Stimlus Fails Nation's Young Workers

Over the last few months the Associated Press has published a number of stories critical of various aspects of President Obama's stimulus package. Today, they address the lack of teen jobs created by the bill, despite Administration claims:

More than $1.2 billion in federal stimulus money was supposed to help teenagers find jobs this summer, but the effort barely made a dent in one of the bleakest job markets young workers have faced in more than 60 years.

Despite the program's admirable goals, experts and government watchdogs say it yielded few new opportunities for teens seeking work, as more and more adults are vying for the same low-wage positions at hamburger stands and community pools. ...

Now, as congressional investigators scrutinize the program for potential waste, experts are wondering why it couldn't prevent youth unemployment rates from soaring to 18.5 percent in July, the highest rate measured among 16- to 24-year-olds in that month since just after World War II.

"The summer program was basically half-disaster," said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University in Boston. "It was too little, too late and too poorly constructed to have any lasting effect on our youngest workers."

Expanding on those unemployment figures, the New York Times reported at the beginning of the month:

This August, the teenage unemployment rate — that is, the percentage of teenagers who wanted a job who could not find one — was 25.5 percent, its highest level since the government began keeping track of such statistics in 1948. Likewise, the percentage of teenagers over all who were working was at its lowest level in recorded history.

“There are an amazing number of kids out there looking for work,” said Andrew M. Sum, an economics professor at Northeastern University. “And given that unemployment is a lagging indicator, and young people’s unemployment even lags behind the rest of unemployment, we’re going to see a lot of kids of out work for a long, long, long, long time.”

Continued Budget Concerns in Concord

The Portsmouth Herald reports:

Over the first two months of the fiscal year, the state reported revenue for the General and Education Funds at $187.5 million, which was $17.6 million below the revenue plan passed by lawmakers in June and $5.5 million below 2009 collections for the same period. The rooms and meals tax, which was raised by lawmakers, came in $3.7 million below estimates. The state's two business taxes came in $2 million below estimates while tobacco taxes also came in $2 million below estimates.

House Speaker Terri Norelli assured readers, however, "July and August normally don't provide us solid indicators. I think we will have a better idea of how things are going in this highly volatile economic environment with the September numbers."

Of course, just a few weeks ago in response to poor July revenues, Norelli told us not to worry as August would be better. If not? The she would be "concerned" she said.

Maybe "assured" wasn't the right word.

Meanwhile, talks have broken down with the state's union leadership as Governor Lynch attempts to squeeze out $25 million in mandated cuts needed to balance the budget. The eventual contract will cover over 10,000 state workers and must be finalized by October 12.

On top of that, as the Herald reminds us, there is still the pending matter of the $110 million JUA lawsuit. The JUA of course won the first few rounds of the fight and the matter awaits action by the State Supreme Court (most expect the court will concur with the JUA and subsequently carve a huge hole in the state budget).

"Doing nothing, which appears to be the case right now, is a very dangerous and irresponsible decision," said Senate Minority Leader Peter Bragdon of Milford. "With revenues down 15 percent from their rosy estimates and an adverse ruling from the Supreme Court, a lack of a Plan B could only mean hasty decisions will be made. Hasty decisions are what put us in this mess; more hasty decisions will only further burden our citizens."

Some Stimulus Spending Details

Today's Concord Monitor offers some details on the distribution and use of almost $21 million in federal stimulus funds.

The funding will impact a litany of state and private entities throughout the Granite State, though the focus of much of the Monitor's piece was on Concord specific awards. Here are some of the details:

• "The [Concord] police department received $207,000 to hire a new officer for three years - the city had to agree to pay for the position for one year after that[.]"
  
  
• "[T]he department was awarded more than $180,000 ... about $125,000 of which has been used to retain two officers, ... the rest to buy two police cruisers later this year."
  
  
• "[T]he Belknap-Merrimack Community Action Program has [received] ... more than $3.6 million for weatherization projects."
  
  
• "The [Concord school] district will get nearly $1.3 million more this year in money for disadvantaged students."
  
  
• "[T]he state's community colleges have been awarded money mostly for financial aid. ... NHTI in Concord will get more than $825,000 in awards related to federal Pell grants [and] $17,000 toward a federal work-study program."

What do you think? Good uses of taxpayer cash or simply redistribution minus the federal government's cut?

A Vote on Gregg's Stimulus Signs Legislation

Back in June, we discussed Senator Gregg's "Axe the Stimulus Plaques" legislation to prohibit the use of federal funds to purchase the stimulus project signs we have all become familiar with over the last few months.

Late Wednesday Senator Gregg got a vote on his legislation, in the form of an amendment to a larger spending bill. Unfortunately, though not unexpectedly, the amendment failed as Senate Democrats rallied around the President in support of this egregious waste of taxpayer dollars.

The Union Leader slams the Democrats, while thanking both Sens. Gregg and Shaheen, in an op-ed today:

Adding the cost of those signs for the more than 20,000 stimulus projects nationwide, "we are talking about a cost of somewhere between $6 million and $15 million being spent on signs," Gregg told the Senate. "That is an inexcusable waste of money. That money could be used for something valuable, for example, rather than a sign."

He got only five Democrats (including Sen. Jeanne Shaheen) to vote for his amendment. It failed, 52-45.

Sen. Barbara Boxer, D-Calif., accused Gregg of being "anti-jobs." Actually, he is pro-taxpayer. "The practical effect of this is," he said, "the signs should say 'Wasting taxpayers' dollars; project funded by the future generations of Americans.'"

How political are these signs? This summer, Derry attempted to save money by not buying a sign for a stimulus-funded upgrade to the Meadowbrook water system, The Eagle-Tribune of North Andover, Mass., reported. The town was told that if it didn't put up a sign, it wouldn't get the money. It put up the sign.

These signs are nothing more than taxpayer-financed propaganda for the Democratic Party. Kudos to Sens. Gregg and Shaheen for voting against funding them. And shame on the 52 senators -- including independent Joe Lieberman -- who voted to squander public money on them.

WSJ Shows Government Handouts Don't Stimulate

Both the Bush and Obama Administrations attempted to "jump start" the economy by distributing stimulus payments in hopes that recipients would use the government handouts to go out and shop.

It turns out, however, that these policies do not encourage new spending and instead simply dive up government debt:

Consider first the part of the package that consists of government transfers and rebates. These include one-time payments of $250 to eligible individuals receiving Social Security, Supplemental Security Income, veterans benefits or railroad retirement benefits--and temporary reductions in income-tax withholding for a refundable tax credit of up to $400 for individuals and $800 for families with incomes below certain thresholds. These payments, which began in March of this year, were intended to increase consumption that would help jump-start the economy. Now that a good fraction of these actions have taken place, we can assess their impact.

... [A]s the chart also shows, there was no noticeable impact on personal consumption expenditures. Because the boost to income is temporary, at best only a very small fraction was consumed.

This is exactly what one would expect from "permanent income" or "life-cycle" theories of consumption, which argue that temporary changes in income have little effect on consumption. These theories were developed by Milton Friedman and Franco Modigliani 50 years ago, and have been empirically tested many times. They are much more accurate than simple Keynesian theories of consumption, so the lack of an impact should not be surprising.

Indeed, one need not have looked any further than the Bush administration's Economic Stimulus Act of 2008 to find plenty of evidence that temporary payments of this kind would not jump-start consumption. That package made one-time payments and rebates to people in the spring of 2008, but, as the chart shows, failed to stimulate consumption as had been hoped. Some argued that other factors such as high oil and gasoline prices caused consumption to fall during this period and that consumption would have been even lower without the stimulus, but no significant impact of these rebates is found even after controlling for oil prices.

As a whole, the authors offer this assessment of President Obama's stimulus package:

[T]he data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic--not the fiscal stimulus program--deserves the lion's share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.

The Assumptions of Job Counting

As we have discussed many times, the projected, estimated, or presumed job numbers put out by the White House in association with the stimulus are nothing more than politically motivated best guesses designed to provide support to a policy that is rapidly loosing public confidence.

Today, the Wall Street Journal runs a story supporting that claim (in a much more educated fashion):

As the $787 billion federal stimulus package was being deliberated by Congress in February, the White House estimated that the act would increase employment by 3.5 million jobs, including 24,000 combined in New Hampshire and Wyoming.

So far, though, those states say the stimulus has added fewer than 1,000 jobs.

Less than a month from now, when every state receiving stimulus funds will be required to make such a report, the numbers will fall far short of White House projections -- whether it's the original 3.5 million job projection or the latest estimate, issued by the White House last week, that one million jobs have been created thus far by the stimulus act.

The enormous spread between the states and the White House reflects how difficult it is to measure job creation and attribute it to a specific cause. The result, a hodge-podge of numbers, could accelerate criticism that the stimulus isn't doing enough to reduce unemployment.

"The problem with measuring things like this is enormous," says Robert Baade, an economist at Lake Forest College, who has worked on estimated economic impact from smaller initiatives such as new stadiums. He likens it to finding "a needle in an economic haystack" but says there are other forces at work on the estimates. "Some of these numbers are, let's face it, politically affected."

The most visible figures available to evaluate the job market are unemployment rates, which don't speak well for the stimulus package. The national rate of joblessness last month was 9.7%, up from 8.5% in March, the month after the stimulus act was passed.

A week after that number was released, the White House's Council of Economic Advisers reported that the stimulus had increased employment to a level by "slightly more than 1 million jobs higher than it otherwise would have been."

That awkward wording says a lot: It reflects the tough job facing any economist who tries to estimate job creation. In every method used, economists are forced to imagine an alternate reality -- one built on assumptions that are easily challenged. For example, to compare present unemployment rates to past rates may be straightforward but it fails to account for other economic forces that were going to affect unemployment with or without the stimulus.

The White House method assumes that things were getting worse and that the stimulus is the sole factor responsible for stopping the bleeding. So economists imagined an alternative reality whereby the present would have been much worse -- to the tune of one million more lost jobs.

Next month the states will release their own numbers, as mandated by the act. And they'll use much more conservative methodology that doesn't invoke a parallel universe.

That method is the Office of Management and Budget guidelines to count jobs. To account for the cumulative bump in employment, the OMB calls for states to calculate hours of work funded by the stimulus act. Then states must take that number and divide it by 40, for a normal work week, and by the number of weeks since the act was passed. So jobs just added last week count much less than those added in the first month after the act was passed.

NH Unemployment Climbs Slowly HIgher

Reports the Nashua Telegraph:

The state’s unemployment rate climbed a tenth of a percentage point from July to August, and is 3 percentage points higher than this time last year, according to data released Monday by the state Employment Security office.

New Hampshire’s preliminary seasonally adjusted unemployment rate was 6.9 percent, up from 6.8 percent in July and 3.9 percent from August 2008.

That means 686,550 Granite Staters are employed, a decrease of 3,600 from July and a decrease of 23,710 people from a year ago. A little more than 51,000 state residents are unemployed, an increase of 1,040 from July and 22,590 more than August 2008, according to the Employment Security office.