The Obama Economic Stimulus Program Is Working

Let’s talk jobs.

Since February we keep hearing cries from the Republicans and conservatives and conservative media echo the phrase “where are the jobs?”

The question’s been answered repeatedly.

Where are the jobs?

Just ask the approximately 200,000 to 250,000 jobs a month created by the stimulus. Before the stimulus, we were losing about 500,000 jobs a month. In September we lost 263,000. In September of the previous year we had lost 284,000 jobs. In 2008 we were on our way to higher joblosses, now we are on our way to lower job losses.

September and October have a history of being brutal months, usually the worst months of the year, in regards to the U.S. economy, both in terms of jobs and retails/stock market.

Before continuing I think there should be a point made about job loss numbers being a “net number”. Job loss = number jobs cut – number of jobs created.

On the average, since the Obama “stimulus” went into to effect, 200,000 jobs have been created. Not saved, but created. This number is not from the White House, these numbers are from an independent firm, Economic Policy Institute.

The EPI does a monthly study of the economic stimulus and its effects.

The demand for jobs in the market is far greater than the amount of jobs being created. Each month an average of 125,000 new young people enter the job market, looking for employment, the stimulus program is only providing 250,000 (high end estimate)jobs a month.

Much more needs to be done. Unfortunately there is only so much a government could do, but they can definitely be doing more, faster. As I’ll mention later, the stimulus package was planned to be slow in the beginning and faster down the line. It was a two-year plan.

There is a lot of criticism about this stimulus plan picking on the fact that most of the jobs it has created are government jobs. That is only a criticism if you are looking to find things to complain about.

Most of these government jobs are commonly called “teacher jobs” or “librarian jobs”. These are the jobs that keep local government going. This September, an estimated 15,600 teachers did not return back to work, they were laid off. Other local government jobs were dropping all over the nation. The simplest way to make sure an economy is worse than it needs to be is to make sure libraries, schools and other necessary services break down.

The criticism should be that there aren’t enough construction jobs being created, not most of the jobs created are government jobs.

We need government jobs; they are the only people that can hire before the private sector is stable enough to start hiring. The government needs to be the band-aid and bridge during these times and it isn’t creating enough jobs.

Create more government jobs, mostly in infrastructure and watch the private sector get strong. Construction jobs add a significant number of jobs to the economy. You know, if the government needs to build a bridge, it needs to hire a group of people. They in turn hire a group of people. Who buy things from another group of people; that will need to add employees to their company to keep up with demand; and all these people now have money coming in they didn’t have coming in before and therefore are going to be paying off debt and buying things again.

Stop spending and give more tax cuts

Tax cuts by the right have become an end in an argument, when it should really be a means.

Tax cuts should be “carrots and sticks”.

Reagan to conservatives is like Obama to liberals, over-credited.

In 1981 as soon as he came into office, Reagan and the Republican controlled Congress passed ERTA, the Economic Recovery Tax Act. It is known as the biggest tax cut ever, in modern history.

In 1982, after he saw that the tax cut didn’t have the results he was hoping for Reagan with the help of the Democrats in Congress passed TEFRA (Tax Equity and Fiscal Responsibility Act), the biggest tax increase for the same time frame.

In fact if you keep in mind all of his tax cuts ($275.3 billion) and also keep in mind all of his tax increases ($132.7 billion), you’ll notice that about half of his tax cuts, he took back.

Some of the provisions of TEFRA were started immediately but all in all the Act didn’t take effect till February 1983.

The Reagan tax cut okayed in the beginning of ’81, much of it taking place within the years. The unemployment during the Reagan tax cut era went from 7.1% the beginning of the year to 9.7% by the end.

The deficit and debt also skyrocketed.

But after Reagan began treating tax cuts as a “carrot and stick”, Reagan presided over unemployment numbers that went from 9.7% to 6.2%. The GDP that was in the negatives during the third quarter of ’82 was up to 8.2% in the third quarter of the following year.

Unemployment went down to all the through the first Bush Sr. year (5.3%), by the time Clinton was elected the percentage of the unemployed were around the higher than where Reagan had picked up(8.5%).

But during the Clinton years, unemployment went from 7.5% to 4.2%.

In the Bush Jr. years, unemployment went from 4.0% to 6.0% in 2003 and then leaving office with 7.6% in January 2009. The Bush years were nothing but tax cuts. It was their answers to everything and it was those answers that cost the Republican Party the election.

Coming back to the Obama economic plan, critics of the stimulus continually say that the plan isn’t working and it’s time for tax cuts, especially corporate tax cut so that corporations can start hiring.

So far the Obama administration has handed out $126 billion in tax cuts through the economic stimulus package. As of September only $191 billion dollars of the stimulus program had been spent. $126 of it were tax cuts.

You may have seen the critics like to act on television and other media outlets that all the Democrats do is increase taxes, but that’s not how things work. The Obama administration, like all other administrations, increase taxes one place and decrease taxes in other places.

Those criticizing the stimulus package because it doesn’t have any tax cuts don’t know what they are talking about. And frankly speaking, tax cuts like the Bush and Reagan tax cuts are going to cause more problems than they will solve.

The Obama stimulus plan uses tax cuts as but one piece of the larger plan, it isn’t the whole plan as the conservatives would like it to be. And so far that piece has been overwhelmingly tax cuts.

It’s about time that the job creation part--the infrastructure part--kick in, enough with the tax cuts.

Unfortunately, big projects like fixing bridges and power grids take a longtime to get started. Usually it starts with a handful of people in a room doing nothing else but planning for a few months. The actual hiring to start the construction may not begin for another few months.

What about the national debt?

There is this belief in conservative circles that has proven not to work. It’s called the “starving the beast” mentality. The thinking is if we don’t give Congress any money to spend, they will stop spending the money, thereby ultimately bringing down government spending. This has not worked. It has only increased our deficits because we end up borrowing money to pay for things we want but can’t afford because of tax cuts to the corporations and the affluent.

The most current example being the Bush tax cuts that were passed without the 60 votes usually expected for big bill like across the board tax cuts.

We handed out a tax cut that we paid for by borrowing money from other nations. The “starve the beast” theory doesn’t work. It’s been tried numerous times in the past and has never succeeded.

Tax cuts alone can not bring about the economic change that is require in this recovery. Increasing national debt, meaning more federally funded jobs, is part of the plan, just as increasing government spending, is part of the plan.

The plan is to increase spending for projects that are need to put people to work, while the private sector is still recovering from the economic downturn.

Many economists are arguing for more spending. The United States can afford a lot of spending still. Even with our current debt, there is still room for more debt and still remain a healthy economy.

The plan is to spend now, when the economy is bad and cut in spending once the economy starts to pick up again (this yet to be announced time may be as quickly as 2011 or as late as 2015 depending on many different variables, foreign and domestic).

Since 2001 when the national debt was a $5.8 trillion, by the end of 2008 the debt had risen to about 10 trillion dollars.

In 2001 the percentage of GDP that was public debt was 57.4%. by the end of 2008 70%. The public debt is estimated to be around $12.5 trillion for 2009, 90% of GDP.

Based of projections, it is estimated that by 2019 the national debt will be at $17.9, at about 75% of the estimated GDP. The projections do not take into account things that will be done to prevent that from happening, but rather what would happen if we don’t do anything. They also don’t take into account how well the economy will expand once it does pick up.

The last time the percentage national debt to GDP had gotten so high was back in 1950, when it was about 95%. Hey, aren’t those considered the best of years?

Yes they are and we taxed our way out of that debt and into the days that are considered the Golden Years of America’s economy. Taxed and spent our way into prosperity.

We spent on infrastructure and on creating a giant middle class.

In 1945 we had a national debt that was 120% of the GDP. About a decade and a half later in 1960 it was 56.1%. A decade after that it was 37.6% and in 1980 it was 33.3%

The point being, we have been in deep debt many times over in our history and then done just fine a few years down the line. Our economy has been here before and has pulled out of it each time, primarily because we are an extremely strong economy.

The point that brings us more to current affairs is that unlike the 4.3 trillion dollar debt we added during the Bush years, the debt being taken on by the Obama administration is actually having an effect on the economy because it is more than just tax cuts.

It is also an investment in the infrastructure, though there is still a wait on the big projects to begin. Highway and interstate construction have already commenced.

All in all the economy is at the start of a recovery, not even half of the economic stimulus has been spent yet. Many of the big construction projects are in planning phases, as soon as the next phase starts, the unemployment numbers will begin to dip sharply.

The GDP is showing signs of returning to a path of normalcy. The GDP was estimated at 3.5% increase because of the stimulus program; economists believe the GDP would have been at -0.5% if not for the stimulus.

The economic stimulus program is working, but there is still more to come before one can pass judgment on its success or failure.