Debate on Economy Grows More Urgent
Saturday, March 8, 2008
A surprisingly bleak employment report sent tremors through Washington and roiled the presidential campaign yesterday, infusing new urgency into the debate over how to reverse an accelerating economic slide and fueling a political contest over who to blame for it.
The nation shed 63,000 jobs in February, the worst job loss in five years, the Labor Department reported, and another sign that the economy may have slipped into a recession that could prove to be the defining challenge for President Bush and Congress through the rest of his administration.
Responding quickly to the report, Bush asked for patience to let an economic stimulus package he signed last month start to work. Democrats on the campaign trail just as quickly faulted the president's economic policies, and congressional leaders pressed for a new economic package to pump money into unemployment benefits, as well as road construction and other job-creating infrastructure projects.
"Losing a job is painful, and I know Americans are concerned about our economy," Bush told reporters at the White House. "So am I. It's clear our economy has slowed, but the good news is we anticipated this and took decisive action to bolster the economy." Last month's $152 billion package of tax breaks for workers and businesses, Bush added, "provided the economy with a booster shot" whose impact will be felt "over the coming months."
While placing faith in the stimulus plan, White House officials said they are also considering other measures, including a pay-down program in which the federal government would offer low-interest loans to financially pressed homeowners to bring down their mortgage costs and forestall defaults. Bush's economic advisers said they have downgraded their short-term forecast and now expect the first quarter to be the "weakest," but they expect stronger growth by summer.
The economic troubles stem from a crisis in debt markets that developed last August and touched off a wave of home foreclosures. Despite efforts by the Federal Reserve to cut interest rates, credit has continued to tighten, making it harder for businesses to raise capital to expand operations and for Americans to pay off credit cards and buy homes or cars.
Although the unemployment rate edged down from 4.9 percent to 4.8 percent in February, the jobs report alarmed policymakers in Washington because the losses proved worse than Wall Street predictions. The Labor Department said the economy lost 52,000 manufacturing jobs and 39,000 construction jobs last month, continuing deep losses over the past year. The only reason the overall report was not worse was the addition of 38,000 government jobs.
"The short-term discussion ought to be what does this mean for economic policies, what kind of anti-recessionary policies do we need to start crafting, what is the impact of the policies we've crafted so far?" said Jared Bernstein, a scholar at the liberal Economic Policy Institute. The long-term issue, he said, may be "to what extent is our current situation a result of Bushonomics? That's really going to be fodder for the campaign."
Rea S. Hederman, an economist at the conservative Heritage Foundation, said the report may not signal the need for additional government action because it will take time for the stimulus package to have an impact. "We've already diagnosed the problem," he said. "We've already tried one remedy. Let's at least see if that works."
Rising economic anxiety dominated the day on the campaign trail. Sen. Hillary Rodham Clinton (D-N.Y.), who won the Ohio presidential primary this week in part on the strength of support from voters worried about the economy, took aim at both Bush and her rival, Sen. Barack Obama (D-Ill.).
The numbers "are painful reminders that we need a president who is ready to be a steward of our economy starting on Day One," she said. And referring to Bush, though not by name, she said, "It's going to take more than tax rebates to avoid a deep economic downturn." Clinton renewed her call to extend unemployment insurance, invest to create jobs, and impose a 90-day moratorium on foreclosures and a five-year freeze on subprime mortgage interest rates.
For his part, Obama cited the everyday Americans he meets on the campaign trail while lumping Clinton in with the Republicans as part of the problem. "They can't afford John McCain's promise of four more years of the very same failed Bush economic policies that have failed us for the last eight," Obama said, "and they can't afford another politician who promises solutions but won't change the divisive, lobbyist-driven politics in Washington."