Even before Barack Obama took the oath of office, his economic advisers projected that without hundreds of billions of dollars in government spending, the U.S. economy could lose another 3 million to 4 million jobs on top of the 3.1 million lost in 2008.
It turns out they were optimistic. Even with the $787 billion stimulus package that Obama signed in February, more than 4 million jobs have been lost in 2009, the worst year for job losses since World War II. The jobless rate that advisers projected would peak at 8% has topped 10%.
So in the midst of major decisions on Afghanistan, health care and climate change, the president today turns his attention back to a problem he tried to solve already — and one that's sure to dominate next year's elections, when his Democratic majorities in Congress will be at stake.
Obama convenes a summit here on jobs, then flies Friday to Allentown, Pa., for the first in what will be periodic listening tours on the economy. The goal is to develop new spending and tax proposals to help many of the nation's nearly 16 million unemployed people find work in 2010.
"Though the job losses we were experiencing earlier this year have slowed dramatically, we're still not creating enough new jobs each month to make up for the ones we're losing," Obama said last week. "For families and communities across the country, this recession will not end until we completely turn that tide."
The new focus on jobs comes as the first stimulus plan's impact remains unclear. The Obama administration says more than 640,000 jobs have been saved or created by employers who received funds. The Congressional Budget Office this week put the figure at 600,000 to 1.6 million after considering other factors, such as the impact on consumer demand from tax cuts, unemployment insurance extensions and spending by the newly employed. It said unemployment would have been up to 0.9 percentage points higher without the stimulus.
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The White House says more than 3.5 million jobs will be saved or created through 2010 as a result of the stimulus. Republicans such as House GOP leader John Boehner dispute the figures.
Also in dispute: whether new spending or tax cuts should add to the record $1.4 trillion budget deficit and $12 trillion debt. Democrats such as House Speaker Nancy Pelosi favor more spending now. Obama has voiced caution about the deficit.
"The American people recognize that we have two twin challenges," White House communications director Dan Pfeiffer says. "They're concerned about deficits, and they're concerned about jobs."
The immediate concern is economic. About 5 million people have been out of work six months or longer, government data show. Unemployment worsened or stayed the same in most metro areas in October, the Labor Department said Wednesday.
"We need something done right away," says Philadelphia Unemployment Project director John Dodds. "That doesn't always get through to the Ph.D.s and CEOs who will probably be in the front row at the summit."
A secondary concern is political. When James Carville coined the phrase "It's the economy, stupid" to define the 1992 presidential election won by Bill Clinton, times weren't as tough as they are now. A USA TODAY/Gallup Poll last week showed 55% of Americans don't like how Obama is handling the jobs issue, tied with Afghanistan for his poorest showing. Only 35% say things will improve during the next year.
"You can say whatever you want, but if it's 10.2% unemployment, people have an unwavering opinion of that," says Chris Chocola, president of the Club for Growth, which backs Republican candidates. "That's what I think we're seeing at tea parties and town hall meetings."
'Doing nothing not an option'
It wasn't supposed to happen.
The nearly $800 billion in spending and tax cuts approved last February would reverse the economic tailspin, Obama and his Democratic allies said. The jobless rate would lag behind, as it always does — but not this much.
"It's getting increasingly unusual that we're not seeing a hiring kick set in," says Mark Zandi of Moody's Economy.com. Employers are holding back due to a lack of credit, of confidence in the economy and of certainty about government actions, he says.
To create more jobs, 18% of those surveyed in the USA TODAY/Gallup Poll last month said, steps should be taken to stop employers from sending jobs overseas. Other top choices: cutting taxes, helping small businesses and creating infrastructure jobs.
Among the ideas under consideration, according to National Economic Council director Lawrence Summers and others:
• Extending unemployment insurance benefits beyond this year. Earlier extensions already have made some people eligible for a record 99 weeks. Giving money to jobless Americans spurs consumer spending, which saves or creates jobs.
• Sending more aid to cash-strapped state and local governments. States are writing their 2010-11 budgets, and federal aid included in February's stimulus package runs out in 2010. Without another bailout, they might be forced to cut spending or raise taxes, hindering the recovery.
• Creating tax incentives, such as for small businesses or manufacturers. During last year's campaign, Obama proposed a tax credit for each new job created.
• Financing more infrastructure and energy efficiency projects. Obama favors an "infrastructure bank" with public and private money, which he promoted in last year's campaign and this year's budget.
"The premise of our policy is that while there is a public sector responsibility for employment, long-term economic recovery depends on private sector growth," Summers says.
Labor leaders such as AFL-CIO President Richard Trumka want the government to create jobs. "Doing nothing is not an option," Trumka says. "If we don't put people back to work, the deficit will get higher."
Republicans are promoting their own agenda: slashing payroll taxes, limiting regulations and reducing the deficit through spending cuts. House Minority Whip Eric Cantor outlined that agenda in a speech Wednesday; Boehner meets with conservative economists today.
'Still in the hope stage'
When Billy Joel wrote his 1982 anthem about Allentown's steel factories closing down, times weren't nearly as bad nationally as they are today. About 2.1 million jobs were lost that year, according to government data — about half the number lost in the first 10 months of this year.
When Obama comes to the Lehigh Valley on Friday, he'll be entering a region of 600,000 people fraught with economic fear — and hope. State figures show unemployment is about 9.5%, slightly below the national average, but the rate has risen in 18 of 22 months since the recession started. Mack Trucks moved its world headquarters to Greensboro, N.C., this year.
The region also is the scene of economic innovation, ranging from regional health care networks to bank and insurance call centers. The Lehigh Valley Health Network is moving about 1,000 employees into the former Mack Trucks headquarters.
"It represents that classic Northeast city that's trying to make the transition," says Tony Iannelli, president of the Greater Lehigh Valley Chamber of Commerce. How is it doing? "We're still in the hope stage," he says.
Joe Alfonso lost his information technology job at Merrill Lynch in January when Bank of America took it over. He applied for about 50 jobs but got no offers. Now he's taking classes at Northampton Community College in Bethlehem to upgrade his skills.
"I'm beginning to think this is a good time to even change careers," Alfonso says.
That's becoming more typical, says Maryann Haytmanek, whose job helping displaced homemakers return to the workforce has evolved to include people who have been laid off. More men are going into nursing these days, she says. More women are becoming solar panel installers.
"I'm not seeing a lot of people get jobs at this point," she says. "For every job, there's six people. Five people aren't getting a job."
'Congress is worried'
Advocates for the unemployed hope today's summit of corporate CEOs, small-business owners, labor leaders and others is a start toward reversing that trend. Some, such as Philadelphia's Dodds, planned to bus jobless people to Washington to walk picket lines outside.
The White House's decision to hold a summit and put the president on the road reflects the need to build public support for whatever plan Democrats push.
"Congress is worried. They're the ones who are up for election next November," says Dean Baker of the liberal Center for Economic and Policy Research.
Lawmakers in Democratic strongholds may be particularly worried. Jobless rates are highest in states Obama won last year, including Michigan at 15.1%, Nevada, Rhode Island and California.
Democrats hold an 81-vote edge in the House and a 10-vote edge in the Senate. Since World War II, the party of a first-term president has lost an average of 16 House seats in midterm elections, says Charles Cook of the non-partisan Cook Political Report. In the Senate, Cook rates six Democratic seats and four Republican seats as tossups.
Douglas Holtz-Eakin, former director of the Congressional Budget Office and top domestic policy adviser to Sen. John McCain in last year's presidential race, says Obama's tax, trade, health care and environmental policies are holding companies back from hiring workers.
Holding a summit "is what they know how to do," Holtz-Eakin says. "But there's no follow-through."
Still, polls show voters favor Democrats over Republicans on the economy — by a 50% to 39% margin in a Gallup Poll in early September. That, Pfeiffer says, will determine who does best in next November's elections. (source)
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