Al Angrisani tells why the government stimulus program is not stimulating new jobs and wonders if we’re headed for a jobless ‘recovery.’

It just isn’t supposed to be happening. The unemployment rate was supposed to start declining, not moving ever closer to the 10 percent mark. In fact, the Obama Administration and Congress promised taxpayers that the $787 billion Stimulus Bill passed on Feb. 13 would keep unemployment from rising above 8 percent and that it would create millions of new jobs. Since that promise and the passage of the Stimulus Bill, unemployment has risen to 9.4 percent, and there seems to be no end in sight to its climb.
So here we are more than three months after the passage of the Stimulus Bill and it’s clear that the legislation isn’t living up to its name; it’s failing to stimulate the economy. How can this be? As usual, the “devil is in the details” of this bill, which was rushed through Congress in the middle of the night, before many members of Congress had a chance to fully digest its contents.

In order to fully understand why this bill is failing to boost the economy out of its doldrums – as the president had assured us it would – I took the time to read the bill line item by line item, as President Obama promised he would. As I burned the midnight oil reading all 647 pages, I discovered that this legislation is simply masquerading as a job-creation bill. In truth, it is, first, a transfer payments program and, second, a government overhead expansion bill. (A transfer payments program is simply redistribution of funds, using a number of existing programs as vehicles. It doesn’t create new income, just redistributes it.)

Here’s how the Stimulus Bill breaks down:

  • $225 billion, or approximately 30 percent of the funding, will go to pure transfer payments through a number of programs, including Unemployment Insurance, Medicare and the food stamp program.
  • $170 billion, or 21 percent, is for expansion of federal, state and local government overhead, including expenditures for cars, facilities, research projects and general administrative purposes, including salaries. These state and local salaries are the ones I believe President Obama counts when he states that the bill saved 150,000 jobs. This would also explain why government payrolls have stayed flat, while state and local governments are cutting back budgets.
  • $288 billion, or 37 percent, is dedicated to tax cuts, mostly for individuals, through a small payroll tax deduction. This deduction is being more than offset by state and local tax increases for those individuals. The approximately $50 billion in corporate tax cuts is largely for special-purpose credits like energy and green initiatives, making them conditional on improvements many businesspeople are simply not in a position to initiate at this time.
  • Finally, the remaining $104 billion, or 12 percent, of the $787-billion stimulus expenditure, is for “shovel-ready” or near-shovel-ready infrastructure projects that will create real jobs. At an average, estimated cost of $50,000 per job, we should expect to see approximately two million jobs created over a two- to three-year period. This is not enough to make up for the six million jobs already lost since the start of the recession 10 months ago. Undoubtedly, some indirect jobs will be created from the other 88 percent of the stimulus bill used for transfer payments and expansion of government overhead, but probably not enough to make up the deficit.

As Assistant Secretary of Labor responsible for employment policy for President Reagan, I watched the power of the Reagan and Jack Kemp tax cuts swiftly reduce national unemployment from 10.6 percent and create 16 million new jobs over eight years. (That unemployment figure remained below 8 percent for 25 years, until February, 2009.) The key to our success was that the Reagan/Kemp free enterprise approach to solving unemployment put $1 trillion of tax cuts, which acted like new investment capital, into the hands of small businesses across America. These businesses employ 70 percent of all workers in the country. In short, those small businesses reinvested that capital back into their businesses and re-employed America.

It’s clear to me that, as the deficiencies of this un-stimulating Stimulus Bill become more apparent, the Obama Administration and Congress will have to change direction and adopt the Reagan/Kemp approach to solving the unemployment problem. That’s the only way to lower the unemployment rate for the long term, and to avoid seeing more multi-billion-dollar stimulus bills and even bigger deficits in 2010.

Al Angrisani is former US Assistant Secretary of Labor for President Ronald Reagan and Author of “Win One For the $hareholders.”


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