Unemployed Ranks Swell by 598,000 in January
From the Department of Labor today comes more news that this recession will be around for a while: In January alone, 598,000 more Americans lost their jobs, raising the country’s unemployment rate from 7.2 percent to 7.6 percent — the highest tally in 16 years. Since December 2007, 3.6 million Americans have lost their jobs.
So it’s certainly timely that Congress is moving closer to passing the stimulus bill that’s being promoted as the lifeline that will prevent the recession from lasting longer than it otherwise might. And yet, if some figures crunched by the Congressional Budget Office recently are accurate, the Democrats might want to rethink their strategy.
Testifying before Congress last month, CBO Director Douglas Elmendorf told lawmakers that the House-passed stimulus proposal would boost the number of jobs by between 800,000 and 2.1 million at the end of 2009, between 1.2 million to 3.6 million at the end of 2010, and between 700,000 and 2.1 million at the end of 2011. (These numbers are relative to end-of-year projections, meaning you can’t just subtract them from the jobless figures of today.)
Those are enormous numbers, even on the low end. But with the economy shedding 600,000 per month with no end in sight, you’d like to think that $825 billion could buy the country more than 800,000 jobs by the end of this year.
This dilemma arises not because experts don’t know how to create jobs via federal spending. Indeed, there’s almost universal agreement that public works projects produce the greatest return on the government’s investment. As University of Maryland economist Peter Morici wrote to reporters earlier this week:
Economists know that real infrastructure improvements–roads, schools, internet upgrades, clean water projects, and a smarter energy grid–return more than a dollar in additional GDP for every federal dollar spent, if substantial amounts of the needed materials and components are not imported.
Why, then, did the House bill include just $90 billion for these bang-for-the-buck infrastructure projects? Even House Infrastructure and Transportation Committee Chairman James Oberstar (D-Minn.), who recommended tens of billions more in ready-to-go public works projects, can’t get a good answer for why that spending was cut out, yet $275 billion in tax cuts remains. Not to mention a number of provisions that seem to satisfy campaign promises, but would do little to stimulate job creation. As The Washington Post wrote in an editorial yesterday:
This is precisely the problem. As credible experts, including some Democrats, have pointed out, much of this “long-term” spending either won’t stimulate the economy now, is of questionable merit, or both. Even potentially meritorious items, such as $2.1 billion for Head Start, or billions more to computerize medical records, do not belong in legislation whose reason for being is to give U.S. economic growth a “jolt,” as Mr. Obama himself has put it. All other policy priorities should pass through the normal budget process, which involves hearings, debate and — crucially — competition with other programs.
Some in the Senate — Democrats and Republicans — are trying to refocus the spending package on its more stimulating elements. We could know as soon as today how well they fare.