Afew bright spots finally are emerging in this nasty economic recession. In the past week, the national unemployment rate dropped slightly, new federal estimates suggested most of the money loaned to troubled financial institutions soon will be returned, and state economists revised their Florida tax revenue predictions upward. Today, President Barack Obama is expected to lay out the next phase of his economic agenda. That must include a comprehensive plan for creating more jobs in the short term.
Both Washington and Tallahassee have an obligation to lead at times like these. Many deficit hawks will inevitably attack any plan Obama presents, saying America — looking at a $1.4 trillion deficit in 2008-2009 and a similar projected deficit this year — can't afford another stimulus plan. Concerns about the federal deficit are legitimate but shortsighted. The consensus among economists is that the bold and timely federal stimulus plan and Troubled Asset Relief Program, both of which weathered heavy criticism due to their cost, greatly ameliorated the economic downturn. That suggests the need for more government-backed stimulus to create more jobs.
The national unemployment rate ticked down last month to 10 percent from 10.2 percent, and weekly hours worked increased. But each of the nation's 15.4 million unemployed is still competing against five other applicants for every opening. New spending is justified to get Americans working again. House Speaker Nancy Pelosi has suggested that the return of most of the TARP funds is an opportunity to redirect it into job-creation programs. The government estimates all but $42 billion of the $370 billion will be returned.
Where should this money go? In broad terms, the programs that Obama is expected to endorse are sensible: additional aid to states, more infrastructure spending, incentives for banks to increase small business lending and incentives for homeowners to increase the energy efficiency of their homes. All these initiatives would create or retain jobs. The nonpartisan Congressional Budget Office estimates between 600,000 and 1.6 million jobs were created under the $787 billion federal stimulus plan.
Extensions on emergency unemployment benefits and health insurance subsidies should also be considered to help the jobless from spiraling into severe economic distress. But Obama should avoid broad tax cuts or credits to companies that add employees. Florida has seen how companies easily manipulate the numbers when they are recipients of economic incentive dollars. Businesses claim jobs are being created even as they cut jobs in other parts of their operations, or new jobs end up being temporary. The IRS has had trouble enough policing the $8,000 first-time home-buyer tax credit. A tax break for new hires could be another enforcement nightmare.
The success of TARP and encouraging signs that unemployment numbers are stabilizing suggest the federal government can still make a positive impact with more targeted spending. Florida and the nation will not really recover from the Great Recession until more workers have jobs.