A Real Jobs Bill At Last!

March 17, 2010

Those of you who follow this blog know that I’ve been disappointed with what the White House and Congress have thus far done to address the jobs crisis. I’ve recently vented on the Poverty in America blog as well. And, of course, I’m hardly a voice crying in the wilderness.

The jobs problem hasn’t been altogether ignored. The Senate managed to pass a watered-down tax credit for new hires and a stop-gap extension of expanded unemployment benefits and COBRA subsidies.

It then approved extensions of both to the end of the year, along with an extension of the higher federal match for state Medicaid programs–these as part of a large package consisting mostly of tax cut extensions. The House leadership is now deciding what to do with this bill.

By now, it’s fairly common knowledge that public benefits like UI indirectly save or create jobs because recipients use them to purchase essential goods and services. Demand drives hiring–not only at the retail level, but up the supply chain and out to firms that provide contract services.

But the unemployment problem is far larger than the investments to date. In February, 14.9 million jobless people were actively looking for work–100,000 more than in January. But the number of underemployed workers, i.e., those who were working part-time though they wanted full-time jobs, increased by nearly half a million. An additional 1.2 million had given up looking.

Adding the number of payroll jobs eliminated since the beginning of the recession to the number that would be needed to keep pace with population growth, the Economic Policy Institute estimates that about 11.1 million new jobs would be needed to bring the unemployment rate down to its pre-recession level.

Meanwhile, as the Center on Budget and Policy Priorities reports, state governments are proceeding to slash spending. Education, health care and a wide range of other public programs and services have been targeted for cuts. More freezes and reductions in state-level workforces are in the offing.

Some of the cuts–K-12 education, for example–are actually cost-shifting to local governments, which have already laid off teachers, firefighters, public safety officers and other critical workers. They have also deferred or canceled capital projects, thus precipitating more private-sector job losses.

The National League of Cities projects job losses at 1.5 million or more by the end of 2011–unless the federal government steps in to stabilize city budgets.

And now, at last, it may. Congressman George Miller (D-CA) has introduced a bill–the Local Jobs for America Act (H.R. 4812)–that addresses job creation directly and aggressively, with a focus on restoring, retaining and perhaps expanding public services.

The bill would channel:

  • $75 billion to local communities–$52.5 billion directly to communities with at least 500,000 residents and the remainder to states to distribute to smaller communities
  • $23 billion to states, most of it for earmarked for distribution to local school districts and public higher education institutions
  • $1.68 billion for law enforcement and firefighter jobs
  • $500,000 to Workforce Investment Act programs for additional on-the-job training slots in private-sector businesses

Most of these provisions were part of the jobs bill the House passed in December, though the proposed WIA funding is somewhat lower. The local community aid would be new.

Funding under the new provisions would be allocated according to a formula that targets funds to communities with above-average poverty and unemployment rates.

Up to half the funds could be used to preserve local government public service positions that would otherwise be eliminated and up to half could go to nonprofits that provide services not customarily provided by local government employees. Any funds left over would go to creating new local government public service jobs.

Funds could be used only for compensation of employees in full-time, full-year positions. And priority for new hires is to be given to laid-off city workers, veterans and workers who are receiving unemployment benefits, have been unemployed so long as to have exhausted their benefits and/or aren’t eligible for benefits because their earnings were below the required minimum.

The price tag on the total package is about $100 billion over the next two years. Miller estimates it would save or create a million jobs. EPI says the actual number could be higher because people with these jobs would be spending money at local businesses.

EPI is very high on the bill. Needless to say, the National League of Cities is too. Also, needless to say, the bill has no Republican cosponsors.

A spokesperson for House Minority Leader John Boehner (R-OH) previews where the Republican delegation will be coming from: “The American people don’t want more wasteful Washington spending that expands government at the expense of small businesses. They want Congress to focus on long-term economic growth by helping small businesses create jobs.”

Last time I checked, Americans were a whole lot more concerned about jobs than the economic engine that would create them. But the Miller bill will face tough sledding anyway.


Bipartisan Isn’t Always Better

February 27, 2010

We’re likely to see a tax credit for new hires as part of whatever first-installment job creation measure Congress finally agrees on. But, as Timothy Bartik, an economist at the W.E. Upjohn Institute, explains “not all job creation taxes are created equal.”

What we want, of course, is to encourage employers to expand their payrolls–bring some of those jobless workers on board, put some workers whose hours were cut back into full-time positions, raise wages for those who’ve been struggling to make ends meet with, at best, what they made before the recession set in.

Now, no employer is going to bring on new workers just because of a tax credit. In fact, the National Federation of Independent Businesses, the main small business association, has said that new-hire credits won’t do much until consumer demand increases.

But say an employer was thinking about new hires. A meaningful tax credit that kicked in soon could persuade that employer to go ahead now.

The problem is that it could be easy to game the system–just fire someone and hire someone else instead. Or convert a full-time job to two part-time jobs and hire a new worker for one of them–or both if the screwed-over worker quits.

Another problem is that turnover in some types of businesses is always high–well over 100% in major fast food restaurants. We don’t want our taxpayer dollars going to employers that are just coping with routine churning.

President Obama proposed a $5,000 tax credit for every net new employee a business hires, capped to prevent very large rewards to large, expanding businesses. Note how that net increase requirement deters both gaming the system and rewards to employers who are merely replacing departed workers. The tax credit would be payable on a quarterly basis. So funds would start flowing to the employer soon after each hire.

The President’s plan would also reimburse small businesses for inflation-adjusted increases in their Social Security payroll taxes. This would provide incentives not only for new hires, but also for increased hours and/or wages.

Senators Charles Schumer (D-NY) and Orrin Hatch (R-UT) came up with an alternative bipartisan measure. It would waive an employer’s 2010 share of Social Security taxes for new hires who’ve been unemployed at least 60 days. They say this approach would encourage employers to hire soon, since the amount they’d save would dwindle as the year goes on. They’d also provide a $1,000 tax credit for each eligible employee still on board in 2011.

Bartik says that limiting the tax credit to employees who’ve been unemployed for a specified time and the employer’s Social Security share to only one year will limit the impact. Ditto for deferring the little hiring bonus to 2011.

He and a colleague estimate that the Schumer-Hatch plan would create no more than 200,000 jobs. At an estimated cost of $13 billion, each of these jobs would cost $65,000–probably more than most of the jobs would pay. Dean Baker, Co-Director of the Center for Economic and Policy Research, calls the plan “money for nothing.” Other economists have chimed in on a similar note.

By contrast, the Congressional Budget Office recently identified a tax cut along the lines of the President’s proposal as the most effective option for increasing employment. The Economic Policy Institute estimates that it would create about 1.1 million jobs, at a cost of about $30,000 each.

Nevertheless, Senate Majority Leader Harry Reid decided to include the Schumer-Hatch version in the pared-down jobs bill he managed to get the votes for. Odds are the House will pass it as-is.

Seems that these days a bipartisan proposal is likely to trump a better one.

Correction: More Job Creation In Obama’s Budget Than I Said

February 20, 2010

I recently criticized President Obama’s job creation initiative, in part because $1 billion seemed to me too little to make much impact on our high unemployment rate. Policy analyst and sometime-guest blogger Matt McKillop commented that I was understating the job creation components of the President’s budget.

A budget briefing hosted by the Coalition on Human Needs has just confirmed Matt’s view. According to Robert Greenstein, Executive Director of the Center on Budget and Policy Priorities, the better figure is $281 billion over the next three years–or as a CBPP brief explains, $266 billion over the long term.

I relied on the figure the White House cited–as indeed did many reporters. Turns out that, for strategic reasons, the White House decided not to include the costs of its proposed extensions of a number of provisions in the economic stimulus package–expanded unemployment benefits, COBRA subsidies, the increased federal match for Medicaid, the boost in food stamp benefits and more.

While these alleviate hardship, they also provide a big “bang for the buck” stimulus to the economy–thus preserve and create jobs.

So I stand corrected. And I’m glad of it. Now let’s see what our fractious Congress does.

President’s Budget Falls Short On Job Creation

February 13, 2010

I’ve spent the past two weeks combing through President Obama’s proposed Fiscal Year 2011 budget and analyses from various sources. A fine occupation for a snowed-in wonk. Of course, I’ve been highly selective, focusing on the relatively few issues I’ve been blogging about.

Even for these, there’s still more to learn. But this much I’m pretty sure of. It could have been a whole lot worse, especially with the President committed to a freeze on discretionary spending. But it could have been better too.

Consider what’s supposed to be his top priority–job creation.

The President proposes $100 billion for a new jobs initiative. This is much more than we understand the Senate leadership plans to invest, but $54 billion less than the jobs bill the House passed in December.

It’s hard to know just what the President has in mind since the figure is characterized as a placeholder. We do know it would include tax credits for small businesses that increase their payrolls, other small business benefits, new investments in clean energy and infrastructure, plus some extensions of provisions in the economic recovery act, e.g. expanded unemployment insurance benefits.

What we don’t see is a focus on people who were struggling to make it even before the recession began. Where are the investments to create jobs in and for disadvantaged communities? We look in vain for a budget theme that focuses on them.

Ben Jealous, President and CEO of the NAACP frames the issue well. “You cannot … rebuild the middle class without rescuing those who strive to be in the middle class. Many Americans live on Main Street, but many more live on Back Street.”

It’s all very well and good to create new, good-paying “green jobs.” But what assurance do we have that people with the highest unemployment rates will get them?

In January, the unemployment rate for adults without a high school diploma was 6.7% higher than for those with some postsecondary education and 10.3% higher than for those with at least a bachelors degree. How will the dropouts and the numerous teenagers who graduate from high school without basic skills compete for the jobs that will give them a pathway out of poverty?

And how much will $100 billion do when we need to create more than 400,000 jobs a month for the next three years to get the unemployment rate back to its pre-recession level?

I understand that the President feels pressed to control the deficit. He’s also undoubtedly gauging what can pass in the Congress and hoping to avoid another donnybrook like health care reform. But I’d like to see some leadership here–and greater concern for people whose boats won’t necessarily be lifted by the rising economic tide.

Big Job Creation Plans Fit the Crisis, But Not the Agenda

January 26, 2010

Everyone who’s in touch with the world knows we’ve got a jobs crisis and that it’s likely to continue for some considerable time.

Just about everyone thinks the federal government should do something about it. Needless to say, there are wide differences of opinion on what. The Republican leadership says that the answer is to cut back on taxes, spending and regulations.

Progressives say, on the contrary, that the government needs to plow more money into the economy–that if it doesn’t invest in job creation, the economy will leave lasting scars on the economic prospects for individuals and our economy as a whole.

They also recognize that the recession has exposed long-standing systemic problems that have depressed real income growth among a large sector of workers and left others on the sidelines, relegated to low-wage, no-benefit, often part-time jobs or out of the labor market altogether.

Some major organizations have come out with job creation plans that will put people back to work quickly and, at the same time, help the jobless keep the wolf from the door.

The Coalition on Human Needs has a set of job creation principles. The National Council of La Raza has recommendations reflecting Latino principles for job creation. The Economic Policy Institute has a detailed five-point plan. The AFL-CIO has one also.

These are all very similar in spirit and the last two in substance. They are reflected in yet another job creation plan issued by Jobs for America Now–a coalition the organizations helped launch.

The coalition, now more than 150 organizations strong, calls on the administration and Congress to:

  • Provide relief through continued and expanded unemployment benefits, COBRA and SNAP (the food stamps program).
  • Extend substantial fiscal relief to state and local governments.
  • Create jobs that put people to work helping communities meet pressing needs, including distressed communities that face severe unemployment.
  • Invest in infrastructure improvements in schools, transportation and energy efficiency, thus providing jobs in the short run and productivity enhancements in the longer run.
  • Spur private-sector job growth through innovative incentives and providing credit to small and medium-sized businesses.

There’s no price tag on all this. However, EPI estimated that its plan would entail roughly $400 billion in investments during the first year. About $160 billion of this would be recouped in higher tax revenues and lower safety net costs.

To pay for the rest, EPI recommends a financial transactions tax, i.e., a small tax that would be imposed whenever stocks and possibly other financial assets changed hands.  The tax would kick in two years from now, when presumably the economy will have fully recovered.

But first the deficit would grow. Does President Obama have the stomach for this?

Much appears to depend on how his strategists read the mood of the public–and more particularly, the upset in Massachusetts. Thus far, the prospects don’t look good.

We hear the President talking about doing a better job of explaining his agenda to the people. He mentions health care, energy, education, financial regulatory reform and the deficit.

Not a hint that “the anger and frustration that people are feeling” stems from our justified dismay about the jobs crisis–and the fact that it’s still nowhere on that must-do agenda.

New Report Warns of Growing Race Gap In Employment

January 22, 2010

The Economic Policy Institute has issued what it rightly calls “grim 2010 projections” for the employment prospects of our nation’s racial minorities.

Here are some lowlights from the “downcast” forecast, along with some calculations by yours truly.

The overall unemployment rate is expected to peak at 10.7% in the third quarter of 2010. But for blacks, the projected rate is 17.2%. This is in part because minorities “began the recession in a recession,” with the black unemployment rate more than double the white unemployment rate–higher, in fact, than the current white rate.

In the third quarter of 2009, the white unemployment rate was at or below 9% in all but nine states. In the 18 states for which there are reliable data black unemployment rates were all double digit. By the projected 2010 peak, the black unemployment rate will be over 17% in 11 of these states and over 20% in five.

The race gap is writ large in the District of Columbia.

  • In the third quarter of 2009, the black unemployment rate was 11.9% higher than the white unemployment rate. This is larger than any of the reported state race gaps except South Carolina’s, which is a mere 0.1% higher.
  • By the 2010 peak, the white unemployment rate will have increased by 0.4% and the black unemployment rate by 1.3%–more than three times as much as the white rate.
  • The difference between the white and black rates will have grown to 12.8%–again greater than the difference in any state except South Carolina.
  • Yet the increase in the black unemployment rate since the recession set in will be just about at the median–another indicator that black unemployment in the District is a long-standing problem.

The EPI report is a call to action for a job creation strategy that targets states and populations with the severest employment problems. And, indeed, the race gaps it documents clearly show that we can’t count on a rising tide to lift all boats.

The administration and Congress are going to be under pressure to put as many people as possible back to work as soon as possible. But if they focus only on raw numbers, low-income minorities and their communities will again be left behind.

In December, the unemployment rate for adults over 25 without a high school diploma was more than three times greater than the rate for those with a bachelor’s degree or higher. For teens, the rate was 23.6% and for black teens an appalling 48.4%.

So there’s an urgent need to build education and training into job creation programs, including meaningful work-learning opportunities for low-income youth. And we need, at long last, to commit to resolving other problems underlying the employment race gap.

And what if we don’t? Well, according to EPI, the black child poverty rate will increase to more than 50%–more than half of all black children beginning life with two strikes against them. A recipe for millions more trapped on the bad side of the economic divide.

Hunger Experts Say the Top Remedy Is Jobs

January 11, 2010

Catching up on things in my files…

A mid-December article in the Washington Post explores “the silent epidemic” of child hunger. Bottom line is that the problem is complex and unlikely to be solved by simply putting more money into food assistance programs.

This took me back to a webinar on the struggle against hunger in America. Anyone who’s been following the news knows the news wasn’t good.

  • Food banks in Feeding America’s network reporting an average of 30% more requests for emergency food assistance since last year.
  • An unprecedented one-year jump in the number of people who are food insecure–from 36.2 million in 2007 to more than 49 million in 2008.
  • Nearly 37.2 million people receiving food stamps in September–almost 15.6% more than in September 2007.
  • Hunger and/or dietary deficiencies among one in four of the children cared for by pediatricians in the Children’s HealthWatch network.

And more …

But, of course, we already knew that many more households are struggling with hunger–and many more children at high risk of life-long consequences. Every new report is a shocker, but not a surprise.

The surprise, for me, was what the panelists said should be done. As you’d expect, they noted needs to improve and expand federal nutrition programs. But their A-number 1 remedy was action to address the jobs crisis.

Putting people back to work will surely reduce food hardship. But just creating jobs won’t be enough. We’ll continue seeing dire figures like those above unless we make sure that those who’ve been hit hardest by the labor market contraction can find living wage jobs–a challenge for many of them even before the recession set in.