of Nashville.

Obama's stimulus is paying the salaries of dozens of workers, but local officials said the unemployment rate continues to rise and is expected to top 20 percent soon. The new money for road projects isn't enough to offset the thousands of local jobs lost from the closing of manufacturing plants and automotive parts suppliers.

"The stimulus has not benefited the working-class people of Marshall County at all," said Isaac Zimmerle, a local contractor who has seen his construction business slowly dry up since 2008. That year, he built 30 homes. But prospects this year look grim.

Construction contractors like Zimmerle would seem to be in line to benefit from the stimulus spending. But money for road construction offers little relief to most contractors who don't work on transportation projects, a niche that requires expensive, heavy equipment that most residential and commercial builders don't own. Residential and commercial building make up the bulk of the nation's construction industry.

"The problem we're seeing is, unfortunately, when they put those projects out to bid, there are only a handful of companies able to compete for it," Zimmerle said.

The Obama administration has argued that it's unfair to count construction jobs in any one county because workers travel between counties for jobs. So, the AP looked at a much larger universe: The more than 700 counties that got the most stimulus money per capita for road construction, and the more than 700 counties that received no money at all.

For its analysis, the AP reviewed Transportation Department data on more than $21 billion in stimulus projects in every state and Washington, D.C., and the Labor Department's monthly unemployment data. Working with economists and statisticians, the AP performed statistical tests to gauge the effect of transportation spending on employment activity.

There was no difference in unemployment trends between the group of counties that received the most stimulus money and the group that received none, the analysis found.

Despite the disconnect, Congress is moving quickly to give Obama the road money he requested. The Senate will soon consider a proposal that would direct nearly $28 billion more on roads and bridges, programs that are popular with politicians, lobbyists and voters. The overall price tag on the bill, which also would pay for water projects, school repairs and jobs for teachers, firefighters and police officers, would be $75 billion.

"We have a ton of need for repairing our national infrastructure and a ton of unemployed workers to do it. Marrying those two concepts strikes me as good stimulus and good policy," White House economic adviser Jared Bernstein said. "When you invest in this kind of infrastructure, you're creating good jobs for people who need them."

Highway projects have been the public face of the president's recovery efforts, providing the backdrop for news conferences with workers who owe their paychecks to the stimulus. But those anecdotes have not added up to a national trend and have not markedly improved the country's broad employment picture.

The stimulus has produced jobs. A growing body of economic evidence suggests that government programs, including Obama's $700 billion bank bailout program and his $787 billion stimulus, have helped ease the recession. A Rutgers University study on Friday, for instance, found that all stimulus efforts have slowed the rise in unemployment in many states.

But the 400-page stimulus law contains so many provisions — tax cuts, unemployment benefits, food stamps, state aid, military spending — economists agree that it's nearly impossible to determine what worked best and replicate it. It's also impossible to quantify exactly what effect the stimulus has had on job creation, although Obama points to estimates that credit the recovery program for creating or saving 1.6 million jobs.

Politically, singling out transportation for another round of spending is an easier sell than many of the other programs in the stimulus. The money can be spent quickly and provides a tangible payoff. Even some Republicans who have criticized the stimulus have said they want more transportation spending.

Spending money on roads also ripples through the economy better than other spending because it improves the nation's infrastructure, said Bernstein, the White House economist.

But that's a policy argument, not a stimulus argument, said Daniel Seiver, an economist at San Diego State University who reviewed AP's analysis.

"Infrastructure spending does have a long-term payoff, but in terms of an immediate impact on construction jobs it doesn't seem to be showing up," Seiver said. "A program like this may be justified but it's not going to have an immediate effect of putting people back to work."

Will latest jobs bill really produce jobs?

In the January 3, 2010 article "Will latest jobs bill really produce jobs?," Associated Press writer Jim Abrams outlines opposing sides in the Congressional battle over U.S. government efforts to increase employment:

WASHINGTON – When the Senate takes up a jobs bill later this month or early in February, the debate will center on whether it really will create jobs and be worth plunging the government tens of billions of dollars further into debt.

Republicans scoff at the "Jobs for Main Street Act" title that House Democrats put on their $174 billion package last month. They refer to it as "son of the stimulus," the $787 billion economic recovery plan of nearly a year ago that they say was ineffective at producing jobs.

In its last vote of 2009, the House narrowly passed the bill, 217-212, without a single Republican supporter.

Democrats tick off the job prospects from the House bill's $75 billion in infrastructure and public sector spending: tens of thousands of new construction jobs, 5,500 more police officers, 25,000 additional AmeriCorps members, 250,000 summer jobs for disadvantaged youth, 14,000 part-time jobs for parks and forestry workers.

"Why don't we just put everyone in the United States on the federal government payroll and call it a day?" counters Rep. Jerry Lewis, R-Calif.

House Democrats diverted $75 billion from the Wall Street bailout fund to offset some of the costs. Opponents said that amounted to a shell game because unused bailout money is supposed to be used to reduce the deficit, which hit $1.4 trillion in the 2009 budget year.

The Senate, however, has less of an appetite for another costly round of economic stimulus measures, particularly with a vote on tap for Jan. 20 to again raise the ceiling on the government's total debt just a month after upping it to $12.4 trillion.

Conspicuously absent from the House plan were President Barack Obama's proposals to attack unemployment through tax credits for small businesses that create jobs and for homeowners who make their dwellings more energy efficient.

A job-creating tax credit for small businesses has support among some Democrats in the Senate, even though critics fear it may be too complex to work.

"Small business people have too much to do just to keep their businesses afloat to try and figure out some fancy, complex credit," Lawrence Lindsey, an economic adviser to former President George W. Bush, told a Democratic panel last month.

But Gene Sperling, an adviser to Treasury Secretary Timothy Geithner, said tax credits would empower growing small businesses.

"If these have even a marginal incentive on even a few ... employers, the bang for the buck in terms of job creation would be one of the highest of any of the types of incentives that we've had," Sperling said.

The job creation issue is complicated. Much of the money in the House bill goes to programs that may stimulate the economy but don't appear to directly put people to work.

There's $41 billion to extend unemployment benefits for six months and $12.3 billion to extend a health insurance subsidy for people who have lost their jobs. There's extension of a child tax credit for poor families, $23.5 billion to help states cover Medicaid costs and $23 billion so states can support some 250,000 education jobs over the next two years. An additional $2.8 billion goes to clean water and environmental restoration projects.

Even the investment in "shovel-ready" highway and bridge projects may not immediately translate into a reduction in the nation's 10 percent unemployment rate.

Republicans cited government figures showing that, as of Sept. 30, only 9 percent of $27.5 billion for highways in the first stimulus bill had been spent. The Congressional Budget Office estimates that of the $39 billion in the new House jobs bill directed to the departments of Transportation and Housing and Urban Development, only $1.7 billion will get spent before next October.

A lot of the money "hasn't even gotten out of Washington yet," said Rep. Eric Cantor of Virginia, the House's second-ranked Republican. "Why is it still here if it was designed to create jobs?"

Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, said some 8,000 highway and transit projects — more than half those designated under last February's stimulus bill — are under way, creating or sustaining 210,000 direct jobs. When indirect jobs are included, that number reaches 630,000, he said.

The low federal spending rate, committee officials said, is because the treasury outlay comes at the end of the process, after the contractor bills the state and the state bills Washington.

Dan DuBray, spokesman for the Interior Department's Bureau of Reclamation, said his agency will have no problem putting to work the $100 million it would receive under the jobs bill to provide clean drinking water to rural areas. "Projects in Reclamation are much akin to planes waiting on the taxiway waiting to take off."

Matt Jeanneret, spokesman for the American Road and Transportation Builders Association, agreed that "a lot of jobs" have been saved by the stimulus act, although in many cases federal money is basically replacing lower levels of private or state investment. The unemployment rate in the construction industry remains at about 19 percent, almost double the national level.

The stimulus is "a needed shot in the arm, but the real solution is a long-term highway and transit investment bill," Jeanneret said. Congress has put off consideration of a six-year $450 billion infrastructure measure to replace the highway and transit act that expired in September.

The CBO has estimated that employment was 600,000 to 1.6 million higher in the third quarter of 2009 because of the stimulus act.
___
Associated Press writer Ann Sanner contributed to this report.
___
On the Net:
Information on the bill, H.R. 2847, can be found at http://thomas.loc.gov/
Congressional Budget Office: http://www.cbo.gov/
Background on the Jobs for Main Street Act: http://tinyurl.com/yz2ryx9

Obama economic adviser pitches job stimulus

According to the December 13, 2009 article "Obama economic adviser pitches job stimulus," an "Obama aide says it would be 'suicide' for government to tackle deficit without regard to jobs."

WASHINGTON (AP) -- A White House economic adviser says it would be "suicide" for the government to focus exclusively on the deficit when the economy is sorely in need of jobs.

Christina Romer says money freed up from the repayment of financial bailout funds gives the government the leeway to boost try to employment while seeking to control the deficit over the longer term.

She says "no one is talking about raising taxes" during a recession to pay for the proposed new stimulus plan.

Romer, who heads the White House Council of Economic Advisers, was asked Sunday on NBC's "Meet the Press" whether the recession was over, She said it might be over in official terms, but that it's not truly over until unemployment goes back down to normal levels, in the range of 5 percent.

The jobless rate now is 10 percent.

Obama urges major new stimulus, jobs spending

In the December 8, 2009 article "Obama urges major new stimulus, jobs spending," Associated Press writer Tom Raum reports:

WASHINGTON – President Barack Obama called for a major new burst of federal spending Tuesday, perhaps $150 billion or more, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment.

Despite Republican criticism concerning record federal deficits, Obama said the U.S. has had to "spend our way out of this recession" with so many people out of work but insisted he was still mindful of a need to confront soaring deficits. More than 7 million Americans have lost their jobs since the recession began two years ago, and the jobless rate stands at 10 percent, statistics Obama called "staggering."

Congressional approval would be required for the new spending.

"We avoided the depression many feared," Obama said in a speech at the Brookings Institution, a Washington think tank. But, he added, "Our work is far from done."

It was the third time in a week the president had presided over a high-profile event on jobs, responding to rising pleas in Congress that he spend more time discussing unemployment as midterm election season draws near.

Obama proposed new spending for highway and bridge construction, for small business tax cuts and for retrofitting millions of homes to make them more energy-efficient. He said he wanted to extend economic stimulus programs to keep unemployment insurance from expiring for millions of out-of-work Americans and to help laid-off workers keep their health insurance. He proposed an additional $250 apiece in stimulus spending for seniors and veterans and aid to state and local governments to discourage them from laying off teachers, police officers and firefighters.

He did not give a price tag for the new package but said he would work with Congress on deciding how to pay for it.

On Capitol Hill, estimates of a potential jobs bill range from $75 to $150 billion, said Rep. Steny Hoyer of Maryland, the No. 2 Democrat in the House.

"100 billion, 150 billion, 75 billion — those are all figures that are being talked about," Hoyer told reporters.

Those billions would be on top of money for separate legislation for safety-net initiatives such as extending unemployment benefits for the long-term jobless and providing them health insurance subsidies.

Some lawmakers put the total cost of the new proposals at $200 billion or more.

White House economic adviser Jared Bernstein said the White House is considering spending $50 billion on infrastructure projects alone such as roads and bridges and water projects. Other figures, he said in an interview with The Associated Press, would be worked out with Congress.

Republicans ridiculed the president's speech and his parallel call for doing more to hold down government deficits.

"At least the president's proposal will result in one new job — he'll need to hire a magician to make this new deficit spending appear fiscally responsible," said Sen. Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee.
House GOP leader John Boehner of Ohio declared the president "out of ideas and out of touch."

While Obama did not propose the kind of direct federal public works jobs that were created in the 1930s, he said government action could set the stage for more job creation by private business. Many of his proposals would extend or expand programs included in the mammoth $787 billion stimulus package passed last winter.

While acknowledging increasing concerns in Congress and among the public over the nation's growing debt, Obama said critics present a "false choice" between paying down deficits and investing in job creation and economic growth.

"Even as we have had to spend our way out of this recession in the near term, we have begun to make the hard choices necessary to get our country on a more stable fiscal footing in the long run," he said.

To find money to pay for the new programs, the administration is pointing to the Treasury Department's report on Monday that it expects to get back $200 billion in taxpayer-approved bank bailout funds faster than expected.

Obama suggested this windfall would help the government spend money on job creation at the same time it eats into the nation's debt, which now totals $12 trillion.

He called the bank bailout, under the 2008 Troubled Asset Relief Program (TARP), "galling."

"There has rarely been a less loved — or more necessary — emergency program," Obama said.

The program is due to go out of business at the end of this year, although Congress is expected to extend it to next October.

The perception that the program mainly bailed out Wall Street bankers while doing little to help ordinary Americans has fed anti-Washington sentiment across the nation.

In clear acknowledgment of this sentiment, Obama said the unexpected $200 billion in repaid loans and other savings "gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street."

But Republicans cried foul, claiming that the leftover and repaid TARP money must be used exclusively for deficit reduction or additional bank bailouts, as the law setting it up spells out, and not for what amounts to an expensive new stimulus program to create jobs.

"The stimulus money clearly was a spending bill. TARP was a loan — a loan to be paid back. And we know that a number of the banks are, in fact, paying it back," said Senate Minority Leader Mitch McConnell, R-Ky. "So I don't think raiding a loan program to launch another spending spree is the best way to create jobs."

David Walker, president of the Peter G. Peterson Foundation, a group that promotes fiscal responsibility, said that just because the government hasn't had to spend all the TARP money on banks "doesn't mean we should automatically spend it on something else."

Walker, former head of Congress' Government Accountability Office, said in an interview that clearly defined objectives or conditions were missing from both the $700 billion bank bailout law passed in October 2008 and this year's $787 billion stimulus package. He said, "You can't change history, but you need to learn from past mistakes to make sure that you don't repeat them."

Liberal groups praised Obama's new initiatives. "We think that Obama made a step in the right direction," said Karen Dolan of the Institute for Policy Studies. "He's finally tapping into that moral outrage of the American people at the Wall Street bailouts."

A major part of his package includes new incentives for small businesses, which account for two-thirds of the nation's work force. He proposed a new tax cut for small businesses that hire in 2010 and an elimination for one year of the capital gains tax on profits from small-business investments.

Obama also proposed an elimination of fees on loans to small businesses, coupled with federal guarantees of those loans through the end of next year. His proposal for new tax breaks for energy-efficient retrofits in homes is modeled on the now-expired Cash for Clunkers rebates for trading in used vehicles for more fuel-efficient vehicles. Some administration officials have dubbed the proposed new program "Cash for Caulkers."

Although the unemployment rate inched down to 10 percent in November from 10.2 percent in October, more of America's largest companies will shrink their staffs than will hire in the next six months, according to a new survey by the Business Roundtable.

A Labor Department report on Tuesday showed there were about 6.3 unemployed people, on average, for each job opening in October. Comparable November figures were not yet available.

Can the Federal Government Really Create Jobs?

In the December 7, 2009 TIME article "Can the Federal Government Really Create Jobs?," Barbara Kiviat outlines four ways the government might reduce unemployment in the short run.

The Obama Administration is out to create jobs. Let's not get our hopes up.

The day before the Labor Department announced a second month of 10%-plus unemployment last week, the White House hosted a get-together to hear from executives, labor leaders and academics about how the federal government might jolt job growth. "We're looking for fresh perspectives," the President said. "I am open to every demonstrably good idea."

That may sound promising, but the truth is, drumming up new jobs on short notice isn't exactly in the government's wheelhouse. In the long term, what the government does and doesn't do is incredibly important to the health of the labor market. Trade policy, corporate tax rates, the structure of health care — these things all have a real impact on economic growth. But Washington's toolkit doesn't work nearly as well in the short run. Right now companies aren't hiring for a very specific reason: there's not as much demand for their products and services. Callous as it may sound, high unemployment at the front end of an economic recovery is perfectly normal.

Of course, for the 15 million people out of work, that's little consolation. So the government is poised to act. Here's a rundown of four sorts of ideas being bandied about, and how much we can realistically expect from each.

Target an Industry and Stimulate Demand

Cash for Clunkers — the program that paid people $4,500 to turn in their old cars and buy new ones — is one of the most demonstrably successful federal efforts at stimulating the economy so far. Over the summer, General Motors and other car companies ramped up production — adding shifts and running plants on overtime — to meet the increase in demand. Now policymakers are talking about Cash for Caulkers, a program that would give homeowners an incentive to better weatherize their houses. The goal would be to create work for a construction industry that still hasn't found its feet in the wake of the real estate bust, while also pushing through a bit of the Administration's green agenda.

Such a targeted type of program has a good shot at doing what it sets out to do. The downside: intervening in the economy in such a precise way is almost by definition not expandable. Cash for Caulkers would give building contractors a boost, but they represent a small slice of the economy. To next help out, say, bakers, policymakers would have to design a brand-new program. Plus, if such a program had an expiration date, we'd feel not just a rise in demand, but a fall later on as well. Car manufacturers and the people who work for them certainly did after the Cash for Clunkers discounts ended.

Pay Companies to Hire People

If we want firms to go out and hire, why not give them an economic incentive to do so? This could be done by flat-out paying companies to hire, or by reducing their share of payroll taxes (the money that gets withheld from workers' paychecks to pay for Social Security and Medicare). Either way, adding a new worker becomes cheaper. We last tried this in the 1970s — the mechanism was a tax credit for hiring — and the results weren't particularly remarkable, though part of that could have had something to do with the structure of the credit.

The goal of this sort of approach is to accelerate the way an economy naturally comes out of recession. Since there has been less demand for goods and services, firms hesitate to add workers. Instead, companies squeeze more productivity out of their current ones. This is a trend we've been seeing. Paying companies to hire would ostensibly push them into the next phase of recovery: adding more employees.

But there are reasons to question how effective and efficient such a program would be. First of all, it is misleading to imply that companies aren't hiring because workers aren't cheap enough. As Dale Mortensen, a professor of economics at Northwestern University, points out, workers are a real bargain right now. Unit labor costs — how much a company has to pay people to produce a unit of whatever it is that the company makes — have been flat or falling for all of 2009. Between the second and third quarters, labor costs dropped at an annual rate of 2.5%. "If you just look at the cost side, this should be a labor boom," says Mortensen.

It is also misleading to imply that companies aren't hiring. They are — about 4 million workers a month. There is always a lot of churn in the American labor market and that doesn't stop during a recession. (We don't particularly feel the hiring right now because companies are letting workers go at a higher rate.) In a best-case scenario — if using tax dollars to subsidize corporate hiring works exactly as it should — we'd wind up paying for 4 million hires a month that we would have otherwise gotten for free.

Hire More People to Work for the Government

Perhaps the easiest way for the government to create jobs is for it to create government jobs. The example quoted most often: the federal Works Progress Administration (WPA), which during the late 1930s employed more than 8 million people. The jobs were project-based and largely in construction — we got a lot of highways and airports out of it — but also occasionally in professional fields such as teaching, nursing and writing.

Do we want the federal government deciding which jobs should be created in our economy? In capitalism, the answer to this question in the long term is no. However, in the short term, there is a different economic argument that could plausibly take over.

Coming out of a recession is a tricky thing. Companies feel like it might be time to start ramping production back up, but demand hasn't fully returned, so they hesitate to hire. The conundrum: demand in the United States is overwhelmingly consumer-driven and people need to have jobs to feel like it's once again safe to spend money. It's classic chicken-or-the-egg matter. Direct hiring by the government could, theoretically, sidestep the impasse. The question then becomes whether or not such a program creates more economic benefit than it does economic inefficiency by having the government dictate job creation. Consider that one criticism of the WPA was that it prevented people from moving to jobs where they would have been more economically productive — and actually slowed down the post-Depression recovery.

Boost Access to Credit for Growing Businesses

Small businesses — or, to be more precise, young businesses — create a disproportionate share of new jobs. To do that, they need to grow, and to do that, they often need access to credit. While the ability of large firms to borrow has pretty much returned to normal, many smaller firms are still struggling to get the money they need from banks. It's a problem even Federal Reserve Chairman Ben Bernanke has talked about in recent weeks. The seeming solution: help get small, growing companies loans and the jobs will follow.

The government has already taken a number of steps in this realm, largely through the Small Business Administration. The issue with increasing access to credit, though, is that easy money was one of the main reasons we wound up on the brink of economic calamity in the first place. Taken as a group, new businesses may be job creators, but any sort of average masks the fact that many young companies completely combust. Lending to them is risky, and while it may be desirable to lend more in an attempt to create jobs, there is a flip side to the coin. There is a reason banks right now are hesitating to lend too readily — they've recently learned a lesson about where that can lead.

If it seems like there are few obvious steps for a government looking to create jobs, that's because there are, in fact, few obvious steps. Governmental programs that would have the clearest impact are, by their nature, limited in scale. Broad-based programs come with caveats and knock-on effects.

At the end of the day, the thing the government may be best at doing job-creation-wise is sticking to the thing it is in more of a position to control: long-term strategy. With major legislation taking shape on a range of issues, from health care to climate change, it is not at all clear what the business landscape will look like in coming months and years. "There's a lot of evidence that suggests uncertainty right now is enormous," says John Haltiwanger, a professor of economics at the University of Maryland. "If some of these things were resolved, businesses might be able to get a clearer map of what things will look like in the future." Including, perhaps, how much they'll want to have some new workers on board.

The Stimulus Spending Bill: Is It Working at All?

In the November 2, 2009 TIME magazine artilce "The Stimulus Spending Bill: Is It Working at All?," Justin Fox explains that much of the criticism of stimulus spending is misguided.

The $787 billion American Recovery and Reinvestment Act that Congress approved last February was the first major legislative accomplishment of the Obama White House. Lately, it has also become one of Washington's most frequently tossed political footballs.

Here's the play-by-play from a few days in mid-October. House Republicans wrote (and released to the public) a letter to the President in which they claimed that with the unemployment rate at 9.8%, "it is now evident that the massive 'stimulus' spending bill enacted months ago has been unsuccessful." Obama economic adviser Larry Summers stepped up to play defense. "Thanks largely to the Recovery Act ...," he wrote, "we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery."

The next counter came in a memo to House Republicans from economist and former John McCain adviser Douglas Holtz-Eakin, who wrote, "Jobs keep disappearing ... and the Obama Administration's only apparent plan is to double down on a failed strategy for economic stimulus." The next day, the White House went on offense, hailing a preliminary report on stimulus job creation (30,000 jobs directly created or saved by the first $16 billion in spending). House minority leader John Boehner retorted that such exulting was "beyond the pale" because "3 million private-sector jobs have been lost since it became law."

Who's right here? Well, first, the Republican argument that the stimulus is a bust because jobs have been lost fails a basic logic test. After last fall's global financial shock, the job market was going to be thrown for a loss no matter what. The issue is whether the number of job losses is greater or lesser than it would have been in the absence of the stimulus. "You can't answer these questions without a compared-to-what," says Jared Bernstein, economic adviser to Vice President Joe Biden, who is overseeing the stimulus. "We can have good arguments about the baseline, but a critique that doesn't evoke the baseline is useless."

I got my rough baseline from a conversation at the height of last fall's financial panic with Barry Eichengreen, an economist at the University of California, Berkeley, who is an expert on the Great Depression. "I doubt that we'll be able to avoid double-digit unemployment," he told me. "But I'm still confident we can avoid 24% unemployment like in 1933."

By that standard, we're doing O.K. But Bernstein and Christina Romer, the chairwoman of the President's Council of Economic Advisers, made the mistake of providing a more optimistic baseline last January — a forecast in which unemployment peaked at 9% without the stimulus bill and stayed below 8% with it.

Unemployment has of course passed both those mileposts and is probably still rising. ("I have noticed," Bernstein says dryly.) This overshoot says more about the inadequacy of economic-forecasting models than about the efficacy of the stimulus. But the White House cites these same kinds of models in claiming that the stimulus added between 2 and 3 percentage points to economic growth in the second quarter and 3 points in the third quarter. This may be correct as far as general direction — my unscientific assessment (a.k.a. guess) is that it is — but the exact numbers are probably bunk.

The political back-and-forth on the stimulus bill is the ultimate in bunk, though, because it ignores most of the fiscal stimulus provided by Washington so far. Anytime the Federal Government spends more than it takes in, it creates fiscal stimulus. That stimulus (deficit) was $1.4 trillion for the just-ended fiscal year, up about $1 trillion from the year before. The stimulus bill accounted for just $200 billion of that increase, according to the Congressional Budget Office. Bailing out banks and other financial firms cost $245 billion. A $419 billion drop in tax receipts (due mainly to recession, not legislation) without an offsetting spending cut was the biggest factor in the deficit's rise. Then there are the trillions of dollars the Federal Reserve put into asset purchases and other programs — surely the biggest stimulus of all.

Why don't we hear constant political debate about these other stimulus efforts? Presumably because they were the result of bipartisan legislation or were the doing of the nonpartisan Fed. That is to say, the Obama Administration can't take full credit for the bulk of the stimulus, and the Republicans can't disown it. So neither side talks much about it. Over the coming year these other forms of stimulus will — one hopes — be ratcheted back, while stimulus-bill spending will peak. At that point the great stimulus debate might actually start to matter. Until then, there's better football to be watched elsewhere.

STIMULUS WATCH: Construction drives up new jobs

In the October 15, 2009 article "STIMULUS WATCH: Construction drives up new jobs," Associated Press writers Matt Apuzzo and Brett J. Blackledge report:

WASHINGTON – Businesses reported creating or saving more than 30,000 jobs in the first months of President Barack Obama's stimulus program, according to initial data released Thursday by a government oversight board. Military construction led the way, and states in the South and Southwest saw the biggest boost.

The new job numbers — in line with expectations for such an early accounting — offer the first hard data on effects of the $787 billion stimulus program.

The figures are based on jobs linked to less than $16 billion in federal contracts and represent just a sliver of the total stimulus package. But they represent a milestone of sorts for an administration that promised uprecedented real-time data on whether the program was working.

Until now, the White House has relied on economic models to argue that the program created jobs and eased the recession. The numbers help shift the discussion from whether the program is creating jobs to whether it is creating enough to justify its enormous price tag.

"These are the most thankful employeees you'll ever want to see," said Robert Del Riego, majority owner of Frederick, Md.-based Re-Engineered Business Solutions, who said he hired 33 new employees, mostly skilled laborers looking for work in the dismal construction market.

He expects to hire six more to help with water and sewer projects in Arkansas and North Carolina and small construction jobs at other sites. His company won $1.9 million in Army Corps of Engineers contracts.

"It's extra work and with work, hopefully you make a profit," he said. "But the main thing is, it's putting real guys back to work."

The White House said the new numbers were validation that the administration was on track to hit Obama's goal of creating or saving 3.5 million jobs by the end of next year.

"The early indications are quite positive," said White House economic adviser Jared Bernstein, who said the report "exceeds our projections."

The construction industry showed the strongest numbers in Thursday's report, accounting for about a third of the jobs thanks to contracts to repair military bases.

"It's kind of carrying us, allowing us to retain employees until the economy makes a rebound," said Matt Rathsack, director of operations at the Kentucky engineering firm, TetraTech, which reported saving 71 jobs thanks to an Army Corps of Engineers construction project at the Detroit Arsenal facility in Michigan. "We've already pared back and cut back. The staff is on reduced hours. The feeling is we're coming around the corner. We're optimistic."

Environmental jobs also provided a big boost. CH2M Hill, the contractor in charge of cleaning the nation's most contaminated nuclear site, said nearly 2,200 jobs, from carpenters to engineers to secretaries, had been created in southwest Washington state.

On paper, Colorado posted the largest increase of any state, more than 4,700 jobs, largely thanks to a contract to set up a call center to field questions about a change to digital cable. But the jobs were spread across multiple states, underscoring one of the many hiccups in the data. Like most contracting jobs, these were temporary, and most are already over.

California, Florida, Tennessee and Texas also showed strong gains.

New England fared poorly, with fewer than 750 jobs reported across the region. Rhode Island, which has the third-highest unemployment rate in the country, reported the weakest job numbers, both overall and per capita. Businesses there reported creating or saving about six jobs.

Broader numbers on local stimulus spending, for everything from repairing public housing and building schools to repaving highways and keeping teachers off the unemployment lines, won't be available until late this month. Those figures are expected to show early stimulus money saving thousands of teaching jobs and creating construction work for highway projects nationwide.

Thursday's numbers represent such a small snapshot, they are unlikely to significantly change the debate over whether the stimulus law was the right prescription for an ailing economy. Until more money is spent and more data come in, it is impossible to accurately calculate how much the government is spending per job.

House Republican leader John Boehner said the numbers don't change the fact that unemployment has climbed higher than the White House ever expected. Since signing the stimulus in February, Obama has watched the economy shed millions of jobs. The White House says things would have been far worse without the stimulus.

"The administration's continuing assertion that the stimulus is working flies in the face of the harsh reality being faced by Americans outside the Beltway every day," Boehner said. "While the administration spins its illusion, Americans are asking, 'Where are the jobs?'"

In the short term, the most significant thing about the job numbers may be that they exist at all. The government has never before attempted to track the effects, in real time, of such a huge government program. The data released by the Recovery Accountability and Transparency Board allow taxpayers to see not just where their money is going, but what the government is getting in return and how many people are on the job.

The reporting does not attempt to measure jobs created by $288 billion in tax cuts or the sizable increases in spending on Medicaid and unemployment benefits. The White House has said that, when considering those factors and estimating the ripple effect through the economy, more than 1 million jobs have been created or saved so far.

Auditors, fearing businesses would use part-time jobs to inflate the numbers, required companies to convert all jobs numbers to full-time. That means a 20-hour-a-week roofing job is counted as half one job.

___

On the Net:

Interactive map showing job creation by county: http://bit.ly/4oQLIW

Recovery Accountability and Transparency Board: http://www.recovery.gov

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."

Job data to show stimulus aided teachers &laborers

In the October 12, 2009 article "Job data to show stimulus aided teachers, laborers," Associated Press writer Matt Apuzzo reports:

WASHINGTON – President Barack Obama's stimulus plan spared tens of thousands of teachers from losing their jobs, state officials said Monday amid a nationwide effort to calculate the effect of Washington's $787 billion recovery package.

State officials around the U.S. worked to meet a Saturday reporting deadline as part of the most ambitious effort to calculate in real time the effect of a government spending program. From 11 jobs repaving a road in Caldwell, Texas, to one job at Utah food banks, to two forensic scientist positions in North Dakota, states were required to say exactly what became of billions in government aid.

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs.

In California, the stimulus was credited with saving or creating 62,000 jobs in public schools and state universities. Utah reported saving about 2,600 teaching jobs. In both states, education jobs represented about two-thirds of the total stimulus job number. Missouri reported more than 8,500 school jobs, Minnesota more than 5,900. In Michigan, where officials said 19,500 jobs have been saved or created, three out of four were in education.

"They're going to be the biggest driver of jobs from the state side," said Chris Whatley, who tracks stimulus programs for the Council of State Governments.

Construction companies also are expected to report strong job numbers thanks to billions of dollars in highway money, but those figures will vary because some states have spent that money faster than others. Unlike construction jobs, which require bidding and contracting, teaching jobs were relatively quick to save once billions of dollars in aid arrived from Washington.

"This early data confirms that the Recovery Act is working across the country to keep tens of thousands of teachers in the classroom and construction workers on the job during these tough economic times," said Elizabeth Oxhorn, a spokeswoman for the White House recovery office.

Job estimates have become political chips in the debate on whether the stimulus was worth its hefty price tag, particularly since many of the jobs created are temporary contract positions. Since the president signed the bill in February, millions of jobs have been lost and unemployment has climbed higher than White House aides predicted.

The Obama administration, bolstered by some economists and anecdotal evidence, has said things would have been far worse without the stimulus. The White House says more than 1 million jobs have been saved or created so far, a figure that is so murky it can never be verified. That's because the White House estimate is based on economic models that try to calculate the effect of tax cuts and the ripple effect of government spending.

The numbers being collected by contractors and states are expected to provide a much more accurate count of workers employed by stimulus money. The job count will not tally jobs created by Obama's $288 billion tax cuts or attempt to quantify the ripple effect of stimulus spending.

Many states had little information to make public. In some states, government agencies and contractors reported their data separately and governors were still getting a handle on what the job picture looked like. In other states, officials were still reviewing the data for errors.

"I don't want to give you data and have it change as it gets corrected," said Tom Evslin, whom Gov. Jim Douglas appointed as Vermont's top recovery officer. Evslin said before the public could see the data, state lawmakers would receive a briefing Thursday.

Other states that refused to make information public feared getting ahead of the release in Washington.

"We are still awaiting word from the federal government to see if this is data we ought to be releasing," said Tasya Peterson, spokeswoman for Arizona Gov. Jan Brewer's recovery office.

States were told to keep their counting simple: A job means a full-time, full-year position. So a 40-hour-a-week summer job will be counted as one-fourth of a job. A part-time researcher who works all year is half a job. And the full-time construction engineer who works all year is one job.

The Recovery Accountability and Transparency Board, the independent body set up by Congress to monitor recovery act spending, will release job data in two batches. On Thursday, the board will release data on direct spending from federal agencies. That will include jobs such as repairing military bases and improving national parks.

Later this month, the board will release grant data, which will include jobs such as construction workers hired to repair local highways using federal money.

Officials have said the unprecedented accounting could become standard for government programs in the future, and this week's data release will offer the first indication of how it's working.

___

Why do economists disagree so much on whether fiscal stimulus works?

The September 24 article "Much ado about multipliers" in The Economist magazine asks "Why do economists disagree so much on whether fiscal stimulus works?":

IT IS the biggest peacetime fiscal expansion in history. Across the globe countries have countered the recession by cutting taxes and by boosting government spending. The G20 group of economies, whose leaders meet this week in Pittsburgh, have introduced stimulus packages worth an average of 2% of GDP this year and 1.6% of GDP in 2010. Co-ordinated action on this scale might suggest a consensus about the effects of fiscal stimulus. But economists are in fact deeply divided about how well, or indeed whether, such stimulus works.

The debate hinges on the scale of the “fiscal multiplier”. This measure, first formalised in 1931 by Richard Kahn, a student of John Maynard Keynes, captures how effectively tax cuts or increases in government spending stimulate output. A multiplier of one means that a $1 billion increase in government spending will increase a country’s GDP by $1 billion.

The size of the multiplier is bound to vary according to economic conditions. For an economy operating at full capacity, the fiscal multiplier should be zero. Since there are no spare resources, any increase in government demand would just replace spending elsewhere. But in a recession, when workers and factories lie idle, a fiscal boost can increase overall demand. And if the initial stimulus triggers a cascade of expenditure among consumers and businesses, the multiplier can be well above one.

The multiplier is also likely to vary according to the type of fiscal action. Government spending on building a bridge may have a bigger multiplier than a tax cut if consumers save a portion of their tax windfall. A tax cut targeted at poorer people may have a bigger impact on spending than one for the affluent, since poorer folk tend to spend a higher share of their income.

Crucially, the overall size of the fiscal multiplier also depends on how people react to higher government borrowing. If the government’s actions bolster confidence and revive animal spirits, the multiplier could rise as demand goes up and private investment is “crowded in”. But if interest rates climb in response to government borrowing then some private investment that would otherwise have occurred could get “crowded out”. And if consumers expect higher future taxes in order to finance new government borrowing, they could spend less today. All that would reduce the fiscal multiplier, potentially to below zero.

Different assumptions about the impact of higher government borrowing on interest rates and private spending explain wild variations in the estimates of multipliers from today’s stimulus spending. Economists in the Obama administration, who assume that the federal funds rate stays constant for a four-year period, expect a multiplier of 1.6 for government purchases and 1.0 for tax cuts from America’s fiscal stimulus. An alternative assessment by John Cogan, Tobias Cwik, John Taylor and Volker Wieland uses models in which interest rates and taxes rise more quickly in response to higher public borrowing. Their multipliers are much smaller. They think America’s stimulus will boost GDP by only one-sixth as much as the Obama team expects.

When forward-looking models disagree so dramatically, careful analysis of previous fiscal stimuli ought to help settle the debate. Unfortunately, it is extremely tricky to isolate the impact of changes in fiscal policy. One approach is to use microeconomic case studies to examine consumer behaviour in response to specific tax rebates and cuts. These studies, largely based on tax changes in America, find that permanent cuts have a bigger impact on consumer spending than temporary ones and that consumers who find it hard to borrow, such as those close to their credit-card limit, tend to spend more of their tax windfall. But case studies do not measure the overall impact of tax cuts or spending increases on output.

An alternative approach is to try to tease out the statistical impact of changes in government spending or tax cuts on GDP. The difficulty here is to isolate the effects of fiscal-stimulus measures from the rises in social-security spending and falls in tax revenues that naturally accompany recessions. This empirical approach has narrowed the range of estimates in some areas. It has also yielded interesting cross-country comparisons. Multipliers are bigger in closed economies than open ones (because less of the stimulus leaks abroad via imports). They have traditionally been bigger in rich countries than emerging ones (where investors tend to take fright more quickly, pushing interest rates up). But overall economists find as big a range of multipliers from empirical estimates as they do from theoretical models.

These times are different

To add to the confusion, the post-war experiences from which statistical analyses are drawn differ in vital respects from the current situation. Most of the evidence on multipliers for government spending is based on military outlays, but today’s stimulus packages are heavily focused on infrastructure. Interest rates in many rich countries are now close to zero, which may increase the potency of, as well as the need for, fiscal stimulus. Because of the financial crisis relatively more people face borrowing constraints, which would increase the effectiveness of a tax cut. At the same time, highly indebted consumers may now be keen to cut their borrowing, leading to a lower multiplier. And investors today have more reason to be worried about rich countries’ fiscal positions than those of emerging markets.

Add all this together and the truth is that economists are flying blind. They can make relative judgments with some confidence. Temporary tax cuts pack less punch than permanent ones, for instance. Fiscal multipliers will probably be lower in heavily indebted economies than in prudent ones. But policymakers looking for precise estimates are deluding themselves.

Consumer Spending Likely To Rise In Q3, But Outlook Cloudy

In the September 17, 2009 article "Consumer Spending Likely To Rise In Q3, But Outlook Cloudy," Scott Stoddard reports that government macroeconomic stimulus policies have increased consumer spending and aggregate demand:

Gains in retail sales, home purchases and household wealth are bolstering views that consumer spending has stabilized after weighing on the economy for a year. But analysts warn that outlays could remain tepid for two years, making for a sluggish recovery.

Consumer spending, which accounts for about 70% of GDP, is set to rebound sharply in Q3 thanks mainly to government tax breaks and incentives, such as the Cash for Clunkers program that fueled auto sales. Experts say the economy could grow 3% or more in July-September after shrinking for four straight quarters.

But as federal stimulus spending wanes, the economy may struggle to maintain momentum as Americans are pressured by debt, tight credit and a weak labor market.

"The big concern for me is 2011," said Scott Brown, chief economist at Raymond James. "Hopefully, the private sector will be back on its feet and moving forward to offset the decreasing fiscal stimulus."

In a positive sign, household wealth rose by $2 trillion in Q2 to $53.1 trillion as stock values rebounded, the Federal Reserve said Thursday. It was the first gain since Q3 2007, when wealth peaked at $65.3 trillion.

"We're beginning to turn the tide," Richard DeKaser, chief economist at Woodley Park Research, said before the report. "But we have some ways to go before we completely recoup the losses of the last few years."

Housing starts and building permits also rose in August on strong demand for multifamily units, the Commerce Department said.

Adding to signs that the recession has ended, the Philadelphia Fed's index of business sentiment jumped 9.9 points in September to 14.1, a two-year high.

Economists caution, however, that the U.S. could experience a double-dip recession if unemployment and tight credit force consumers to curb spending.

Households trimmed debt at a 1.7% annual rate in Q2 while consumer credit plunged at a 6.5% rate, the Fed said, as Americans focused on paring debt and rebuilding savings.

The number of workers filing new claims for unemployment benefits dropped by 12,000 last week to 545,000, the lowest since early July, the Labor Department said Thursday.

But the number of people still on jobless rolls after an initial week of aid rose by 129,000 in the week ended Sept. 5 to 6.23 million, indicating that employers remain reluctant to hire. The jobless rate, already at a 26-year high of 9.7%, is expected to top 10%.

"We need to see income growth go back up and people need to feel more certain about their job prospects" before they feel confident enough to boost spending, said Mark Vitner, an economist at Wells Fargo Investments.

Big-ticket goods such as autos will probably bear the brunt of consumer cutbacks, analysts said.

A Bloomberg News survey on Thursday showed that almost a third of U.S. households plan to trim spending while 58% expect no change amid concern about the economy over the next six months. Just 8% of households plan to increase spending, the survey showed.

Vitner said that a double-dip recession was unlikely but that economic growth would likely taper off next year after the expiration of stimulus measures such as the $8,000 first-time homebuyer tax credit and Federal Reserve efforts to keep mortgage rates low.

"We're likely to see a relatively sluggish recovery," he said.

G-20 to maintain economic stimulus measures

In the September 5, 2009 article "G-20 to maintain economic stimulus measures," Associated Press business writers Jane Wardell and Aoife White report:

LONDON – Top finance officials from rich and developing countries agreed Saturday to curb hefty bankers' bonuses, but the proposed crackdown on excessive payouts so far falls short of European demands after the U.S. and Britain shied away from imposing a cap.

The Group of 20 finance ministers also pledged to maintain stimulus measures such as extra government spending and low interest rates to boost the global economy, warning that the fledgling recovery that provided the backdrop to their meeting here is by no means assured.

"The financial system is showing signs of repair," said U.S. Treasury Secretary Timothy Geithner. "Growth is now under way. However, we still face significant challenges ahead."

The G-20 joint statement issued at the end of their London meeting said that fiscal and monetary policy will stay "expansionary" for as long as needed to reduce the chances of a double-dip recession.

The International Monetary Fund has said that the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5 percent, from an April projection of 1.9 percent.

But the IMF also downgraded its forecast for this year, saying it would shrink by 1.4 percent, instead of 1.3 percent.

The group also pushed ahead with plans to reform the financial system, including tougher action against tax havens and giving developing countries a greater say in global governance.

French Finance Minister Christine Lagarde said this ensured that "things will not go back to business as usual ... that there are no dark areas anymore to hide."

But while the gathering — a preparatory session for the G-20 leaders' summit in Pittsburgh later this month — reached agreement on the need for ongoing growth-boosting measures and some regulatory reform, it compromised on the hot topic of bankers' bonuses.

Curtailing bankers' pay and bonuses has been seen as key by some countries after the risk-promoting payment culture was blamed for fueling the current financial crisis.

British Treasury chief and meeting host Alistair Darling said that there must be no more cases in which "people are being rewarded for reckless behavior."

Heading into the talks in the British capital, European countries had pushed for the G-20, which represents 80 percent of the world's economic output, to enforce an official cap on both individual payouts and collective bonus pots at financial institutions.

Britain supported the general effort to reign in bonuses, but not the cap, while the United States was more intent on pushing its proposal for a global accord to force banks to hold more capital reserves.

In the event, the G-20 agreed to give the Financial Stability Board, an international body established at the London Summit of G-20 leaders in April, the task of drawing up practical proposals that the Sept. 24-25 leaders meeting in Pittsburgh could agree on.

Suggested measures that countries could take included proposed clawback mechanisms to ensure that bonuses are linked to the long-term success of deals and could be forfeited if they fail to deliver over a period of years.

Lagarde insisted that this would mean real change by limiting bonuses, playing down differences, while Darling again stressed that a straight cap was impractical.

"If you try to cap individual bonuses it would be easy for people to invent exotic products — which we've seen — to get their way around a rather crude mechanism like that," he said.

The G-20 communique failed to directly address a proposal from Geithner for a new international accord to increase bank's capital reserves, but he said he was encouraged by "support around the room."

"Capital is critical" as a shock absorber to cover potential loan losses, Geithner said.

Going into the meeting, Geithner wanted to reach agreement on an accord by the end of 2010, with implementation by the end of 2012.

The communique did not directly address that plan, but called for rapid progress in developing stronger regulation, including a requirement that banks hold more and better capital once recovery is assured.

Geithner also stressed the need for discussions on a so-called exit strategy to withdraw government support for the economy and pay off trillions of dollars in debt, saying a recovery strategy would not be effective "unless we can make fully credible our commitment to reverse those actions as soon as conditions permit."

German Finance Minister Peer Steinbrueck, who has been openly critical of the government debt being loaded up by big spending policies, went further, saying that it was essential to start drawing up exit plans now.

"It makes sense to think ... how can we avoid the next crisis which might be caused by a policy of very cheap money, a huge amount of liquidity and an overstretching of our state aid budgets," he said.

British Prime Minister Gordon Brown won support for his push to take tougher action against tax havens, with the G-20 agreeing to a March 2010 deadline to start sanctions against tax havens which refuse to comply with new transparency rules agreed at the April G-20 leaders' summit in London.

The G-20 also reaffirmed its commitment to changes at the World Bank and the International Monetary Fund to give developing countries a greater say on those bodies.

Brazil, Russia, India and China — the so-called BRIC countries — proposed a quota shift of 7 percent in the IMF and 6 percent in the World Bank Group to reach what they view as a more equitable distribution of voting power between advanced and developing countries.

The G-20 stopped short of that, but said it will complete World Bank reforms by spring 2010 and the next IMF quota review by January 2011.

The G-20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States. The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.

Why the Stimulus Is Helping the Economy, But Not Obama

In the September 4, 2009 TIME magazine article "Why the Stimulus Is Helping the Economy, But Not Obama," Massimo Calabresi reports:

Proving a negative is always a challenge, but there's mounting evidence that the controversial $787 billion stimulus bill is achieving one of its major goals: shortening the recession. Economists at Goldman Sachs say that the bill, officially called the American Recovery and Reconstruction Act, has resulted in a 2%-3% boost to annual GDP in the second and third quarters of this year, turning what could have been a worsening recession into potential growth. For President Barack Obama, whose poll numbers have dropped precipitously from around 65% to around 50% as Americans have become worried about government spending and health-care reform, that should be good news: he fought hard against Republican opposition to push the bill through Congress as one of his first legislative acts, and the fact that it's working should be a vindication.

But it's not that easy. Recent polls show widespread disapproval of the stimulus bill: 51% of Americans polled last month by USA Today and Gallup said they thought the government should be spending less under the plan, while 44% said they thought the government was spending the right amount, or should be spending more. If anything, it seems, the stimulus plan is hurting the President even as it helps the country.

The most obvious reason for that disconnect is jobs: despite the signs of a turnaround, unemployment remains stubbornly high at 9.7%, with employers cutting 216,000 jobs in August. While jobs always trail economic rebounds, the unemployment number is higher than economists thought it would be, even in the worst case scenario forecast by the Treasury department's "stress tests" last spring. The point is not lost on Republicans, some of whom have argued lately that no more of the stimulus money should even be spent. "The metric of this bill was job creation," says Don Stewart, spokesman for the Senate's top Republican, Mitch McConnell, "and it hasn't done that."

Still, one would think that the mere infusion in six months of $88 billion into the economy — that's how much the government has spent so far — would buy Obama some good will; certainly many local and state politicians, including some who originally opposed the stimulus, have been quick to claim credit for stabilizing their economies with the federal largesse. Except, as it turns out, the very thing that makes the stimulus help the economy in the short term is a political loser: the program is giving most of its money to the poor. Of that $88 billion, the majority has gone to low-income recipients. Nearly $28 billion has flowed to Medicaid; $19 billion to unemployment payments; $10 billion to states to bolster educational programs that primarily target the poor; $4 billion to student financial assistance; and $1 billion to rental assistance, among the biggest ticket items alone. And that doesn't even include the share of the $62.5 billion in tax breaks available to the poor through the cut in withholding taxes; the Making Work Pay program, which gives tax breaks to wage earners; and the extension of COBRA Health insurance benefits.

All of that money works well to stimulate the economy because the poor don't save — they spend, and fast. "Recovery money aimed at low and moderate income households has a dual benefit," says Chad Stone, chief economist at the left-leaning Center on Budget and Policy Priorities. "Besides relieving hardship, it gets spent quickly, stimulating economic activity that would not otherwise take place."

But giving money to the poor never won anyone many crucial swing votes. The poor are already disproportionately likely to vote for the Democrats and Obama, if they vote at all. And at a time when the President is under attack from the right wing for being a free spending leftist, shoveling tens of billions into redistributive programs doesn't help his image with wavering independents who are nervous about the growth of government deficits.

The Administration is doing its best to push back. Joe Biden, Obama's point person on the stimulus bill, delivered a lengthy defense of it Thursday at the Brookings Institution. Thanks to the recovery act, he said, "Instead of talking about the beginning of a depression, we're talking about the end of a recession, eight months after taking office." Unfortunately for him and Obama, the money that is boosting the economy isn't boosting their poll numbers.