Saturday, February 7, 2009

Senate "compromise" cuts over a million jobs

The Senate's "compromise" on the federal stimulus plan is a betrayal of the nation's commitment to its people and the well-being of our economy.

The deal slashes job creating investments in the nation's economy by $140 billion. But it leaves in tact between $300 and $350 billion in ineffective tax cuts.

This plan is irresponsible because we know that tax cuts create many fewer jobs than direct government investment. (see CBO chart above)

The multiplier for stimulus spending generally ranges between 1 and 2.5, meaning for every $1 spent between $1 and $2.50 in additional GDP is generated. In contrast, the multiplier for tax cuts for the wealthy is 0.5 -- or less. (See the last page of this pdf from the Congressional Budget Office for their full list.)

This means that the Senate's "compromise" plan will generate between 1 million and 2.5 million fewer jobs than the House's original proposal. It will delay the renovation and modernization, including technology upgrades and energy efficiency improvements, of the nation's deteriorating public schools, colleges and universities. It cuts funds for Wisconsin's technical colleges whose current capacities are strained by the large number of dislocated workers and veterans who are enrolling for retraining. It shortchanges special education students by failing to fund their educations. It will deprive millions of already struggling American families of health care and nutrition.

The nation has lost 3.6 million jobs since the recession began. A record number of American are now collecting unemployment compensation. We should not allow the very supply side ideologues whose economic polices created this recession, the most severe since the Great depression, to play politics with the nation's economy and the health and well-being of its people.

Congress should restore the $40 billion federal investment in reeling state governments that the Senate cut. If it does not, and state and local governments are forced to slash their budgets to balance them, the recession will turn into a full fledged depression as government employees, teachers and health care providers get laid off.

If the $40 billion reduction is not restored, other states will follow California which is furloughing 200,000 state employees for two days a month. Such cuts will only exacerbate the recession, increasing unemployment and reducing wages and consumption. Under these conditions even well-designed business tax cuts have little impact because firms do not invest when no one if buying their goods or services.

Congress should also restore the $19.5 billion investment in higher and public education that the Senate cut. If it does not, other colleges and universities will be be forced to layoff personnel like Louisiana State University which is planning to furlough 2,000 employees, eliminate dozens of courses and shut down research programs.

This isn't a compromise. It is a recipe for disaster.

In his address on Saturday, President Obama criticized the failed approach of his opponents when he said:

Let's be clear: We can't expect relief from the tired old theories that, in eight short years, doubled the national debt, threw our economy into a tailspin, and led us into this mess in the first place. We can't rely on a losing formula that offers only tax cuts as the answer to all our problems while ignoring our fundamental economic challenges – the crushing cost of health care or the inadequate state of so many schools; our addiction to foreign oil or our crumbling roads, bridges, and levees.

Congress should follow the President's lead -- this is a time to be bold, not cautious. This is a time to invest in America's people and future. This is the time to do something that works, not cave in to the failed ideas of the past.

President Obama's weekly address 2/7/09

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