Ron Johnson attacks stimulus program while pursing stimulus dollars

Ron Johnson, the Republican Senate candidate who has built his campaign on opposition to federal spending and the stimulus program sought stimulus funds for renovations to Oshkosh's Grand Opera House when he was president of the Grand’s board in March 2009.

Johnson's hypocrisy is detailed in this article from hometown paper, the Oshkosh Northwestern.

Milwaukee Journal Sentinel’s Sensationalism Misses Real Story

The Milwaukee Journal Sentinel circulation must really be down, or its editors have a pathological hatred of the American Recovery and Reinvestemnt Act.

There are no other possible explanations for its sensationalist, above the fold, front page article about the failure of the Milwaukee Area Technical College (MATC) and four other stimulus fund recipients to meet a reporting deadline.

That’s right, the Journal Sentinel thought missing a deadline merited front page and distorted coverage. Sure, MATC’s administration needs to tighten up its reporting procedures, but its failure to meet a deadline on money it has not even received hardly constitutes front page news.

Here’s how distorted the reporting was: the Journal Sentinel first said five organizations received a grand total of two hundred thousand dollars. But after acknowledging that amount, the paper quoted the chairman of the Federal Recovery Board claiming: “…they took millions and thumbed their noses at the taxpayers.”

If only MATC had received millions of federal dollars, it wouldn’t be struggling to meet the huge increase in demand for its services.

The real scandal that merits front page coverage is that MATC’s enrollments have soared as Iraqi veterans and dislocated workers seek occupational training, but state aid to the tech college system has fallen to 13%, the lowest level in history and way below the state’s 33% commitment.
And while President Obama has proposed a significant increase in federal support for two-year colleges, Congress has yet to approve the needed funding while the GOP appears committed to opposing absolutely everything Obama wants.

Rather than manufacturing imaginary scandals, the Journal Sentinel should use its bully pulpit to demand that the federal government increase its investments in higher education.

The local newspaper apparently has an axe to grind with the stimulus program. A month ago in a front page article entitled "Economists see no stimulus jobs" it incorrectly claimed that the American Recovery and Reinvestment Act had not created any jobs, an assertion that virtually no economist agrees with. Now it implies that the program is acting irresponsibly.

The only institution that is behaving irresponsibly is the Milwaukee Journal Sentinel which in its desperate effort to increase sales, has, in the words of Steven Colbert, a truthiness problem.

Journal Sentinel misleads on stimulus

The Milwaukee Journal Sentinel sank to new lows in covering economics with an inaccurate and sensationalist front page article on the American Recovery and Reinvestment Act's job creation record.

The headline blared "Economists see no stimulus jobs."

Journal Sentinel economics reporter John Schmid wrote: "... more than two-thirds of economists responding to a a nationwide survey say the stimulus so far has failed to create jobs."

This was awful reporting on several levels.

First and foremost, it is dead wrong.

There is virtually no dispute among economists that the stimulus prevented the worst recession since the Great Depression from getting much worse by slowing the rate of job loss and saving between 1.6 and 1.8 million jobs.

The New York Times economics columnist, David Leonhardt, effectively refuted Schmid, in a column the MJS buried (on page 7 in Sunday's edition) when he wrote:

Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

Before the stimulus was passed the nation was losing an average 650,000 jobs a month. It is widely recognized that the "widely successful "cash for clunkers" and the mortgage rebate program shave have stimulated automobile and home purchases saving thousands of jobs. Other stimulus projects have accelerated shovel ready projects and kept or put construction workers to work.

The recession began in December 2007, during President Bush’s 7th year in office. By the time President Obama was inaugurated, 4.4 million jobs had been lost. By the time the Recovery Act was passed, 5.9 million jobs had been lost. As the graph above illustrates, the job losses that were accelerating before the Recovery Act was passed have been virtually eliminated.

We should not forget the damage done to the economy before the Recovery Act. From December 2007 to March 2009, one out of every twenty private sector jobs was eliminated, a rate of destruction 50% greater than even the severe recession in the early 1980s. The economy was in a free fall. With unemployment at 9.7% today, and a record 40% unemployed for more than six months, it’s hard to appreciate how much more damage the stimulus investments prevented.

Without the two million jobs generated by the Recovery Act, the unemployment rate would now exceed 11% rather than the 9.7% rate in January.

Schmid not only misinformed his readers about the stimulus bills' impact, he also misrepresented the survey. It did not ask whether the stimulus had created jobs, but whether it had created jobs "in their firm or industry."

That's a distinction with a world of difference.

The decision to make a minor survey of a handful of business economists the lead article on the front page was a decision with real consequences. The publics' perception of the Recovery Act's effectiveness bill will shape future federal economic policy decisions including:

• Will unemployment benefits be extended for the more than two million people who are about to run out of them?


• Will the feds provide additional job training dollars so the unemployed can acquire the training they need to get back on their feet?


• Will Congress provide financial assistance to the states which face a $357 billion budget shortfall and local governments with an additional $80 billion budget deficit? Without it, state and local governments will be forced to slash spending, laying off police officers, firefighters, teachers, and other public employees or raise taxes to balance their budgets, threatening the nascent recovery.


• Will Congress provide additional health care funding so that's states don't raise eligibility limits or cut programs?


• Will Congress invest in repairing our national infrastructure, our schools, highways, the electric grid, water systems, ports, dams, and levees which must be upgraded, rebuilt or replaced if the U.S. is to remain a first class economy in the Twenty First Century?

The American Recovery Act helped reverse the nation's economic free fall, even if it wasn't large and targeted enough to stimulate a robust recovery. The economy is showing signs of life, but it remains on life support.

Private demand, consumer spending and private investment remain anemic. The only engine of growth and employment remains public demand. Without an accurate analysis of the Recovery Acts positive results, public opposition will grow, fanned by partisan opposition, and Congress will retreat from making the strategic investments our nation needs to revive the economy.

That's the real story. And its the story John Schmid and the Milwaukee Journal Sentinel missed.

Too soon to declare victory over Great Recession

Nobel Prize winning economist Paul Krugman warns that the economy's recovery could be derailed if policy makers declare victory too soon.

He writes:

The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.

Krugman concludes:

Will the Fed realize, before it’s too late, that the job of fighting the slump isn’t finished? Will Congress do the same? If they don’t, 2010 will be a year that began in false economic hope and ended in grief.

The entire column is linked.

Jobs deficit requires bold action

Since the beginning of the Great Recession, unemployment has increased by 5.8%, the biggest increase since the Great Depression. The ranks of the long term unemployed (those laid off for more than six months) has soared to 5.6. million, also a post-depression peak. While Republicans like Congressman Paul Ryan, and Blue Dog Democrats hyperventilate about the threat of inflation and the federal deficit, America's working people are experiencing a real jobs deficit!

As the New York Times Bob Herbert notes:

Wall Street can boast about recovery all it wants, much of America remains trapped in economic hell.

It will take a monumental leadership effort by the administration and Congress to spark the kind of changes necessary to transform this wretched employment landscape. Ross Eisenbrey of the Economic Policy Institute has written: “By itself, the private sector is unable to create jobs in the numbers the United States needs to obtain a robust, full economic recovery.”

...we need to rethink our entire approach to employment. Conventional efforts to kick-start economic growth are dwarfed by the vast scale of the problem. Bold new efforts — creative efforts — are needed.

Herbert's piece is linked.

Labor Secretary calls for jobs program

A jobless recovery is an oxymoron

If you are looking for an economic recovery you can believe in, the October employment report is not for you.

After contracting for a year and a half, the economy grew in the quarter that ended in September, driven largely by federal stimulus. But government spending, as large and as necessary as it has been, has not been enough to revive hiring.

Unemployment surged from 9.8 percent in September to 10.2 percent last month, its highest level since 1983. At the same time, the economy lost 190,000 more jobs. That means employers have eliminated 7.3 million positions since the recession began in December 2007.

As dreadful as they are, the headline numbers understate the severity of the problem. They also obscure an even grimmer fact: Unless there is more government support, it will take several years of robust economic growth — by no means a sure thing — to recoup the jobs that have been lost.

The unemployment rate includes only jobless people who have looked for work in the past four weeks. The underemployment rate — which also includes jobless workers who have not recently looked for work and part-timers who need full-time work — reached 17.5 percent in October. And the long-term unemployment rate — the share of the unemployed population out of work for more than six months — also continues to set records. It is now 35.6 percent.

The official job-loss data also fail to take note of 2.8 million additional jobs needed to absorb new workers who have joined the labor force during the recession. When those missing jobs are added to the official total, the economy comes up short by 10.1 million jobs.

Taken together, the numbers paint this stark picture: At no time in post-World War II America has it been more difficult to find a job, to plan for the future, or — for tens of millions of Americans — to merely get by.

At a recent meeting at the White House to discuss job creation, President Obama said that “bold, innovative action,” would be needed — from the administration, Congress and the private sector — to undo the devastation in the labor market. Americans are waiting for Mr. Obama to lead the way.

There were good ideas floated at the White House meeting, including bolstered federal support for efforts to retrofit and weatherize homes and public buildings. There was also talk of using government money to establishing a so-called infrastructure bank that would issue bonds to help finance big construction projects.

The country also needs a program that would create jobs for teenagers — ages 16 to 19 — whose unemployment rate is currently a record 27.6 percent. Deep and prolonged unemployment among the young is especially worrisome. It means they do not have a chance, and may never get the chance, to acquire needed skills, permanently hobbling their earnings potential.

We know that more stimulus spending and government programs are a fraught topic. But they are exactly what the country needs. It may be the only way to prevent a renewed downturn.

And the only way to create the jobs needed to put Americans back to work. Those are the essential — and missing — ingredients of a sustained recovery.

New York Times, November 8, 2009

Declining wages threaten economic recovery

Global growth in real wages slowed dramatically in 2008 as a result of the economic crisis.

Wages are expected to drop even further this year despite some signs of an economic recovery, the International Labour Organization (ILO) reports.

“The continued deterioration of real wages worldwide raises serious questions about the true extent of an economic recovery, especially if government rescue packages are phased out too early. Wage deflation deprives national economies of much needed demand and seriously affects confidence”, said Manuela Tomei, Director, ILO Conditions of Work and Employment Programme and lead author of the study.

Consumption accounts for seventy percent of the U.S. economy and has been the engine of growth for almost thirty years. A continued decline in real wages will further depress consumption at a time when U.S. consumers are already tapped out on credit, business investment is stagnate, unemployment is expected to rise to over 10% and banks remain reluctant to make loans.

If real wages continue to decline economists worry that the 3.5% increase in GDP last quarter, driven by federal stimulus spending including the cash for clunkers program and the homeowners tax credit, will not be sustainable.

In this context Milwaukee County Executive and Republican candidate for Governor Scott Walker's pledge to cut wages if elected would undermine any possibility of economic recovery in Wisconsin.

The ILO adopted a Global Jobs Pact at the International Labour Conference in June that calls for measures to maintain employment and avoid the damaging consequences of deflationary wage spirals and worsening working conditions.

The update of the Global Wage Report says “the picture on wages is likely to get worse in 2009” regardless of other economic indicators suggesting an economic rebound. The report notes that in half of the 35 countries for which figures are available, real monthly wages fell in the first quarter of 2009 compared to their average of 2008, often due to cuts in hours worked.

The current deterioration in wages follows a decade of wage moderation before the global economic crisis. The report says that years of stagnating wages relative to productivity gains – together with growing inequalities – have contributed to the crisis by limiting the ability of many households to increase consumption other than through debt.

“In the future, restoring the link between productivity growth and wage increases is essential for economic and social sustainability. Companies should be able to achieve competitiveness through rising productivity rather than by cutting labour costs, and workers should have sufficient bargaining position to defend their wages. This will go a long way towards addressing income inequalities”, Ms. Tomei said.

The report also concludes that excessive bonuses, unrelated to actual performance, contributed to the crisis by distorting incentives in the financial sector and promoting short-term risk taking.

Nobel Prize winner calls for more federal job creation

Nobel Prize winning economist Paul Krugman writes:

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

And the really bad news is that “centrists” in Congress aren’t able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation.

The article is attached.

New York Times calls for additional stimulus spending

Today's New York Times opines:

Without another round of effective stimulus, the worst recession in modern memory will likely become — at best — the weakest recovery in modern memory. Another boost to federal spending that is targeted and timely should not be too much for politicians to deliver.

The editorial is linked.

Nobel Prize winner calls for federal job creation

Nobel Prize winning economist Paul Krugman has added his voice to those calling on the Obama administration to increase its job creation efforts, calling anything less "unacceptable."

He writes:

"...while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market — a market in which there are currently six times as many people seeking work as there are jobs on offer — will remain terrible for years to come... "

The entire column is linked.

Joblessness rises to 26 year high

The latest jobs report from the Department of Labor is a glass half full and half empty.

While job loss was the smallest in the past year, the nation’s employers still shed more than 200,000 jobs and the unemployment rate rose to 9.7%, its highest in 26 years. The fact that losing 216,000 jobs is seen as progress indicates how deep this recession has been and how far the economy has to climb

The recession has eliminated a net total of 6.9 million jobs since it began in December 2007.

There are now 14.9 million Americans unemployed. The recession has wiped out all of the jobs created during the Administration of President George W. Bush. We have lost so many jobs that we have less than we did before the 2001 recession.

Even these numbers undercount the lack of employment because the nation needs to add 150,000 jobs a month simply to absorb the new workers entering the labor market. By that measure in August we fell 350,000 jobs short.

If laid-off workers who have settled for part-time work or have given up looking for new jobs (discouraged workers) are included, the so-called underemployment rate reached 16.8 percent, the highest on records dating from 1994.

Another disturbing sign is that the number of workers who have been unemployed for six months or more is at a record level. The long term unemployed are starting to run out of unemployment benefits, extended benefits and even their emergency payments from the government. If Congress does not act to extend their benefits again, their decline in income will act as a drag on the economy.

Job cuts remain widespread across many sectors. The construction industry lost 65,00 jobs. Factories cut 63,000, while retailers pared 9,600 positions. The financial sector eliminated 28,000 jobs, while professional and business services dropped 22,000. Even the government lost 18,000 jobs, as the U.S. Postal Service cut 8,500 positions. These figures offer few signs that employers who have slashed their payrolls to conserve money were ready to hire again. Economists say employers must create 300,000 to 400,000 jobs a month to bring unemployment rates back to pre-recession levels

Health care and educational services were the only bright spot, adding 52,000 jobs.

The fact that jobs loss has moderated reflects the impact of the Obama administration’s $877 million stimulus package which has begun to impact the economy and the efforts of the Treasury Department and the Federal Reserve to shore up the nation’s financial system.

Public spending including the now ended "Cash for Clunkers” program have had their intended effect of increasing demand and stimulating production and sales. But employers are clearly reluctant to hire and consumers to spend. Since consumer spending is 70% of the economy, it is hard to see a revival of economic growth until unemployment declines and wages grow. The concern now is whether the federal stimulus is large enough to effectively jump start the economy or whether the current signs of growth and slow down in job loss are a temporary blip that will fad as the stimulus dollars work their way through the economy.

539,000 jobs lost in April-furloughs and layoffs undermine stimulus spending

The Bureau of Labor Statistics announced this morning that the nation lost another 539,000 jobs in April increasing the unemployment rate to 8.9%, its highest rate since the early 1980s

It is a reflection of how bad the labor market is that some commentators are interpreting the loss of half a million jobs as a positive development.

The nation has lost 5.7 million jobs since the recession began in December 2007, with most of those coming in the last five months. The figure for March was revised upward Friday to 699,000, from 663,000.

Unemployment rates rose in April for adult men (9.4 percent) and blacks(15.0 percent). The jobless rates for adult women (7.1 percent), teenagers(21.5 percent), whites (8.0 percent), and Hispanics (11.3 percent) were little changed over the month.

In sign of continued labor market weakness, the number of long-term unemployed (those jobless for 27 weeks or more) increased by 498,000 to 3.7 million over the month and has risen by 2.4 million since the start of the recession in December 2007.

The number of persons working part time for economic reasons referred to as involuntary part-time workers was essentially unchanged at 8.9 million; however, the number of such workers has risen by 3.7 million over the past 12 months.

The ranks of discouraged workers (workers who have given up looking for work) rose to 740,000 in April, more than double the 328,000 from a year earlier.

When discouraged workers, those who are part time for economic reasons, and the marginally attached are added to the officially unemployed, the unemployment/underemployment rate soars to 15.8%.

Those who see a silver lining in these numbers point to the decline in the rate of job loss and to the potential impact of federal stimulus dollars that are beginning to wash through the economy.

Losing half a million jobs hardly qualifies as good news. And the federal stimulus package was designed to save or create only 2.5 to 3 million jobs, about half of what the nation has lost since the Great Recession began.

Permanent layoffs like those at Chrysler's Kenosha engine plant and furloughs of state and city employees will undermine the impact of federal stimulus spending in Wisconsin.

Of equal concern - real hourly wages are falling. The economy cannot recovery unless there is increased demand for good and services. While stimulus spending will certainly slow the rate of decline in the next quarter, unless there is an additional stimulus bill it is hard to identify a source of demand that will lead to sustainable growth and an economic recovery.

Ryan ignors the unemployed to fight phantom foe

When the U.S. Bureau of Labor Statistics issues its February unemployment report on Friday expect more bad news.

My back of the envelope analysis projects that employers eliminated almost 700,000 jobs in February which will cause the unemployment rate to rise to 8%, the highest rate since the recession of 1981.

In January 2009 employers slashed 598,000 jobs. It was the worst monthly job loss since December 1974, and brought job losses to 1.8 million in just the last three months, or half of the 3.6 million jobs that have been lost since the beginning of 2008.

The job loss since November is the biggest 3-month drop since immediately after the end of World War II, when defense contractors were shutting down for conversion to civilian production.

January's job loss caused the unemployment rate to rise to 7.6%, its highest level since September, 1992.

As bad as the unemployment rate is, it only tells part of the story for people struggling to find jobs. The January report also showed that 2.6 million people had been out of work for more than six months, the most long-term unemployed since 1983.

And that number only counts those still looking for work. The so-called underemployment rate, which includes those who have stopped looking for work (discouraged workers) and people working only part-time that want full-time positions, climbed to 13.9% from 13.5% in December. That is the highest rate for this measure since the Labor Department first started tracking it in 1994.

Despite these gloomy number Wisconsin Congressman Paul Ryan (R) continues to oppose efforts to jump start the economy.

Ryan voted in lock step with his Party in opposing the stimulus package that provides help to the unemployed and their families by increasing unemployment benefits and food stamps and expanding eligibility, increasing Pell Grants, and investing in job creating infrastructure projects and education. Ryan's fiscal conservatism, incidentally, is new. When his Party was in power he voted for the 2001 and 2003 high income tax cuts which caused more than 50% of the Bush era record deficits.

Instead of voting for legislation that helps unemployed workers and their families, Ryan has waging war against an imaginary boogie man, stagflation that even he admits does not currently exist.

Nouriel Roubini, the NYU economics professor know as Dr. Gloom because he correctly predicted the current recession more than a year before it began, argues, contrary to Ryan' imaginary stagflation, that without even more aggressive federal action "this ugly U-shaped recession may turn into a more virulent L-shaped near-depression or stag-deflation (a deadly combination of economic stagnation and price deflation like the one Japan experienced in the 1990s after its real estate and equity bubbles burst."

Ryan has also criticized the President's proposed budget. "If there's anything that economists on the left and the right agree on, that supply-siders, classic economists and Keynesians agree on, you don't raise taxes in a recession," said Rep. Ryan. "This budget is raising taxes in a recession." Ryan was joined in his opposition by among others the American Petroleum Institute, the oil industry's most powerful trade group.

Ryan is either badly misinformed or deliberating misleading the public.

The economic stimulus package signed into law by Obama last week enacted one of the largest tax cuts ever, which made good on Obama's campaign promise to cut taxes for 95 percent of Americans. The first benefits from these cuts should be seen no later than April 1, 2009.

Obama has proposed increasing marginal tax rates on the richest 5%, people earning over $250,000 annually, and on hedge fund executives who have used tax loopholes to pay lower rates than middle income Americans. As Office of Management and Budget Director Peter Orszag said, "Folks need to actually look at the budget document." To avoid raising taxes during the recession, these increases will not take effect until 2011.

The ranks of the unemployed are growing. People in Wisconsin are losing their jobs, their healthcare and their homes. It's time for Congressman Ryan to worry less about imaginary problems and phantom tax increases and devote his attention to the real problems facing Wisconsin's increasingly beleaguered working families.

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

Obama demands action on jobs!

The Action Americans Need

By Barack ObamaThursday, February 5, 2009

By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring.

What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis.

Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits.

Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.
That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come.

This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education.

And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.

Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.

Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.

Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.

And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.

These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.

So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

The writer is president of the United States.

Republicans stand in the way of economic recovery

Harley Davidson's layoffs are another indicator that the economy is in a freefall.

That is why most economists support the Obama administration's push for a large stimulus package. Private demand (consumption and private investment) is non-existent. The only way to reverse the economy's decline is through increased public demand.

President Obama has proposed an $825 billion stimulus package. Many economists think that Obama's proposal is too modest and that a stimulus in the range of $1.3 trillion is needed.

But not the Republican Party!

The very same Republican leaders who remained silent as President Bush ran record deficits nearly doubling the national debt are now expressing concern over Obama's plan.

These are the very same politicians who refused to extend unemployment benefits, increase food stamp expenditures and expand health care for children from low-income families a little more than a year ago. The only economic recovery measures they support are tax cuts, one of the least effective forms of stimulus.

The right's failure to recognize the severity of the crisis and to endorse an effective federal responses has contributed to the loss of 2.4 million jobs in the last year, more than a million in the last two months.

Once again they are digging in their heels and opposing federal action. President Obama has exhibited restraint in responding to this ideologically motivated opposition. But people are hurting and the Republican Party is standing in the way of help.

Nobel Prize winning economist Paul Krugman summarized the Republicans opposition in his New York Times Column, "Bad Faith Economics" today: "Basically conservatives are throwing up any objection they can think of against the Obama plan hoping something will stick."

President Obama politely listened to Republican gripes about his stimulus package during a meeting with congressional leaders last Friday - but he also left no doubt about who's in charge of these negotiations. "I won," Obama noted matter-of-factly, according to sources familiar with the conversation.

In an earlier interview President Obama was clear about his negotiating style. Right-wing ideologues who have led their party toward irrelevancy and the country to the brink of economic disaster ought to remember what the President had to say.

Noble prize winning economist calls for $1 trillion stimulus

Noble prize winning economist Joseph Stiglitz has joined the ranks of those urging that the stimulus package being developed by President-elect Barack Obama's economic team be "very big."

Stiglitz writes: "A large stimulus package can always be trimmed later if it’s not needed because the economy returns to health faster than most economists think. But we need to plan for what looks to be a deep and long downturn. By relying heavily on automatic stabilizers — expenditures like increased unemployment benefits and revenue sharing with states — we can dose out the medicine as needed. The deeper and longer the downturn, the greater the spending.

Faint measures would be foolhardy. A weaker economy will suffer lower tax revenues, more foreclosures and more bankruptcies. Once a firm is bankrupt, you can’t unbankrupt it by providing a stronger stimulus later on."

The op ed is linked.

China enacts large stimulus-U.S. needs one!

Sixty-seven thousand (67,000) Chinese factories have closed and tens of thousands of workers have been laid off since the beginning of the year. As a result, the Chinese government announced a $568 billion stimulus program, 7% of GDP, aimed at bolstering its faltering economy.

The United States has lost 1.3 million private sector jobs since January while the ranks of the long-term unemployed have grown at record rates.

Goldman Sachs economists are predicting that the unemployment rate (now 6.5%) will rise to 8.5% by the end of next year and go even higher in early 2010 because "U.S. domestic demand and production are dropping sharply." The cumulative trough-to-peak projected increase of more than 4 percentage points in the jobless rate would be the most since World War II.

Like China, the United States needs a bold stimulus program.

Nobel Prize winning economist, Paul Krugman, is urging U.S. policy makers to think big, suggesting a back-of-the- envelop number of $600 billion. That's a significantly smaller percentage of the U.S. economy than the Chinese plan, but much bigger than the $300 to $400 billion plans currently being discussed in Washington.

Krugman notes that if the stimulus package is larger than needed and the economy overheats, the Fed can easily raise interest rates to head off the threat of inflation. But if the stimulus is too small, there is nothing the Fed can do since interest rates are already at historic lows.

The Bush administration and Congress moved quickly when Wall Street and its highly paid CEOs were teetering on the edge of financial collapse. Now that the middle class is facing a similar catastrophe they are dithering while America is burning.

Krugman's column is linked here.

Wisconsin needs economic stimulus that assists workers and the economy

Since January, the economy has shed 1.3 million private sector jobs, over half a million in the last two months. More than ten million Americans are now out of work including tens of thousands in Wisconsin.

Not only are workers losing they jobs, they are having a harder time finding new ones. The number of people who are involuntarily working part-time has dramatically increased, by 544,000 in October, bringing the two-month rise to a record 844,000. The U-6 index, the broadest measure of labor market slack, rose to 11.8 percent, tying the rate for January 1994 (when the measure was first established) as the highest on record.

The percentage of long-term unemployed (more than 26 weeks) rose by 1.2 percentage points to 22.3 percent. It had been 17.9 percent just a year ago. And the average duration of unemployment increased by 1.3 weeks to 19.7 weeks. The two-month rise of 2.3 weeks in average duration is the sharpest increase ever.

For those remaining on the job, wages and hours of work have declined. As a result, consumer spending, the economy's engine for almost three decades, has fallen (by a 3.1% annual rate) for the first time since 1974.

The recession is causing a precipitous decline in state and local government revenues. Wisconsin is facing a record $5 billion budget deficit; New York $12.5 billion. California recently cut its spending by $7 billion.

Nationally states and local government will be forced to slash spending by $100 billion because they are required to balance their budgets. The consequent reduction in demand will make what is already a very nasty recession even worse.

Congress needs to enact a stimulus plan immediately. It should be based on three principals:

1) minimizing the human suffering that is caused by widespread unemployment and underemployment;

2) generating the biggest and quickest bang for the buck;

3) increasing investments in strategic areas that strengthen the economy in the long run.

Wisconsin Congressman Paul Ryan's proposal to cut investment taxes misses the boat on all counts. Ryan and his Republican brethren, including President Bush, remain ideologically committed to the notion that the only acceptable federal response is to cut investment taxes. This approach is wrong on three counts.

• First, cutting capital gains and dividend taxes which are already taxed at lower rates than earned income won't help the 10 million people who have lost their jobs or those who can't find full time work.


• Second, tax cuts on non-existent profits and dividends won't stimulate the economy because unearned (investment) income has plummeted with the real economy's decline. Ryan's proposal amounts to little more than a brazen attempt to use the crisis to enact tax breaks for very wealthy people.


• Third, cutting investment taxes is ineffective because in an economy where credit markets remain tight, interests rates high and consumer demand is declining, business tax cuts won't stimulate increased investment. Businesses don't invest in research and development or new plant and equipment unless there is a demand for what they produce. Yet, consumer spending fell last quarter for the first time since the early 1970's. And that didn't include the impact of the credit crunch which hit in October. We need to stimulate demand (public and private) which will jump start the economy and allow investors to respond to the market.

The current economy demands a stimulus package that will provide immediate relief to the unemployed and provide maximum economic bang for the buck.

Most of the money from the original tax rebate stimulus was saved rather than spent thus blunting its stimulative benefit. By comparison, other options—such as infrastructure spending on deteriorating roads, bridges, mass transit and sewer systems, aid to states, increased food stamps, and unemployment insurance (UI) benefits—are much more cost-effective because they are more likely to channel money directly into the economy.

Mark Zandi from Moody’s Economy.com estimates that each dollar of refundable tax rebates only boosts GDP by about $1.26, while each dollar of infrastructure spending could provide a $1.59 boost.

Not only are many of these stimulus options more effective than tax rebates, but they also have the added benefit of assisting those hardest hit by the downturn, ensuring necessary public services are provided and tackling long-standing infrastructure needs that would lower transportation costs, decrease traffic, and increase future business productivity.

Zandi’s analysis also shows what doesn’t work as stimulus: a variety of tax breaks for corporations and wealthy individuals which cost over twice as much as they return to the economy. Yet, these are the very breaks that Congressman Ryan and President Bush support.

The Congress needs to shift its focus from Wall Street to Main Street and craft a stimulus package that grows the economy from the bottom up, provides emergency aid to states and local government and invests in the nation's infrastructure. Such an approach will not only create jobs and help those who need it the most, but prevent state and local spending cuts that would make the recession worse and have the added benefit of rebuilding the nation's deteriorating infrastructure creating the basis for long term economic growth and a shared prosperity.

The time to act is now!