TOPICS > Economy

States Hope Stimulus Will Boost Sagging Local Economies

February 16, 2009 at 6:05 PM EDT
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With state officials scrutinizing the stimulus plan for funding they hope will revive regional economies, four business writers examine what the real impact may look like.
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JUDY WOODRUFF: That stimulus bill is being studied intently by state officials who hope the economic jump-start will bring relief. For a read on what different states expect, we asked four journalists who follow the economy to join us again.

Kathy Kristof is a syndicated personal business columnist in Los Angeles. The latest figures show California has a 9.3 percent unemployment rate. Last year at this time, it was 5.9 percent.

Keith Reed is the editor of Catalyst Ohio magazine and writes on financial issues. Statewide, Ohio is at 7.8 percent unemployment, near the national average. That’s a jump from 5.8 percent the previous December.

Shirley Leung is a business editor at the Boston Globe. Massachusetts has a 6.9 percent unemployment rate, up from 4.3 percent a year ago.

And Doug Smith writes on the economy for the Charlotte Observer. Statewide, unemployment in North Carolina is 8.7 percent. That’s up 4 percentage points from the same time last year.

Thank you, all four of you, for joining us.

And, Kathy Kristof, let’s start in the west with you. Your situation in California is among the most difficult, high home foreclosure rates, high unemployment, a budget crisis. What is California looking for — first of all, what does California need? And what is it going to get from this stimulus bill?

KATHY KRISTOF, Personal Finance columnist: Well, California is looking for a miracle. We’re probably not going to get that, but we’re going to get some aid.

We’re going to get a high-speed rail project, which will be important. We get some help in education, in health care, in clean energy. All of these are very important to our state.

And also, extremely importantly, we’re extending unemployment benefits, which for a state with a 9.3 percent unemployment rate is huge, and providing some subsidies for COBRA insurance, which, again, is huge. And Medicaid. So all of these are very big-ticket items to the state.

JUDY WOODRUFF: COBRA insurance, of course, a reference to medical costs.

Keith Reed, let’s move east to Ohio, unemployment there 7.8 percent. Take us inside your situation. What are the needs and what are you in Ohio looking for from the stimulus bill?

KEITH REED, Catalyst Ohio: Well, just like in California, we have many, many needs here in Ohio. You said that we’ve got a relatively high unemployment rate. Many parts of the state are suffering because of job losses. DHL laid off almost an entire town in the southern part of Ohio just about a month-and-a-half ago.

We need help with unemployment. We need some help with health insurance. We need help, particularly in the northern part of the state, with foreclosures here in the Cleveland area, where I am right now. We’ve got a strong number, many foreclosures. The housing market has completely, entirely tanked.

If you talk to some real estate agents around here, they will tell you that on Sundays, when they have open houses, very few people are coming through. There are many houses that are underwater people — for people who are living in them and still making their payments on time, they’re paying for houses that haven’t for quite some time been worth what they’re actually paying or worth the value of the loan that they still owe.

So Ohio has a great many needs. There are also infrastructure needs here in Ohio. Just to the south, again, outside Cincinnati, there was a bridge on Interstate 275 that needed major repair at the end of last year. There’s a bridge here that leads into the Cleveland area that needs — leads into downtown Cleveland, in fact, that needs repair.

These things have been happening as the state can afford to fix them, but not really a massive, comprehensive overhaul of the state’s transportation and infrastructure network. All of these things are needs. And, of course, they all come at the same time that the state has a massive budget shortfall.

So you’ve got unemployment. You’ve got infrastructure. You’ve got housing. You’ve got all these things happening at the same time, many needs that the state has right here in Ohio right now.

In need of infrastructure funds

Shirley Leung
The Boston Globe
One of the things that hasn't been really talked about but we've talked about here in Massachusetts is that some of that money will actually help spur private development.

JUDY WOODRUFF: So not looking for all of those to be met, but for some of them, in any event, from the stimulus bill.

Let me move to Boston now and Shirley Leung. Unemployment rate there somewhat below the national average, but well above what it was a year ago. Take us inside the situation in Massachusetts and what you expect.

SHIRLEY LEUNG, Boston Globe: Yes, it's very similar across the country what's happening. You know, Massachusetts, we really -- we're getting about $12 billion from the stimulus plan. This will help with extending unemployment benefits. This will also help towns dig out from deficits. Also, some money will go to fix roads and bridges and build new schools.

There's one thing we could use more money from is the infrastructure part. One of the things that hasn't been really talked about but we've talked about here in Massachusetts is that some of that money will actually help spur private development.

I mean, think about all those stalled condo, hotel, retail projects that have broken ground that can't get done because they couldn't get financing or the last chunk of financing because of the markets. Well, some of these projects here have public infrastructure.

For example, they may have a train station component to it. And those are the projects that really can create a lot of jobs in the area. And Massachusetts could use a little bit more money there.

Also, just like California, we're getting a lot of money -- we could get see a lot of money from money being poured into clean energy and also health care and hospitals and upgrading of medical research.

We already get a lot of NIH funding. There's supposed to be more money towards that. So we could benefit from that. So this system is a plan that Massachusetts needs.

JUDY WOODRUFF: To Charlotte and Doug Smith, you heard what the others have said. Pretty much the same things needed in North Carolina? What would be different?

DOUG SMITH, Charlotte Observer: Yes, very similar. North Carolina hopes to get a rapid rail transit line that would run from Virginia through North Carolina to Georgia. It has a list of about $6.1 billion in projects. Of course, probably not all those are going to get done.

But the governor is wanting to appoint a special panel to oversee spending, because she believes that we in North Carolina can spend it faster, and maybe, as she says, go back for a second bite of the apple.

There's also money in our program of what the state wants for Medicare, schools. We need it for public schools and for higher education. Some schools are facing major cutbacks. School facilities need to be upgraded. Some systems have had to cut their budgets.

Estimating a timeline for spending

Kathy Kristof
Syndicated Columnist in Los Angeles
Our state legislature is amazingly inefficient. And so, if it relies in any way on taking that money and doing something with it through legislative action, we're going to have difficulty getting anything done.

JUDY WOODRUFF: And let me circle back now to Kathy Kristof in Los Angeles. You've all listed some pretty impressive lists of needs. How quickly do officials there think they're actually going to get this money and get it into the economy so that jobs start getting produced, the state budgets begin looking healthier?

KATHY KRISTOF: I wish I knew. Our state legislature is amazingly inefficient. And so, if it relies in any way on taking that money and doing something with it through legislative action, we're going to have difficulty getting anything done.

But I think everybody is hoping that, in the next six months to a year, you're going to start to see projects funded and you're going to start to alleviate a little bit of the state budget crisis, simply by doing simple things like extending unemployment benefits. That means more people in our state will have more money to spend, and that adds to our tax revenue base, and so it immediately alleviates a portion of the problem.

JUDY WOODRUFF: And, Keith Reed in Ohio, what's the sense there of how quickly this money can make a difference and then begin to turn people's confidence in the future, to change people's confidence?

KEITH REED: Well, I think that's two very distinct questions. How quickly can the money begin to make a difference? I believe that, here in the state of Ohio, they could spend that money probably as quickly as they can get it.

Now, how long it will take to get here from Washington, D.C., is another order all together, but there's a long laundry list of things that Governor Strickland would like to do with that money. High at the top of that list, he's got a huge school reform package that he's put some money in his budget for.

He'd like to see -- there's about, I think, $1.5 billion or so in the stimulus package that they're hoping to get for education here in Ohio, for example. There are any number of projects that are already in the governor's budget that he'd like to fund and they'd like to get moving with as soon as they can get the money.

Now, how quickly that will actually translate into greater confidence here in the state among consumers, among workers, that's a different story. People are very discouraged. People are very angry, quite honestly, at what happened with the TARP bill in Washington.

I hear comments every day from people about how much money is going to bank CEO bonuses and those sorts of things and how there's very little accountability. And people are worried about that.

So I don't know that even a quick spend, a quick fix with this money will translate very rapidly to confidence among some disaffected workers.

States have long wish lists

Doug Smith
The Charlotte Observer
I think it's sort of like a trip to the dentist. You know you need to get something done about your toothache, but you don't know how it's going to turn out.

JUDY WOODRUFF: And, Shirley Leung in Boston, what is the sense there from talking to local officials? Do they feel this money is going to make a tangible difference?

SHIRLEY LEUNG: I think so. I mean, but the problem is this. The governor's list has 8,000 projects, $28 billion dollars, I guess, on their wish list. And we probably will only get about $2 billion. So it will take a long time to figure out which projects to fund.

I mean, if the governor wanted to quickly, I guess, instill some confidence, perhaps he'll just pick some marquee projects to quickly fund just to get things going and make people feel better, and then work out the details for some of the smaller projects.

JUDY WOODRUFF: And same question to Doug Smith in Charlotte. From talking to people there, from talking to officials, how much do they believe this is going to make a difference and how soon?

DOUG SMITH: Oh, I think they will. The city and the county here in Charlotte expect to create about 27,000 to 28,000 jobs. The state's estimate is 100,000 jobs, if its full wish list gets done.

The question is, as you said, many of these projects are labeled shovel-ready, but exactly what does that mean? How quickly could they get going? Shovel-ready, if it were a city project or a government project, you'd still have to bid it out, find a contractor. So you're still talking three to six months out before anything probably could really happen.

On the state level, the governor is hoping that rapid start would be within one year to get going on the projects.

JUDY WOODRUFF: And just staying with you quickly, Doug Smith, in terms of a sense of confidence that Washington is doing the right thing or not, what's your read on that?

DOUG SMITH: Well, I think it's sort of like a trip to the dentist. You know you need to get something done about your toothache, but you don't know how it's going to turn out. And I think that's kind of the mood here, not just my mood. We're pretty evenly split here between the Republican views and the Democratic views.

But I think there's so much red tape involved in this and so many questions yet to be answered that I don't know. I don't know how it's going to turn out. And I don't know if anybody else would make a prediction on what's going to happen with it.

Feeling hopeful and resentful

Keith Reed
Catalyst Ohio Magazine
They want the problem to be fixed. They would hope that this stimulus bill will do it, but they know that it's not going to do it. It's probably not going to happen in 2009, and that makes people angry.

JUDY WOODRUFF: Shirley Leung, back to you in Boston. What's the sense there overall, in terms of whether this can begin to turn things around? Or are people just accepting the idea that it's going to take time?

SHIRLEY LEUNG: I think -- I think stimulus is just part one or part two, I guess if you count TARP as being part one. But it's going to take -- I don't think anyone thinks that this is -- the stimulus plan is the silver bullet to our problems.

I mean, I think it's going to take several trillions of dollars. And this is just, you know, just one phase of the recovery. I mean, people are bracing for hard times.

And, I mean, you'll just see what's going to happen next week. I mean, once Obama signs the stimulus plan into law, it's not like banks are going to suddenly be lending like it was two years ago or companies aren't going to suddenly feel confident enough to begin hiring instead of laying off. I mean, I think everyone is really hunkering down for a long recovery.

JUDY WOODRUFF: Keith Reed and Kathy Kristof, let me let each of you just give me a sentence on how you think the sense of confidence there is that things will get better.

KEITH REED: Well, I think, in one sentence, people are hopeful, but people are resentful. They're very resentful that -- telegraphing what Shirley said -- that it is actually going to take several trillions of dollars to get this problem fixed. And they know that that money is coming from tax coffers.

They want the problem to be fixed. They would hope that this stimulus bill will do it, but they know that it's not going to do it. It's probably not going to happen in 2009, and that makes people angry.

JUDY WOODRUFF: And, Kathy Kristof, back to you in California?

KATHY KRISTOF: It's a huge gamble. We're all hoping that the gamble works out, but we don't know. And if it doesn't, it could be very inflationary and it could actually create bigger problems than it solves.

JUDY WOODRUFF: Well, we are going to leave it there. And I want to thank you, all four, Kathy Kristof in Los Angeles, Keith Reed in Ohio, Shirley Leung in Boston, and Doug Smith in Charlotte. We appreciate it.