Thursday, February 25, 2010

Jobs, Jobs, and More Jobs

Has the economic stimulus package created more jobs? It’s a question that many Americans have pondered over the last year. Yesterday, the Congressional Budgetary Office (CBO) released a report stating that the economic stimulus law has added between 1 million to 2.1 million to the number of workers employed in the United States.

In accordance with ARRA’s stipulations, the CBO must comment on the reports filed by recipients of the economic stimulus package that detail how jobs were created and retained through ARRA funding. In addition to fulfilling this requirement, the report measures ARRA’s impact on employment and economic output. The CBO estimates, however, differ substantially from the reports filed by the recipients of ARRA funding.

The recipients’ reports, for example, estimated that ARRA funded nearly 600,000 full-time-equivalent (FTE) jobs during the fourth quarter of 2009. CBO argues that such reports do not provide a comprehensive estimate of the law’s impact on employment in the United States. In the report, the CBO acknowledges several reasons for why the impact of the law may be higher or lower than the reported numbers they received from recipients including the fact that some of the reported jobs might have existed in the absence of the stimulus package, with employees working the same activities or other activities. The CBO, instead, relied heavily on the recorded numbers of ARRA spending, evidence about the effects of previous similar policies, and various mathematical models that represent the workings of the economy to estimate ARRA’s overall impact on employment and economic output.

Recently, there has been an increased focus on workforce related funding opportunities, especially with the Senate's “jobs bill” winning enough votes to block a filibuster. This version of the “Hiring Incentive to Restore Employment Act” introduced by Sen. Harry Reid is a much narrower version of a $85 billion jobs package formerly on the table that included extensions on unemployment insurance, COBRA health benefits, and a $31 billion package of extensions on expiring tax breaks. This recent version contains four main components: creating a payroll tax incentive for businesses to hire unemployed workers; allowing small business them to write off certain capital expenditures; extending national transportation and infrastructure programs and providing additional funds to the Highway Trust Fund; and expanding the Building America Bonds program to allow state and local governments to borrow at lower costs for infrastructure projects.

Reid’s and other supporter’s justification for the narrower version was that it had the bipartisan support necessary to pass quickly and that other issues such as unemployment insurance could be dealt with separately. There are concerns, however, from some advocates that the jobs bill is too narrow and does not go far enough in creating jobs and providing cash strapped states the infusion of resources necessary to fight the recession. As the House bill is much more comprehensive, significant work will have to be done to reconcile both versions. The House “Jobs for Main Street Act of 2010, ” which passed in December, included $75 billion in investments in highways and transit, school renovation, public services jobs (e.g. teachers, firefighters, police officers), and emergency funding (such as unemployment insurance and COBRA).

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