MARGARET WARNER: Now: the economy.
Lawmakers took action on a scaled-back employment bill, amid continuing signs of a weak recovery.
The Senate’s latest effort to boost the economy, a $35 billion bill aimed squarely at job creation, passed easily today. Democrats, like California’s Barbara Boxer, said it could create a quarter-of-a-million jobs.
SEN. BARBARA BOXER, D-Calif.: The vote on this was 70-28, Mr. Leader.
SEN. HARRY REID, D-Nev., Majority Leader: That’s good.
SEN. BARBARA BOXER: And this is a very strong signal, I think, that people are now focused on what we need to do as Americans.
MARGARET WARNER: The bill would exempt businesses that hire the unemployed from paying their Social Security payroll taxes through December. Companies would also get an additional $1,000 tax credit for those workers who stay a full year.
The bill further includes about $20 billion in funding for highway and mass transit projects. The measure now returns to the House, which has passed a much more expensive version. But Senate Majority Leader Harry Reid said he’s also planning a larger package of jobless benefits, state Medicaid assistance, and tax breaks that could cost $100 billion.
SEN. HARRY REID: We have other things in mind. Remember, we don’t have a jobs bill; we have a jobs agenda.
MARGARET WARNER: Thirteen Republicans crossed party lines to vote for the bill, including the newest senator, Scott Brown of Massachusetts. But others, like Senator Judd Gregg of New Hampshire, denounced the measure.
SEN. JUDD GREGG, R-N.H.: I understand — and I think most of us understand — that the issue of the economy is critical, and getting people back to work is critical.
But I don’t think you get people back to work in this nation by loading more and more debt onto the next generation.
MARGARET WARNER: All of this came as consumer confidence fell in February by the most in 10 months. The decline was driven by concerns about jobs. And new home sales hit a record low last month, despite recent improvements in other housing indicators.
Federal Reserve Chairman Ben Bernanke forecast a continued slow recovery today in his twice-a-year economic report to Congress. He said record-low interest rates are still essential to help promote hiring.
BEN BERNANKE, federal reserve chairman: Job losses have slowed considerably, and the number of full-time jobs in manufacturing rose modestly in January. Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce.
MARGARET WARNER: Bernanke said again that previous stimulus efforts helped save jobs. At the same time, he said he agreed that record-high federal deficits have to come down. And, at a separate House hearing, Treasury Secretary Tim Geithner acknowledged the debt problem, but said stimulus spending is crucial to the economy right now.
TIMOTHY GEITHNER, U.S. treasury secretary: If we don’t have growth, our future deficits will be higher. And if you care about economic growth, you have to care about these deficits, because, without confidence that, over time, we’re going to be able to work together to bring these deficits down, then future growth will be weaker.
Right now, Mr. Chairman, our top priority has to be to spur job creation and private investment.
MARGARET WARNER: Elsewhere in Washington, President Obama defended his push for tax policies to encourage companies to hire here at home.
U.S. PRESIDENT BARACK OBAMA: My interest is to reward — or at least not disadvantage — companies who are creating more jobs and doing more business within the borders of this country. That’s not anti-business. It’s pro-America. And I don’t apologize for it.
MARGARET WARNER: The president also appealed for businesses to support financial reforms to prevent another near collapse in the banking and financial systems.
The Federal Deposit Insurance Corporation reported yesterday that 700 more banks are now at risk of failing, the most in 16 years.
And for more on these various developments on the economy, we turn to Neil Irwin, business reporter with The Washington Post.
And, Neil, welcome.
Let’s stop with — start with the jobs bill. People on the floor today were saying it will create a quarter-of-a-million jobs. Is that the best estimate, and — and are there questions about how lasting these job will be?
NEIL IRWIN, business reporter, The Washington Post: The numbers are all over the place. It’s truly a guessing game with these — these kinds of giant bills.
What — what’s interesting about this one, it’s designed to encourage businesses to hire, and to hire right away. So, it’s a tax break. It reduces the Social Security payroll matching tax that businesses have to pay, if they hire people who have been unemployed for two months or more.
And — but, if you think about it, it expires at the end of the year. So, if you’re a business, you do better, or you get more tax savings if you hire somebody now than if you wait a couple of months. So, if this becomes law — and the House still has to figure out what they’re going to do with it — it is something that should — should add some significant number of jobs.
The question is whether those last. And I think no one knows the answer to that for sure.
MARGARET WARNER: So, in other words, employers could make temporary hires?
NEIL IRWIN: They could. And there are all kinds of ways to — to game the system.
I mean, one — you know, one issue is that thousands and thousands of jobs are created, people are hiring every day. It’s not that all of the tax benefits of this go purely to people creating new jobs, so a lot of unintended consequences. And it will be interesting to see what the effects really are.
MARGARET WARNER: But now, in the context of the fact that eight million jobs have been shed from the economy in this period of time, why is the Senate bill so small?
NEIL IRWIN: Well, there was this whole saga. There was, as you — as the segment mentioned, the House has passed a much larger bill, $154 billion. And the Senate was negotiating on something much larger as well.
In fact, they seemed to have a bipartisan deal. A lot of liberals didn’t like that deal. They thought there were too many kind of giveaways to big corporations and things that would not have really had a bang for the buck and created jobs.
Senator Harry Reid, the majority leader, agreed with them, and said we’re going to scrap that and do these smaller bills. As you heard, they’re suggesting that they’re — this is just the beginning; they will do a series of them.
The question is whether the House will go along and whether they can get these things passed.
MARGARET WARNER: Now, if you look at the way consumers are feeling, if you look at the consumer confidence report released yesterday — or today — if — it didn’t appear that consumers are persuaded that job growth is right around the corner.
NEIL IRWIN: That’s for sure. It was a — it was a very disappointing number on — that came out yesterday on consumer confidence.
NEIL IRWIN: Apparently, you know, even as there are these signs that the economy has been growing since last summer, it hasn’t been growing very fast, and people don’t have great confidence in their ability to find a job, the — their ability to keep their current job. People are not really ready to make those — those big purchases. They — they aren’t confident that this recovery is for real.
And, until that changes, we won’t have a really sustained period of growth. As — as Chairman Bernanke mentioned this morning on the Hill, eventually, the private sector will have to take over. It’s not enough to have stimulus. And, eventually, the private sector will have to take over, and the American consumer will have to do what they do best, which is consume.
MARGARET WARNER: Which is shop.
MARGARET WARNER: And before we get to Chairman Bernanke’s testimony, there was also the report about housing sales, new home sales being the lowest ever last month. Yet, in December, they have had — we had had, what, seven straight months of house price increases.
So, how do those two square?
NEIL IRWIN: It’s a really mixed picture right now on housing. It looks like the worst of the housing collapse seems to be over. Things have stabilized a lot over the last several months, certainly in pricing, as you mentioned. There was a little uptick in prices around the country last — and in December.
But — but, that said, prices — it’s not enough for prices to go up. People have to have the confidence to make that purchase and clear out this inventory. We still have a lot of foreclosures happening. So, you know, you still have people just fearful of what lies ahead, and, therefore, not willing to make that biggest of investments that most people make, which is buying a house.
MARGARET WARNER: So, given all of this, it’s not surprising that Chairman Bernanke had a rather sober tone?
NEIL IRWIN: That’s — that’s certainly true. He — he laid out an idea that is not new. He’s been saying for some time that we seem to have an expansion. The job market is still in really bad shape. But we are growing. We need to grow faster.
And — and what he restated that has been clear for some time is that the interest — the Federal Reserve is going to keep interest rates as low as they possibly can for quite a while longer to try and get that growth back.
MARGARET WARNER: But he did have kind of an olive branch for Congress, didn’t he?
NEIL IRWIN: He did. What was interesting is, you know, the Fed is under intense criticism and pressure right now.
Congress, they don’t like the bailouts. They don’t like what the Fed did with its regulatory powers before the crisis — a lot of anger at the Fed right now. In fact, it almost cost Bernanke getting confirmed for reappointment.
So, he kind of came bearing gifts a little bit on — in his testimony this morning. He said, I will work with you, Congress, on finding ways to have better disclosure of — of companies that benefit from these special lending programs that we operate.
MARGARET WARNER: Which he has resisted up until now.
NEIL IRWIN: He has.
MARGARET WARNER: Yes.
NEIL IRWIN: He said, I will work with you on finding ways to allow more auditing and review of what the Fed does, as long as you wall off monetary policy.
He thinks that has to stay independent. So, he’s clearly trying to strike a conciliatory tone and — and defuse some of this criticism of the Fed on Capitol Hill.
MARGARET WARNER: And, as you said, of course, Harry Reid, as we said in the setup, he is promising more.
Now, what are the prospects for getting additional bipartisan votes — you did have, I think, 13 Republicans voting for the one today — getting additional bipartisan votes on some of the other job-stimulating measures that Reid would like to push through?
NEIL IRWIN: I think it depends what they move with. It’s a really interesting strategy.
What I think Senator Reid is trying to do is really put Republicans on the spot over and over again this year, and say, we want to pass something, we want a bipartisan vote, but you, Republican senators, have to go back to your state, where the unemployment rate is extremely high. I know you don’t like this, but I’m going to dare you to vote against it.
And it worked in the initial gambit with this bill that the Senate passed today with 70 votes. He got 13 Republicans. It’s an interesting call whether the future bills get the same kind of support.
MARGARET WARNER: Is there also a strategy here that he’s trying to avoid the sticker shock of a really big bill, so he’s doing it in these smaller increments?
NEIL IRWIN: I think that’s exactly right.
People have held the $800 billion cost of the original stimulus last year over Democrats’ heads and used it to criticize them. And I think the idea of a series of smaller bills helps. Also, I think they like to dominate the agenda. They like for headlines in the news to say, Democrats are working on a jobs bill. And if they do a bunch of different bills, then that keeps them busy all year.
MARGARET WARNER: I hadn’t thought of that.
Neil Irwin, thank you so much.
NEIL IRWIN: Thanks, Margaret.