Ending the Great Recession: It's Going to Take More Than Just Stimulus

As we debate what government's response should be to combating a still-growing unemployment rate we might want to take a page from our international competitors.
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With $150 billion spent to date, the White House estimates that the Recovery Act has saved or created roughly one million jobs. This figure includes 650,000 direct jobs saved or created by state governments and contractors as well as an estimate prepared by the White House's Council of Economic Advisers that stimulus spending created another 350,000 indirect jobs.

Citizens across the country will soon be able to log on to www.recovery.gov to see how many of these jobs have come to their states and neighborhoods. Unfortunately, this data provides only an incomplete picture on where we have come so far in addressing the Great Recession, while offering little guidance on where we need to go next.

State leaders have already begun to release their own estimates on the role the stimulus has played in combating unemployment. Maryland Governor Martin O'Malley reports that 14,000 Marylanders owe their jobs to stimulus spending. However, two-thirds of these jobs are the result of indirect effects of stimulus spending in the state rather than direct positions created or saved from specific projects.

No matter how the data is diced, it will not end the political debate over the merits of what amounts to the largest domestic spending program in American history. Proponents will assert that with just a fifth of the spending and tax cuts in the stimulus out the door we are well on our way to creating or saving the 3.5 million jobs promised by the president. Opponents will point to the modest numbers of direct jobs created by the stimulus and the mounting federal deficit.

Both camps make good arguments, but in debating the point we risk losing sight of a bigger challenge. Congressional Quarterly reported this week that job growth in America has been stagnant for almost a decade. The big unemployment numbers we are now posting are as much a product of an economy that is failing to come up with new engines of growth as they are about layoffs in construction firms or manufacturing plants.

While the Recovery Act has made some important investments in economic sectors, such as green energy and biotechnology, that may ultimately prove to be strong engines of job growth, it is increasingly clear that exports will also need to be a big part of the picture. The traditional growth path for start-up companies has been to start selling locally, expand into regional or national markets, and only then turn your attention to markets overseas. Meanwhile similar start-ups in Europe or Canada focus internationally from the moment they set up shop -- often with substantial government help.

As we debate what government's response should be to combating a still-growing unemployment rate we might want to take a page from our international competitors. According to a recent World Bank study, governments that invest in export promotion -- programs designed to help small businesses find markets for their product overseas -- generate as much as 40 dollars in new exports for every dollar they spend.

This message has not been lost on America's state governments who collectively spend almost $100 million each year on export promotion and investment attraction. This is a significant sum when you consider both the dire budget challenges faced by states and the fact that the entire budget for the U.S. Foreign and Commercial Service -- the federal government's global marketing arm -- is just $240 million.

The ultimate solution to the Great Recession may lie in growing the pie at home by building markets abroad. Fortunately, the costs involved in helping small businesses succeed in the global market place are a drop in the bucket compared to the eye popping price tag of the Recovery Act.

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