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The Democrats’ Jobs Pickle

Blue-dogs.jpg
Blue-dogs.jpg

President Obama meets with members of the Blue Dog coalition (UPPA/ZUMApress.com)

With unemployment in double digits and no relief in sight, swift passage of the Democrats’ “jobs agenda” — set to be unveiled today in the Senate — might seem like a sure thing.

Well, not quite.

Not only are Senate Republicans balking at early proposals to cover the substantial costs, but moderate Democrats in both chambers — spooked by Republican Scott Brown’s astonishing Senate win in Massachusetts last month — have grown wary of big spending bills, fearing that support for such measures could haunt them on the campaign trail this year. As a result, Democrats are under pressure to scale down their jobs bills at the same time leading economists warn that the severity of the unemployment crisis demands a much larger package. The saga has left party leaders in a familiar pickle: They need to boost short-term spending to create jobs, but to do it they need the backing of fiscal conservatives — notably the House Blue Dogs — who are already apprehensive about enormous deficits. The Democrats, despite their commanding majorities, are learning the hard way that it’s no easy needle to thread.

[Congress1]“They’ve got to do something on job creation,” said Charles Stenholm, a former Blue Dog Democrat from Texas and now a lobbyist with the Washington-based firm Olsson Frank Weeda. “But people are very concerned about the debt buildup of the United States and the inability of Congress to come up with solutions. It’s a very difficult situation that Congress finds itself in.”

Front and center will be the Blue Dogs, a group of fiscally conservative House Democrats now 54-members strong. Although House Democratic leaders already ushered a $154 billion jobs bill last December, they’ll have to repeat the process in order to accommodate the changes expected from the Senate. Furthermore, the December vote was hardly a rout. Indeed, despite the Democrats’ lopsided 81-seat advantage in the lower chamber at the time, the bill squeaked by 217 to 212, with 38 Democrats opposed. Most were Blue Dogs critical of the bill’s proposal to tap extra money from the Troubled Asset Relief Program — money that was initially aimed at paying down the debt.

Rep. Betsy Markey (Colo.) was one such Democrat. Her spokesman, Ben Marter, said this week that the Colorado Blue Dog supports the idea of a jobs bill, but not the idea of tapping TARP funds to pay for it. “That’s not just a free pot of money,” he said. “That’s borrowed.”

“It’s all money we don’t have,” said another Blue Dog aide, who wasn’t authorized to speak on the record.

Other moderate Democrats are simply skeptical that a jobs bill can be effective regardless of how it’s funded. Alyson Heyrend, spokeswoman for Rep. Jim Matheson (D-Utah), another Blue Dog, said the congresssman “has concerns about just how much the federal government can do to create job growth.” Although Matheson voted in favor of the Democrats’ $787 billion stimulus bill a year ago, he opposed December’s jobs bill. “It’s that balancing act,” Heyrend said, referring to the need for job creation versus the push to rein in spending. “The devil’s always in the details.”

The offices of other leading Blue Dogs — including Reps. Stephanie Herseth Sandlin (D-S.D.), Baron Hill (D-Ind.), Heath Shuler (D-N.C.) and Allen Boyd (D-Fla.) — did not return multiple requests for comment.

On Thursday, Senate leaders are scheduled to outline their legislative plans for creating jobs. The strategy — which will feature several bills, not just one as the House had passed — includes tax credits for small businesses, tax incentives for businesses that hire new employees, new infrastructure spending and funding to spur jobs in the green-energy sector. Separately, party leaders hope to extend both unemployment insurance and the jobless health-care benefits under the COBRA program. But they haven’t said publicly how they plan to pay for the bill. Early proposals to tap TARP funds, as the House had done, drew howls from Senate Republicans, who know well that Brown’s victory has stolen the Democrats’ filibuster-proof majority.

And it’s not only Republicans pushing back against the thought of Congress borrowing once more to fund another large spending bill. In a back-and-forth with President Obama on Wednesday, Democratic Sen. Evan Bayh (Ind.) said all the deficit spending is simply “bad economics.”

“It’s unfair to our children to ask them to pay these bills,” Bayh said. “Ordinary citizens are making sacrifices, and yet we want our earmarks or pet projects.”

The effects of the Brown election are also evident in the House, where the refusal of moderate Democrats to take up the Senate’s health reform bill has stalled the party’s top domestic priority indefinitely. If those election-year jitters are an indication of a trend, the jobs bill might also face an uncertain future. House Speaker Nancy Pelosi (D-Calif.) is reportedly resisting the Senate strategy of carving the bill into pieces, but opposition within her own party might leave her little choice.

“It’s clear that Massachusetts has had an impact on moderate Democrats’ willingness to stick with the presidents’ agenda,” said John Schmitt, senior economist at the liberal Center for Economic and Policy Research. “The recent politics makes things much more difficult to pass a jobs bill.”

House Democratic leaders will have this going for them: the Senate jobs package is widely expected to be significantly smaller than the $154 billion House-passed bill. Still, many economists don’t consider lean, in this case, to be an asset. Indeed, they’re arguing that the Democrats’ proposals are far too small to tackle the nation’s unemployment crisis.

Schmitt, for his part, estimated that Washington’s stimulus effort — stretching back to the $787 billion bill — is “at least $600 billion” short of where it needs to be to tackle the jobs crisis. “They’re a factor of three, four or five off,” he said, referring to the size of jobs bill Democrats are eying this month. “They’re not winning any awards for sensible economic policy at the moment.”

The Economic Policy Institute, another liberal policy group, has summarized the severity of the jobs crisis this way:

The United States has lost 8 million jobs (5.9% of all jobs) during the recession so far, the sharpest drop since World War II. But bringing back even 8 million jobs would not return us to the pre-recession unemployment rate of 4.9% because the population has grown since then. Each month we need to create 127,000 jobs just to keep unemployment from rising. Therefore, we actually need 10.9 million new jobs to get us back to 4.9% unemployment.

Economists at EPI have outlined their own plan to battle unemployment. The pricetag: $400 billion — a cost, they say, that’s well worth the short-term effects on the deficit. “The long-term costs of an extended recession will far outweigh the additional interest payments on the national debt required to fund a major intervention,” EPI notes.

Some lawmakers agree outright. “We’re not going to save our way out of this recession,” Rep. James Clyburn (D-S.C.) told Fox News on Monday. “We’ve got to spend our way out of this recession, and I think most economists know that.”

Whether the message reverberates on Capitol Hill is another story.

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