The Stimulus and Unemployment

In January, two of the Administration’s top economic officials released a report regarding the job creating potential of the stimulus bill. On page four, they offer a graph detailing the nation’s unemployment picture with and without the bill.

Geoff at Innocent Bystanders has been tracking the actual monthly unemployment numbers in relation to this estimate. Unfortunately, though not entirely unexpectedly, by this measure the plan appears to be failing miserably.


As job losses continue to mount, President Obama's pledge to save or create 3.5 million new jobs becomes more difficult to live up to. Fox News reports:

To reach his 3.5 million-jobs goal, Obama needs at least 138.6 million people employed by next year, leaving him with a job deficit of nearly 6.2 million jobs, according to the Heritage Foundation, a conservative think tank.

J.D. Foster, a senior fellow in economics at the Heritage Foundation, who performed the analysis, argues Obama's policies will only widen the gap.

"Unfortunately, the president's policies will more likely decrease employment than help to reach his target," he wrote in his analysis.

"Policies like higher tax rates on small businesses, sustained massive budget deficits, doubling the national debt (and the consequent upward pressure on interest rates) and the building threats of government meddling in companies are eroding the foundations of the economy today and for the future," he said.

Unsustainable

The Associated Press reports (emphasis ours):

The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates.

Budget office figures released Monday would add $89 billion to the 2009 red ink -- increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama's economic stimulus bill -- as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

Continuing an apparent trend of discussing things in terms of pennies, thanks to the MegaPenny Project for this visual:

(With 1.8 trillion pennies you could build a structure about the size and shape of the Empire State Building. The scale model would weigh 5,683,200 tons.)

Unemployment Closing in on Nine Percent

From Reuters:

U.S. employers cut 539,000 jobs last month, the fewest since October, according to government data on Friday that signaled the economy's steep decline may be easing.

The unemployment rate, however, soared to 8.9 percent, the highest since September 1983, from 8.5 percent in March and job losses in March and February were a combined 66,000 steeper than previously estimated, the Labor Department said.

Unemployment in rates in New Hampshire continue to trail the national number, however, as you can see in the below graph, they have spiked slightly over the last few months. New Hampshire’s employment numbers for April are scheduled for release on May 18.

A Cut and a Trim

President Obama received some positive press this morning by announcing plans to trim or eliminate 121 federal programs in an effort to save $17 billion. Unfortunately, these plans were revealed at the same time as the President was outlining the details of his $3.4 trillion federal budget, which includes substantial increases for a number of “domestic priorities.”

Certainly, these cuts appear more significant than last month's $100 million drop in the bucket. Media reports, however, reveal the President’s latest attempt at fiscal discipline to be no more than further smoke and mirrors.

The Washington Post reports:

If approved by Congress, those trims would amount to only about half a percent of the $3.4 trillion federal budget. But the proposed reductions are expected to be equally controversial on Capitol Hill, with some lawmakers battling for programs they favor and others demanded deeper cuts. …

Obama's list of proposed cuts is less ambitious than the hit list former president George W. Bush produced last year, which targeted 151 programs for $34 billion in savings. Like most of the cuts Bush sought, congressional sources and independent budget analysts predict, Obama's also are likely to prove a tough sell. …

The proposed cuts, if adopted by Congress, would not actually reduce government spending. Obama's budget would increase overall spending; any savings from the program terminations and reductions would be shifted to the president's priorities.

But the more likely outcome, budget analysts said, is that few to none of the programs targeted by Obama will be terminated. Presidents from both parties have routinely rolled out long lists of spending cuts -- and lawmakers from both parties routinely ignore them.

Marc Thiessen at the National Review has a useful article putting the value of this next round of supposed reductions into context.

Short on Transparency

Yesterday, the U.S House of Representative’s Subcommittee on Investigations and Oversight held a hearing entitled “Follow the Money Part II,” intended to take a look at the oversight measures in place to track the distribution of stimulus dollars.

During the hearing the subcommittee Chairman charged the taxpayers with overseeing the stimulus funds, which may be a good thing as only 3 of the 10 committee members felt it was necessary to show for the hearing.

The star witness for the scarcely attended event was Earl Devaney, chairman of the Recovery Act Accountability and Transparency Board (pictured).

The Washington Times reports:

Mr. Devaney, though, said his board - made up of 10 IGs - has a dual mission: "First, the board is responsible for establishing and maintaining a Web site." Oh, and second, it's supposed to "help minimize fraud, waste or mismanagement."

"As I mentioned in my testimony," Mr. Devaney said, "that Web site is evolving. ... I would probably be the first to admit today the Web site doesn't give you that kind of information."

USA Today also reporting on the hearing:

Recovery.gov now lists programs being funded by the stimulus money, but provides no details on who received the grants and contracts. Agencies won't report that data until Oct. 10, according to Earl Devaney, chairman of the Recovery Accountability and Transparency Board, which manages the website.

Devaney told a House subcommittee Tuesday that it will be a challenge to have the site ready to present spending data in five months. He said after the hearing that the board doesn't have enough data storage capacity, for example. …

Devaney said that after the first data become available in October, the board will wait six to nine months for the White House Office of Management and Budget to issue new guidance on how far down the spending chain the money must be tracked.

It doesn’t seem likely the public will be able to “track every dime” of the stimulus as promised until this time next year. Greg Elin of the Sunlight Foundation summed it up well when he said, “If we have to wait until October to get the information or to the end of the year to get a powerful recovery.gov site, the Obama administration will have missed an important opportunity.”

Rich Uncle Sam

USA Today reports:

In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments. …

Federal stimulus money aimed at reviving the economy and a sharp drop in tax collections have altered, at least temporarily, the traditional balance of how states, cities, counties and schools pay for their operations. …

The dominance of federal money is set to expand dramatically this year because tax collections are sinking while the bulk of federal stimulus aid is just starting to arrive. "This money isn't manna from heaven. It comes with a price," says Indiana state Sen. Jim Buck, a Republican. He worries that the federal money will leave states under greater federal control and burden future generations with debt.

STEWARD’s economic study released last month noted a significant portion of the stimulus funds headed to New Hampshire will actually supplant state funds with federal dollars. Instead of encouraging states to reduce spending when budgets are tight, the stimulus monies allow them to prop up (and in some cases grow or even create new) programs that would otherwise have to be cut.

Problems arise two years from now, however, when these programs no longer have the funds to operate and the people that work for or rely on them are left out in the cold.

Tax Cut Smoke and Mirrors

The AP reports:

Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.

The government is going to want some of that money back.

The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.

But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.

So while Democrats in Congress argue the President has cut taxes for 95% of working Americans, the truth is he has instead rovided them with a low interest loan that, unbeknown to them, they will be required to pay back at tax time. Some transparency.

The AP warns further that this issue may really come back to bit social security recipients:

The Social Security Administration is sending out $250 payments to more than 50 million retirees in May as part of the economic stimulus package. The payments will go to people who receive Social Security, Supplemental Security Income, railroad retirement benefits or veteran's disability benefits.

The payments are meant to provide a boost for people who don't qualify for the tax credit. However, they will go to retirees even if they have earned income and receive the credit. Those retirees will have the $250 payment deducted from their tax credit -- but not until they file their tax returns next year, long after the money may have been spent.

We mocked this effort to stimulate social security recipients a few weeks back. It makes the whole situational all the more frustrating to know that the government now plans to unexpectedly hit these older Americans, who the Administration believe “need it most,” with an increased tax bill around this time next year.