Congress looks to create jobs, but will it be enough?

McClatchy NewspapersJanuary 25, 2010 

WASHINGTON — Democrats in Congress are furiously crafting legislation to spur job creation, but experts warn that the benefits could be too small to make much difference.

Senate Democrats plan to meet Tuesday to discuss a package that could provide billions in help for strapped state and local governments, as well as infrastructure projects. They're also considering tax breaks to small businesses for hiring workers and to help make homes more energy-efficient.

The House of Representatives passed its own $154 billion jobs plan last month.

The packages could include the initiatives that President Barack Obama proposed Monday to help middle-class families, though they're expected to be part of separate legislation. Obama called for nearly doubling the child-care tax credit for families that earn less than $85,000 annually, providing $1.6 billion more for child care programs in fiscal 2011 and capping student loan payments at 10 percent of income above a basic living allowance.

Congress' major focus, though, is on what House Speaker Nancy Pelosi calls "That four-letter word ... jobs, jobs, jobs."

Some analysts warned that such limited stimulus measures would hardly make a dent in a $14.2 trillion economy, however.

"It's more of a painkiller than a cure," said Robert Bixby, the executive director of the Concord Coalition, which monitors fiscal issues.

"While $150 billion might give the economy some stability, it's not large enough to make much of a difference," added Muhammad Islam, an associate professor of economics at St. Louis University.

Senators hope to debate their plan during the first two weeks of February. Lawmakers feel a growing urgency to move quickly, for both economic and political reasons. The nation's unemployment rate is 10 percent, and employers cut 85,000 non-farm payroll jobs last month, well above the 8,000 to 10,000 economists had anticipated.

As for political pressure, when lawmakers were home over the holidays, constituents made it clear that the economy is their top priority. Republican Scott Brown's upset victory last Tuesday for the Massachusetts U.S. Senate seat long held by Democratic icon Edward Kennedy underscored the message.

"Americans are most focused, as we need to be, on the creation of jobs," House Majority Leader Steny Hoyer, D-Md., said afterward.

Democratic leaders in Congress generally agree on boosting spending for infrastructure. The House bill would spend $48.3 billion, about half of that for highway improvements and $8.4 billion for public transportation.

The House also would provide $26.7 billion to help sustain public service jobs. Most of the money would go to states to "keep or create" 250,000 education jobs over two years, and other funds would help pay for 5,000 police officers and firefighters.

Another $79 billion was targeted for emergency aid to families and the unemployed.

The Senate position is still being formulated. Its leaders have expressed sympathy for a tax credit to businesses that hire new workers, as well as energy breaks. No details are available yet, however.

The biggest hurdle could involve the source of the money.

About half the House bill would be paid for with funds from the Troubled Asset Relief Program, the 2008 bill to help bail out ailing financial institutions. The rest is considered emergency spending, adding to a fiscal 2010 budget deficit that the Congressional Budget Office estimates could reach $1.4 trillion, about the same as last year.

Senators are more reluctant to do that, and under Senate rules, it would take 60 votes. Once Brown is sworn in, possibly before final passage of the jobs bill, Republicans will control 41 seats in the 100-member body.

Even if a plan is enacted, experts see only modest short-term gains.

"At the margin, it could encourage more hiring," said Brian Bethune, the chief U.S. financial economist at IHS Global Insight, an economic research firm.

Islam thought that "shovel-ready" infrastructure projects would benefit.

The biggest boost for the economy, the experts said, would be something that restores consumer and business confidence, but a $154 billion jobs package is unlikely to make factories suddenly hum or motivate people to head for the malls.

"The roadblock is just general business confidence," Bethune said. "Whether this kind of legislation will do the job is hardly clear."

ON THE WEB

December labor report

December consumer confidence survey

Committee for a Responsible Federal Budget analysis of 2010 spending

Congressional Budget Office federal budget analysis

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