Job-Creating Stimulus Program Comes to an End, Auguring Thousands of Layoffs
Thursday, September 30, 2010 at 4:33 pm
Thirteen years ago, Lee Bush started his own small business, National Collection Systems, a waste management service based in Jackson, Miss. “Times are tough, and they were especially tough when the market turned down,” Bush says. “It’s hard to get loans to fund the business. We got more efficient. And we had to downsize. We had an in-house mechanic, and we had to let him go.”
[Economy1] But the business could not afford to shrink any further. “It takes a certain amount of labor to pick up trash and garbage. We have temps we use, but we weren’t getting the kind of capacity contracts or funds that would necessitate us growing,” he explains. One night, though, when Bush was watching television, he heard an advertisement for a Mississippi program that would help businesses pay for the cost of hiring new workers. It was called the Mississippi Subsidized Transitional Employment Program, or STEPS.
The funds for STEPS came from the Feb. 2009 American Recovery and Reinvestment Act, the stimulus bill. And when the program was launched, none other than Mississippi Gov. Haley Barbour (R) — a fierce critic of the stimulus, who rejected billions in funding for the state — started singing the program’s praises. “Mississippi STEPS is unique in that it is a program specifically designed to benefit both the employee and employer,” he said in 2009, adding that the program would feed “the economic engines of our local communities.”
“We were figuring out how to get someone to get us more business, a developer, but we couldn’t afford to hire then,” Bush says. “I saw the ad for the program, announcing there were funds available. I called around, I asked, and we were the first in the whole state to sign up.”
Soon after, Bush hired that business developer. “He goes out and contacts construction and demolition sites, and residential pick-up sites,” Bush explains. And he’s good at it. STEPS paid 100 percent of his salary for the first two months, then less and less for another four. Now, he brings in enough business to pay for himself, and Bush has made him permanent.
“STEPS — that program pushed us to hire. And now we have nine employees,” Bush says.
It is a stimulus success story: Federal funding targeted to a small business led to a previously unemployed worker finding a permanent job. The worker is better off, and so is the business. But as of midnight tonight, the federal program that once funded Bush’s worker is gone.
At midnight on Sept. 30, the TANF Emergency Contingency Fund (TEF) — considered one of the most successful stimulus programs, having created 250,000 jobs for previously unemployed workers — expires. The Obama administration and Democrats had requested $1.5 to $2.5 billion to keep it going for another year. The House has passed two extenders, but yesterday, legislation failed again in the Senate. That means employers are now faced with laying off the TEF workers, as many as 100,000, into an economy that already has 14.9 million unemployed.
“Without federal funding, most states and localities won’t be able to continue to provide support for these jobs,” Larry Summers, the director of the White House’s National Economic Council, said in a statement today. “Governors from both parties have called for the extension of the program and some will try to keep it going for a couple of months with state funds, buying Congress time to act. But the reality is that many states will be unable to fill the gap, and those that can, only temporarily. A commitment to extending this program will give more governors the confidence not to end it now and could save up to 100,000 jobs.”
The program did not need to end in this way. Senate Democrats tried numerous times to extend the legislation — in provisions moved in March and blocked by Sen. Judd Gregg (R-N.H.), and in versions of the tax extenders legislation. This week, Sen. Dick Durbin (D-Ill.) tried to move a three-month extension, to give Democrats some time to work a fuller fix for the program into another bill. Sen. Mike Enzi (R-Wyo.) objected to Durbin’s unanimous consent request, killing it on the grounds that it expands the welfare state and costs too much.
TEF’s end has led to howls from progressive think-tanks, Republican and Democratic governors and the thousands of businesses and hundreds of thousands of workers the program has aided.
The Center on Budget and Policy Priorities, for instance, looked at the programs states created — 36 of them, plus a program in Washington D.C. — and summarized their achievements. One county in Tennessee brought its unemployment rate from 27.3 to 18.6 percent in just eight months. North Dakota helped create jobs for parents without the means to pay their child support. South Carolina targeted parents who would otherwise collect welfare. Alabama aided job-sapped rural areas. CBPP’s analysts described ending the fund as “walking away from a win-win-win.”
Congress could attempt to recreate or reauthorize the program later, though Congressional aides say that chances are slim. That leaves states to try to fund their own programs, despite the fact that many are facing yawning fiscal gaps and service cutbacks.
In Illinois, for instance, Gov. Pat Quinn (D) has extended the program with state funding for two months. “One of the best ways to help the most people is a j-o-b,” he said this week. “It’s the best way to fight crime. It’s the best way to fight poverty. It’s the best way to keep families together.”
He continued, “We cannot afford to lose momentum as we continue our economic recovery. Quick action by Congress will keep thousands of people at work in Illinois and will continue to build on the progress we have already made.”
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