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With Jobs Still Elusive, White House Defends Stimulus

October 30, 2009 at 12:00 AM EST
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President Obama's $787 billion stimulus package has saved or created about 650,000 jobs, the White House said Friday. But with unemployment at a 26-year high, the administration is facing increased criticism about ongoing weakness in the labor market.
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JIM LEHRER: Now the latest claims on stimulus spending and job creation.

Judy Woodruff has our story.

U.S. PRESIDENT BARACK OBAMA: Today does mark the beginning of the end, the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs.

JUDY WOODRUFF: When President Obama signed the $787 billion stimulus bill last February, he said it would save or create more than three million jobs by the time the money winds down at the end of 2010.

Today, his administration announced that stimulus spending has saved or created almost 650,000 jobs, jobs linked with roughly $160 billion spent through September, less than half of the money disbursed so far.

Vice President Biden argued, the stimulus had already been successful.

U.S. VICE PRESIDENT JOSEPH BIDEN: We’re no longer talking about whether or not we’re going to slide into depression. We’re arguing and talking about the shape of the recovery. And that’s a gigantic change in eight months.

JUDY WOODRUFF: Biden added that money for tax cuts and state aid has created or saved another 400,000 jobs, bringing the grand total to more than a million.

JOSEPH BIDEN: When someone is getting another $60 to $80 in their paycheck, when someone’s getting that one time payment of $250, it means they go to the sandwich shop, they get their hair done, they walk into the local drugstore, they walk into the local hardware store, and they’re able to spend money for things that they need that wouldn’t otherwise have been spent.

That means there’s a clerk that stays working. That means there’s a waitress who is still on the job.

JUDY WOODRUFF: More than 325,000 of the jobs were in education, and 80,000 from construction, including transportation projects.

The figures were based on reports from state and local governments, private companies, and universities. The report was posted on recovery.gov this afternoon, the government’s official Web site where the public can look at spending projects in detail.

We get two views about the track record on jobs and the stimulus package. They come from Mark Zandi, chief economist at MoodysEconomy.com. He has advised both Congress and the White House during the current economic crisis and advocated on behalf of a stimulus package, and Chris Edwards, formerly a senior economist on Congress’ Joint Economic Committee. He is now with the libertarian-leaning Cato Institute.

Gentlemen, thank you both for joining us.

CHRIS EDWARDS, Director of Tax Policy Studies, Cato Institute: Thanks, Judy.

JUDY WOODRUFF: Mark Zandi, to you first.

Tell us, how solid are these numbers?

Strength of the numbers

Mark Zandi
MoodyEconomy.com
I think it's no accident that the recession, the great recession, has come to an end at just the same time that the stimulus is providing its maximum economic benefit.

MARK ZANDI, chief economist, MoodysEconomy.Com: I think they're solid.

I think it's no accident that the recession, the great recession, has come to an end at just the same time that the stimulus is providing its maximum economic benefit. And I think the job impacts that the administration put forward today are reasonable estimates.

JUDY WOODRUFF: We know that the numbers come from state and local governments, from universities and companies reporting them. So, are the numbers, are they verified?

MARK ZANDI: Well, these numbers are. The 600,000-plus estimates from the administration come from recipients of the stimulus aid. And, so, we know for sure that these jobs are for real.

Now, of course, it doesn't count all of the other jobs created by the tax cuts and other elements of the stimulus. That is much more difficult to count, at least directly. But the 600,000-plus, that's numbers that are counted directly and accurate.

JUDY WOODRUFF: Chris Edwards, how solid do you think these numbers are?

CHRIS EDWARDS: I think these are really unscientific numbers.

We're relying on state and local governments and private businesses to tell us how many jobs they are creating with government money. So, there is an obvious incentive to overestimate how many jobs you are creating, because, you know, states want a second round of stimulus payments, so, of course, they want to make their federal masters happy by claiming they created a lot of jobs.

The broader picture is also very interesting. While the administration says it has created 650,000 jobs, we have lost eight million jobs during the current recession over the last couple years.

So, this is only about 10 percent of the overall job losses. And the unemployment rate continues to rise. So, while the government has created some jobs in the government sector, I think the private sector economy is still continuing to shrink.

JUDY WOODRUFF: Mark Zandi, what about his initial point, that this is unscientific and that these organizations giving these numbers have an incentive to inflate them?

MARK ZANDI: Well, I think there are -- all of the statistics that we get on the economy that the government collects are based on surveys and samples, similar to the one that was conducted here. So, I think they are using the same approaches and techniques in constructing these estimates then -- that we use for constructing all kinds of estimates to try to get a gauge of where the economy is.

So, there is a great deal of uncertainty with any of these statistics. But I think it's fair to say that we would have measurably fewer jobs in the economy today if we didn't have that stimulus package.

Job creation stalled amid stimulus

Chris Edwards
Cato Institute
We don't know how many businesses out there are, frankly, scared to death about what is going on in Washington. They see the big deficits, and they're not hiring.

JUDY WOODRUFF: What about that, Chris Edwards? If you hadn't seen this stimulus, would the recession be as bad as it is?

CHRIS EDWARDS: I think we're only using one-sided accounting here.

Sure, the government can create jobs, government-centered jobs, by spending money. But we don't know how many jobs have been destroyed or not started, because, frankly, this administration is doing a lot of stuff to scare private businesses.

We have got trillion-dollar deficits as far as the eye can see. We have got promises of higher taxes in the future, more labor regulations. So, we don't know how many businesses out there are, frankly, scared to death about what is going on in Washington. They see the big deficits, and they're not hiring.

In fact, the GDP data that came out yesterday shows that private business investment is still deeply in the hole. Private business investment now, throughout 2009, actually, is still lower than it was at the very bottom of the 2001 recession.

JUDY WOODRUFF: Mark...

CHRIS EDWARDS: So, I don't think private businesses yet have recovered.

JUDY WOODRUFF: Mark Zandi, what about his point that the private sector picture is very different from the government one?

MARK ZANDI: Well, he is right. The economy is still very weak.

But the private sector is moving in the right direction. I mean, just think about to six, nine months ago, when the stimulus package was passed. Major financial institutions were literally evaporating. The stock market was caving. House prices were crumbling. We were losing 700,000 jobs per month, on average, in the first quarter of this year.

Now fast-forward to today. The financial system is stable. The stock market is up measurably from where it was. House prices have stabilized. We're still losing jobs, but measurably less so. And all the trend lines are headed in the right direction.

And my sense is that, by early next year, the job losses will abate, and by this time next year, we will see job creation in the private sector. Those businesses will step up and grab the baton from the government and run with it, and this recovery will evolve into a self-sustaining economic expansion.

The stimulus did what it was supposed to do. It was supposed to end the recession and get this recovery going. We are now in recovery.

Private business stays cautious

Mark Zandi
MoodyEconomy.com
Businesses, yes, they are still cautious. You know, if you think back through -- given what we went through, businesses are shell-shocked. They went through life-threatening events.

JUDY WOODRUFF: Chris Edwards, essentially, the point is that the fundamentals are strong, and that it's just going to take more time for the rest of the economy to demonstrate that.

CHRIS EDWARDS: I think Mark has a very optimistic view. I think, frankly, we could well have a short-term sort of sugar high here because of some of these government stimulus programs.

I mean, a lot of these jobs, frankly, that the administration says they have created are probably just temporary, and they're not permanent. Once the stimulus money job runs out, those jobs disappear.

Again, you look at the GDP numbers that came out yesterday, I find them very scary. The government sector is expanding. Private consumption is expanding a little bit, but private business investment continues to plunge. We are about 30 percent now down in private business investment than where we were back in 2006, for example.

I find that very scary. And I don't see any policies out of Washington to help give confidence to private business.

JUDY WOODRUFF: Mark Zandi, respond to that, and specifically the point about many of these jobs are just temporary.

MARK ZANDI: Well, you know, take business investment.

Business spending on equipment and software actually rose in the third quarter. And that is a huge change from where we were at the end of last year and the beginning of this, when business investment in equipment and software was falling at a 30 to 40 percent annualized rate.

So, that is a very significant change. So, businesses, yes, they are still cautious. You know, if you think back through -- given what we went through, businesses are shell-shocked. They went through life-threatening events. And it is going to take a while before they feel like it's safe and begin to hire and invest aggressively again.

But they're moving in the right direction. And the stimulus is a key part of it. Now, it is not the only reason. There has been a lot of other policy efforts, everything from what the Federal Reserve has done, to the Treasury, the FDIC. But the stimulus has been a key part of it.

And it also highlights a very important point. And that is, because the stimulus has worked, it may -- in fact, the economy may require some more government help, and we should provide it to it.

JUDY WOODRUFF: Final comment from you, Chris Edwards. Thirty seconds.

CHRIS EDWARDS: I don't see that at all. I see that the stimulus package pushed the nation a trillion dollars further into debt. You know, that money has to come from somewhere. When the government spends money and creates job, it sucks money out of the private sector and it makes the private sector shrink.

I don't -- in the private investment data, again, I think it's very scary. I don't see any -- the Obama administration wants to raise taxes on small business, on multinational businesses. Frankly, I don't see any good reasons for businesses to invest now, when they look at Washington.

JUDY WOODRUFF: Gentlemen, on that point, we are going to leave it.

We thank you both, Chris Edwards and Mark Zandi.