BEYOND THE NUMBERS
Combining bad economics with bad fiscal policy, opponents are on the verge of defeating the compromise jobs bill before the Senate, and we can expect more hardship and a slower economic recovery as a result.
As I’ve said before, the case for extending unemployment insurance (UI) benefits and state fiscal assistance is powerful:
- Nearly a million workers aren’t getting the UI benefits they would receive and spend if Congress hadn’t allowed the Recovery Act’s UI program to lapse on June 2; that number will climb to over 2 million if Congress fails to act before leaving for the July 4 recess.
- The average jobless worker has been looking for work for 34 weeks — the longest stretch on record.
- States, localities, and school districts have cut 231,000 jobs since 2008 due to budget pressures, including 22,000 jobs in May alone.
- Because both houses of Congress passed an extension of state fiscal assistance earlier this year, most states incorporated it into their budgets for the fiscal year that started July 1. (States’ combined budget shortfall for the year is $140 billion.) If Congress reverses course and fails to approve the funds, at least 34 states likely will impose additional job cuts and service reductions.
- Without more federal aid, state budget-cutting actions could cost the economy 900,000 jobs in the public and private sectors next year.
And if Congress doesn’t extend the TANF Emergency Fund, another part of the compromise bill that will create about 190,000 jobs across the country, one of the most cost-effective job-creating programs that we have will disappear.
In short, the bill’s temporary stimulus measures would preserve and create jobs and boost consumer spending at a time when the economy is running well below capacity.
Critics’ main charge has been that the measure would add to the deficit. To satisfy this concern, Senate leaders scaled back the bill’s UI and state fiscal provisions while adding several offsets, dramatically lowering its overall cost.
But the deficit complaint was wrong from the start. Our current deficits are manageable — and in fact necessary to help the economy recover from a deep recession. Because the spending in the jobs bill is strictly temporary, it would barely increase our long-term deficits — which are the real budgetary danger — at all (by just a fraction of 1 percent).
Moreover, even as critics complained about the bill’s impact on the deficit, some of them also pushed to water down provisions designed to crack down on well-known tax loopholes, which would generate long-term budget savings in an efficient manner.
As a result, the current version of the bill has less temporary spending to help the weak economy, and fewer long-term savings to reduce deficits, than earlier versions — the exact opposite of what the situation demands.
Nevertheless, this looks like the best we can do, and it’s essential that Congress approve these stimulus measures. If it doesn’t, the impact will be widespread, ranging from jobless workers who won’t receive UI benefits, to public- and private-sector workers who will be laid off due to state budget cuts, to storeowners who will lose business because unemployed workers have less to spend, and so on across the economy.
Our challenges are big enough already. There’s no sense in making them worse.