So, where are the jobs? Even as the fog seems to be lifting over housing, manufacturing and the financial sector, the unemployment rate continues to float ever higher.
Despite the largest economic bailout in America history, the jobless rate soared to 9.7 percent in August. All told, nearly 7 million jobs have been lost since December 2007. Wasn't that $787 billion stimulus package supposed to make this awful number go down?
The stimulus plan is like trying to weld a plate onto the hull gash in the Titanic after it hit an iceberg. Once you set aside the money spent on economic triage - more than a half a trillion dollars - you have a long-term investment in social and physical capital. As I discovered in researching my new book The Audacity of Help: Obama's Economic Plan and the Remaking of the America (www.audacityofhelp.net), much of the legislation was a combination economic band-aid and long-term therapy.
While it may not be reflected in the unemployment numbers, there is visible progress from the stimulus spending. About $60 billion of the $288 billion in promised tax cuts has flowed into the pockets of most middle- and lower-class Americans. Another $84 billion of a nearly half-trillion dollars in capital improvements spending has been doled out. Roads are being repaved, bridges are being rebuilt and thousands of public works projects are underway, resulting in about 2 million jobs, reports IHS Global Insight, a consulting firm.
Where Money Was Spent
Let's start with the largest chunk of the stimulus program: Tax relief, which accounted for $288 billion of the spending. Those on fixed-income received a one-time payment of $250. That's not much help when Social Security payments, indexed to the consumer price index (CPI), were expected to remain flat. It would be ideal if the CPI reflected the true cost of living, which incorporates higher medical costs, all taxes and transportation, but it doesn't.
Sorry, you can't turn in your clunker for a bigger check to cover higher out-of-pocket medical or insurance bills. Most everyone else saw a slight increase in their take-home pay as withholding taxes were dropped a bit, although it only added up to a few dollars a week. A more salient way of boosting incomes would be to grant a holiday on payroll taxes for a few days or weeks, but that's not what Congress and the Obama Administration decided to do.
The next-biggest portion of the stimulus spending -- $144 billion -- was for "state and local fiscal relief." Faced with the loss of state and local tax revenue, government agencies were facing massive teacher layoffs and shutting down public services without this band-aid measure.
This move saved more jobs than would have otherwise been lost, although it doesn't address a more pernicious long-term problem. Property valuations, which are the basis for local real estate taxes, are continuing to fall. That means less money for schools, libraries, fire and police departments. How can public agencies replace this money? It's an ongoing crisis that will translate into more program, service and job cuts (or tax hikes) later this year and into 2010. Get ready for "Son of Stimulus" when this reality gobsmacks Congress as it heads into mid-term elections next year.
The saving grace of the Obama-designed stimulus is that it's earnest about investing in infrastructure, research, energy and education.
$111 billion will be spent on infrastructure and science. This includes everything from medical research and fixing roads to high-speed rail planning.
Some $53 billion will be spent on education and training and is broadly distributed to everything from Headstart for poor families to higher education.
$43 billion will be spent on energy research for sorely needed technologies like efficient batteries.
What's not clear about the stimulus spending is if the money allocated to specific projects is being spent efficiently or that it will match the number of jobs lost during the recession. Early indications are that it isn't, although it will take time for nearly a trillion dollars to make it from the Treasury to a project in your community. The Obama Administration definitely needs to provide more information on its Recovery.gov site to tell taxpayers how that money is being spent. There are maps that tell you which projects are funded and where, but more detail is needed. For now, a much better source is the nonprofit journalism group ProPublica.
The stimulus program will either be a downpayment on a productive new shift in job creation - what I call social capitalism -- or a bandage on a hemorrhage. In any case, such a transformation will take time and the waiting period will be increasingly painful for those losing their jobs.
For more information please visit: www.audacityofhelp.net