Stimulus Spending (Are Jobs Being Created)
Get Ready for "Son" of Stimulus Plan
By John F. Wasik,
Author of The Audacity of Help: Obama's Economic Plan and the Remaking
So, where are the jobs? Even as the fog seems to be lifting over
housing, manufacturing and the financial sector, the unemployment rate
continues to float ever higher.
Despite the largest economic bailout in America history, the jobless
rate soared to 9.7 percent in August. All told, nearly 7 million jobs
have been lost since December 2007. Wasn't that $787 billion stimulus package supposed to make this awful number go down?
The stimulus plan is like trying to weld a plate onto the hull gash in
the Titanic after it hit an iceberg. Once you set aside the money
spent on economic triage -- more than a half a trillion dollars -- you
have a long-term investment in social and physical capital. As I
discovered in researching my new book The Audacity of Help: Obama's
Economic Plan and the Remaking of the America
(www.audacityofhelp.net), much of the legislation was a combination
economic band-aid and long-term therapy.
While it may not be reflected in the unemployment numbers, there is
visible progress from the stimulus spending. About $60 billion of the
$288 billion in promised tax cuts has flowed into the pockets of most
middle- and lower-class Americans. Another $84 billion of a nearly
half-trillion dollars in capital improvements spending has been doled
out. Roads are being repaved, bridges are being rebuilt and thousands
of public works projects are underway, resulting in about 2 million
jobs, reports IHS Global Insight, a consulting firm.
Where Money Was Spent
Let's start with the largest chunk of the stimulus program: Tax
relief, which accounted for $288 billion of the spending. Those on
fixed-income received a one-time payment of $250. That's not much help when Social Security payments, indexed to the consumer price index
(CPI), were expected to remain flat. It would be ideal if the CPI
reflected the true cost of living that incorporates higher medical
costs, all taxes and transportation, but it doesn't.
Sorry, you can't turn in your clunker for a bigger check to cover
higher out-of-pocket medical or insurance bills. Most everyone else
saw a slight increase in their take-home pay as withholding taxes were
dropped a bit, although it only added up to a few dollars a week. A
more salient way of boosting incomes would be to grant a holiday on
payroll taxes for a few days or weeks, but that's not what Congress
and the Obama Administration decided to do.
The next-biggest portion of the stimulus spending -- $144 billion --
was for "state and local fiscal relief." Faced with the loss of state
and local tax revenue, government agencies were facing massive teacher
layoffs and shutting down public services without this band-aid measure.
This move saved more jobs than would have otherwise been lost,
although it doesn't address a more pernicious long-term problem.
Property valuations, which are the basis for local real estate taxes,
are continuing to fall. That means less money for schools, libraries,
fire and police departments. How can public agencies replace this
money? It's an ongoing crisis that will translate into more program,
service and job cuts (or tax hikes) later this year and into 2010. Get
ready for "Son of Stimulus" when this reality gobsmacks Congress as it
heads into mid-term elections next year.
The saving grace of the Obama-designed stimulus is that it's earnest
about investing in infrastructure, research, energy and education.
$111 billion will be spent on infrastructure and science. This is
everything from medical research, fixing roads and high-speed rail
Some $53 billion will be spent on education and training and is
broadly distributed to everything from Headstart for poor families to
higher education (seewww.ed.gov).
$43 billion will be spent on energy research for sorely needed
technologies like efficient batteries.
What's not clear about the stimulus spending is if the money allocated
to specific projects is being spent efficiently or that it will match
the number of jobs lost during the recession. Early indications are
that it isn't, although it will take time for nearly a trillion
dollars to make it from the Treasury to a project in your community.
The Obama Administration definitely needs to provide more information
on its www.recovery.gov site to tell taxpayers how that money is being
spent. There are maps that tell you which projects are funded and
where, but more detail is needed. For now, a much better source is the
nonprofit journalism groupwww.propublica.org.
The stimulus program will either be a down payment on a productive new
shift in job creation -- what I call social capitalism -- or a bandage
on a hemorrhage. In any case, such a transformation will take time and
the waiting period will be increasingly painful for those losing their
©2009 John F. Wasik, author of The Audacity of Help: Obama's Economic
Plan and the Remaking of America
John F. Wasik, author of The Audacity of Help: Obama's Economic Plan
and the Remaking of America, is the author of twelve books, including
The Cul-de-Sac Syndrome and The Merchant of Power. He speaks widely
and writes a weekly Bloomberg News column that reaches readers of five
continents and which earned him the 2009 Peter Lisagor award for
journalism. He lives in Chicago.
For more information please visit www.audacityofhelp.net