State of Play: Economy

JOB CREATION
Late last year, under the leadership of President Bush, jobs were hemorrhaging at a rate of more than 670,000 a month and the American economy was on the brink of a depression as bad as the Great Depression of the 1930s.

In February, the Congress passed and the President signed the American Recovery and Reinvestment Act, which has created or saved more than 1 million jobs already and is creating essential long-term investments in our economy that will create even more jobs when it is fully implemented.

As Ben Bernanke testified before the House Financial Services committee, “…If the fiscal stimulus package didn’t exist for example, we would anticipate that there would be higher unemployment.” From the Wall Street Journal, 9/3/09 “…Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action…Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.”

Talk of a “second stimulus” is being generated by Republicans who are taking heat back home for their opposition to the Recovery Act. The March 2009 special election for Republican-leaning NY-20 was a referendum on the American Recovery and Reinvestment Act—Democrat Scott Murphy won the seat, showing strong public support for the recovery package. Republicans’ attempt to label any further action on the economy a “second stimulus” is an attempt to claim the first one failed.

While Congress continues to push for timely distribution of job-creating Recovery funds, we will not pass new economic stimulus legislation while the Recovery Act is still being deployed.

But other efforts to create jobs are being considered. For instance, the next step is building on and sustaining the progress of the Recovery Act with proposals such as renewing the highway bill that expires this year. This infrastructure bill will create jobs by rebuilding roads and bridges and strengthening the backbone of American commerce.

We must also extend unemployment insurance benefits, which economists say have a strong multiplier effect on the economy, creating and saving jobs. The House has already passed a UI extension that is awaiting Senate action.

Other efforts targeted specifically at job creation, including extending the first-time homeowners tax credit, are being discussed by Congressional leaders now.

Background:

Moody’s Economy.com, the non-partisan Congressional Budget Office, and the Council of Economic Advisors all estimate that there are 1 million more jobs now than there would have been without the Recovery Act.

· The economy swung more than 5 points in the right direction the second quarter of the year, shrinking at an estimated at -0.7 percent annual rate this spring, a large turnaround from the -6.4 percent decline at the beginning of the year.

· While unemployment is still far too high, because of the recession that President Obama inherited from President Bush, we are moving in the right direction, with the consensus of economists now predicting real GDP of 3.0% this fall and 2.4% in Q4. [Blue Chip, 9/10/09]

· The rate of job losses has started to decline -- from an average of 673,000 per month in the final three months of the Bush Administration to 256,000 during the past three months.