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Final Stimulus Package Aimed at Jolting Sluggish Economy

February 13, 2009 at 6:00 PM EST
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The stimulus bill neared final approval in Congress Friday after weeks of tough debate. After a recap of the developments, Obama economic adviser Christina Romer discusses the plan.
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JUDY WOODRUFF: The economic stimulus bill neared final approval in Congress today. The Senate moved to pass the massive plan hours after the House adopted it.

NewsHour congressional correspondent Kwame Holman has our lead story report.

KWAME HOLMAN: The House had first crack this afternoon, and the outcome was never in doubt.

REP. NANCY PELOSI (D-CA), Speaker of the House: On this vote, the yeas are 246; the nays are 183; and one voting present. The conference report is adopted. Without objection, a motion to reconsider is laid upon the table.

KWAME HOLMAN: Nearly every Democrat voted yes, but, as with the original House bill last month, not a single Republican backed the final measure.

Afterward, their leaders had sharply different takes.

REP. NANCY PELOSI: The American people are feeling a great deal of pain. They have uncertainty about their jobs, about health care, about the ability to pay for the education of their children, and, sad to say in our great country, even their ability to put food on the table. And so today we have passed legislation that does take that swift, bold action on their behalf.

REP. JOHN BOEHNER (R-OH), House Minority Leader: The president made clear when we started this process that this was about jobs, jobs, jobs, jobs. And what it’s turned into is nothing more than spending, spending, and more spending. American families, small businesses deserve better from their Congress.

KWAME HOLMAN: Just before the vote, the Congressional Budget Office revised the final cost down slightly to $787 billion.

In the end, the spending side included: $120 billion for public works projects; $19 billion for health care technology; and almost $50 billion for renewable energy programs.

In addition: nearly $200 billion would go for Medicaid and unemployment benefits; plus, payments of $250 for everyone who gets Social Security.

The tax side offered President Obama’s “make work pay” credit of $400 for individuals and $800 for couples. Other provisions include an $8,000 credit for first-time homebuyers.

There were scores of other provisions, and overall the bill ran more than 1,000 pages. On the floor, Republicans again insisted too many of those provisions have little to do with the bill’s stated purpose.

REP. JERRY LEWIS (R), California: In the end, funding for roads, highways, flood control measures, and other job-creating infrastructure projects were downsized in order to increase the size and scope of — largely in the House — members’ favorite government programs.

Mr. Speaker, that’s not stimulus, that’s not job creation, and it certainly isn’t what the country needs or deserves at this time of crisis.

Job creation crucial point

Sen. John McCain
R-Ariz.
This measure is not bipartisan. It contains much that is not stimulative. And it's nothing short -- nothing short of generational theft.

KWAME HOLMAN: Democrats countered the spending would, in fact, create millions of jobs, especially on public works projects.

REP. JAMES OBERSTAR (D), Minnesota: What is included in this bill from the jurisdiction of our committee will create and sustain 1.8 million jobs, real jobs, construction jobs, professional journeymen, career, apprentice, bricklayers, cement finishers, backhoe operators, real jobs in the U.S. economy, who will be paying taxes, not being paid unemployment compensation for not working.

KWAME HOLMAN: As the House finished its work on the bill, the Senate kept debating and the partisan divide was no less prominent.

SEN. JOHN MCCAIN (R), Arizona: The nation needs a stimulus bill. The nation expects that Congress and the president to act in a truly bipartisan manner to address this crisis. But, unfortunately, this measure is not bipartisan. It contains much that is not stimulative. And it's nothing short -- nothing short of generational theft.

SEN. CHUCK SCHUMER (D), New York: When President Bush talked about $2 trillion of tax cuts mainly for the wealthy, did we ever hear the word "generational theft"? Did we ever hear that we should not do tax cuts for the wealthy or fund the war in Iraq because it was "generation theft," because it would increase the deficit? No, we didn't.

KWAME HOLMAN: Under a budget rule, Democrats needed 60 votes to move the bill, but they had to proceed without the ailing Sen. Edward Kennedy. That meant holding on to three moderate Republicans, Susan Collins and Olympia Snowe of Maine and Pennsylvania's Arlen Specter.

At the White House, the president looked ahead to life after passage of the stimulus. He said the government still has much to do.

BARACK OBAMA, President of the United States: Now, passing this plan is a critical step, but as important as it is, it's only the beginning of what, I think, all of you understand is going to be a long and difficult process of turning our economy around.

To truly address this crisis, we will also need to address the crisis in our financial sector to get credit flowing again to families and businesses. And we need to confront the crisis in the housing sector that's been one of the sources of our economic challenges.

KWAME HOLMAN: But the question remained whether the final bill is big enough to deliver the promised jobs. Economist Mark Zandi is a Democrat who advised the McCain presidential campaign.

MARK ZANDI, Chief Economist, Moody's Economy.com: The stimulus will add 2 million to 2.5 million more jobs than would be the case without stimulus by year end 2010. That's less than the 3.5 million to 4 million that I had expected previously and the president now still does expect.

And that's largely because we've traded some tax cuts that would've been out there without stimulus for spending increases that would have been very important to adding jobs. They're not in the bill now, and that takes away from the bill's impact on jobs.

KWAME HOLMAN: That debate is likely to continue even as the president makes ready to sign the stimulus package on Monday or Tuesday.

Majority of jobs in private sector

Christina Romer
Chair, Council of Economic Advisers
We know that the private sector is the engine of growth, and that's where we expect to see the vast majority of the jobs.

JUDY WOODRUFF: Margaret Warner gets the Obama administration's view of today's developments.

MARGARET WARNER: And joining us now from the White House Briefing Room is Christina Romer, head of President Obama's Council of Economic Advisers.

And, Ms. Romer, welcome. Thanks for being with us.

CHRISTINA ROMER, Head of President Obama's Council of Economic Advisers: Great to be here.

MARGARET WARNER: I should say congratulations, but you did not -- there was not one Republican vote for this in the House and expected to be only three in the Senate for a bill that President Obama had hoped would have broad bipartisan support. I'm wondering what lesson you take from that?

CHRISTINA ROMER: Well, I think the main thing I'd say is, I still like the congratulations, because I think it is a big victory for the American people and for the American economy. So I think that's the key to keep in mind. What the president always said is he wanted a bill that would create between 3 million and 4 million jobs, and I firmly believe that we got that.

MARGARET WARNER: So let's zero in on this jobs number, because, as you just heard, it was the source of much debate today. The president Monday night talked about 4 million. Today he talked about 3.5 million in two years.

But you heard Mark Zandi and other economists have said the trade-offs that were made to get the Republicans in the Senate on board did cause him to revise his forecast downward by like a million jobs. What is the White House forecast today? And by when?

CHRISTINA ROMER: So the numbers that we ran on the conference version of the bill say that it will create, we think, 3.5 million jobs by the end of 2010. And I think it's important to realize that is still in the range, for example, that the CBO put out as a plausible range.

In terms of some of the other forecasters, certainly they may have different weights on sort of what they think different components will do.

But I think actually a crucial difference has been the spend-out rate. Once CBO came out with a fairly low spend-out rate on the House version of the bill, a lot of the private forecasters took down their estimates.

And one of the things that just came out today is the CBO spend-out on the final version of the bill, and it's actually substantially higher. Where it had been only 64 percent in -- for the House bill, it's up to 74 percent. So I think that's going to be much more in the range that we've been using. And I think it confirms that we probably are going to create that 3.5 million jobs that our estimate suggests.

MARGARET WARNER: And what percentage of those will be public versus private sector?

CHRISTINA ROMER: So we estimate about 90 percent of those jobs will be in the private sector. And so that has certainly been something that was important. We know that the private sector is the engine of growth, and that's where we expect to see the vast majority of the jobs.

Public confidence very low

Christina Romer
Chair, Council of Economic Advisers
My hope is that that we may have a sort of Rooseveltian moment, that people will say, "My government's doing something." Maybe that cloud of worry will lift and we'll see consumers back out, we'll see businesses investing again.

MARGARET WARNER: Back to how many jobs you think it will create, does the fact, though, that the House version had a lot more public spending -- and that was taken out to make way for some tax cuts -- how many jobs do you think you did sacrifice there?

CHRISTINA ROMER: So you get a little bit of a sense of this that our numbers have kind of been in the range of, you know, as high as a little bit over 4 million jobs. So as we've come down and as the bill has changed, we've ended up at a number, at 3.5 million, so we definitely sacrifice some jobs.

That was part of what the president told us, right? He said he wasn't going to let the perfect be the enemy of the essential. And he made the kind of compromises that needed to be made to get a bill out. And I cannot emphasize how important that step is.

MARGARET WARNER: Let me ask you about the public mood. There are a couple of surveys out in the last two days that show the public is quite downbeat about their own personal prospects. Pew had one yesterday that something like 44 percent of Americans think they're going to be -- it's likely they'll be laid off or have their jobs or benefits cut or have their employer go out of business.

Today, the Michigan -- University of Michigan consumer confidence survey that people always look at show that two-thirds of Americans think it's going to last, this downturn, five years.

How damaging is that, if the public is that downbeat, in terms of the prospects for our economic performance?

CHRISTINA ROMER: Well, I think that does just really emphasize how important this bill was, right? There's a reason the American public is so downbeat. They have seen us lose 500,000 jobs each of the last three months. They were the ones that knew we needed this package.

I think what certainly, when I think about these estimates, one of the things that's hard to quantify is what kind of effect might you get from a surge of confidence?

And certainly one of the things that I am hoping is that, with the president's more comprehensive approach, this stimulus bill, the financial rescue that what announced on Tuesday, we're going to come out with a housing plan next week, very much my hope is that that we may have a sort of Rooseveltian moment, that people will say, "My government's doing something." Maybe that cloud of worry will lift and we'll see consumers back out, we'll see businesses investing again. And I think that's going to be just crucially important.

MARGARET WARNER: So this level of consumer confidence is, in fact, very -- it becomes a self-fulfilling prophecy in a way.

CHRISTINA ROMER: It certainly is one of the reasons why we've been seeing so much of consumer spending taking a hit, and so, absolutely, we need to change that confidence around.

We also think that the tax cuts that's included in the bill, that's going to show up very quickly in people's paychecks. And we think that's going to be another thing that will get them out spending and, quite possibly, will give them a little more confidence.

Improvements will take a while

Christina Romer
Chair, Council of Economic Advisers
I anticipate that, when we come out with the housing plan, which is sort of that third leg on the stool of the whole comprehensive recovery package, there will be plenty of details. And I think people will find it all very reassuring.

MARGARET WARNER: Now, as an economist and when you look at the number of jobs, layoffs just in January, 600,000, a really accelerating pace, what -- let's assume this bill passes tonight, which it's fully expected to -- at what rate do you expect to see layoffs, say, in this current month or next March? Do you think that pace will continue?

CHRISTINA ROMER: I think we're certainly in for more trouble. And I think the president has been very careful to be honest with the American people and say it's going to get worse before it gets better.

The analogy I like to use is the economy is kind of like a supertanker, and it doesn't change on a dime. But we know that, when you move the rudder, eventually it moves. And I feel like we've given the rudder just a huge shove.

So my hope would be that, obviously -- or, you know, my fear is going to be we're going to see job loss for the next few months, maybe the next several months, but almost all of the forecasters are predicting sort of, by the third quarter, we will have kind of leveled off. And I firmly expect we'll see positive job growth by the end of the year.

MARGARET WARNER: And part of your trying to nudge the supertanker this week was also the bank rescue plan, the further financial system proposal that Treasury Secretary Geithner released. The markets sunk; they didn't much like that. Why do you think that was?

CHRISTINA ROMER: I think it's always hard to guess how the markets are going to respond on any one day. One of the things that we've been encouraged about is that, as people have had more time to digest the plan -- I think inherently a big financial problem takes a very big and complicated plan.

And what we've found is that, as reporters and others start to read it, I think they're coming away much more impressed. And I think that's going to be the pattern that we'll see going forward.

MARGARET WARNER: So one of the criticisms was that there wasn't enough detail. I'm just wondering whether you took any lessons from the reaction to that, if you're thinking about public confidence or trying to keep public confidence up, that will help shape the way you roll out, say, the home foreclosure plan that you've got coming up this Wednesday?

CHRISTINA ROMER: I think it is a good point. We're a little bit walking a balance, though.

One of the reasons that we didn't put out as many of the specifics with the original financial rescue is one of the things we've learned from the previous administration is that announcing details that then needed to be changed created a lot of uncertainty for people, so we're trying to move very cautiously.

But, certainly, I anticipate that, when we come out with the housing plan, which is sort of that third leg on the stool of the whole comprehensive recovery package, there will be plenty of details. And I think people will find it all very reassuring.

MARGARET WARNER: Christina Romer, head of the Council of Economic Advisers, thank you so much.

CHRISTINA ROMER: Thank you.