washingtonpost.com
Obama Stresses Plan's Job Potential
Advisers See Nearly 4 Million Positions Saved or Created

By Perry Bacon Jr.
Washington Post Staff Writer
Sunday, January 11, 2009

Facing increased skepticism from both parties about the details of his economic stimulus proposal, President-elect Barack Obama and his team yesterday laid out new claims regarding the $775 billion package, saying that 90 percent of the jobs produced would be in the private sector, including hundreds of thousands in construction and manufacturing.

Obama used his weekly radio address to continue his pre-inaugural campaign to build momentum for passage of the stimulus package, saying: "The jobs we create will be in businesses large and small across a wide range of industries. And they'll be the kind of jobs that don't just put people to work in the short term, but position our economy to lead the world in the long term."

To buttress Obama's points, two of his top economic advisers released yesterday an analysis of the president-elect's plan. The report carried the grim prediction that, while millions of jobs would be created or saved through the stimulus package, the unemployment rate would be little improved by the end of 2010 from the 7.2 percent at the end of last month -- the nation's highest rate since 1993. The advisers also warned that, without passage of the stimulus plan, unemployment could reach 9 percent.

Obama's speech came as members of Congress, particularly Democrats, had begun attacking some aspects of the still-unfinished proposal. Sen. John F. Kerry (Mass.) and other Democrats object to a proposed $3,000 tax credit to corporations for each job they create or save, saying the credit would be ripe for abuse and difficult to administer. Republicans have questioned the total size of the package and the hundreds of billions of dollars that could go to state governments.

"We want to make sure it's not just a trillion-dollar spending bill, but something that actually can reach the goal that he has suggested," said Senate Minority Leader Mitch McConnell (R-Ky.), who has suggested that states get money in loans instead of grants so they will not ask for projects they do not need.

Many of the ideas Democrats are objecting to, such as the corporate tax credit, are popular among Republicans, complicating Obama's desire to get bipartisan approval of the stimulus package.

Former Treasury secretary Lawrence H. Summers, one of Obama's top economic advisers, will meet with Senate Democrats today.

The report from Obama economic advisers Jared Bernstein and Christina Romer defended against some of the criticism from lawmakers. It acknowledged that tax cuts "are likely to create fewer jobs than direct increases in government purchases," but the economists said that there was a limit to how much government investment could be done over the two-year time frame of the stimulus package.

Republicans have been wary of the potential for government payrolls to balloon, but the Obama aides wrote that less than 10 percent of the jobs created under the stimulus plan would be government positions. They also predicted that many of the new jobs would be "green jobs," involved in such tasks as retrofitting buildings -- reflecting a desire from Democratic activists and lawmakers to use some of the stimulus money for innovative projects, rather than for improving current infrastructure such as roads.

Obama aides said the stimulus plan would create millions of jobs while preventing layoffs of already-employed workers, particularly in state government. The advisers estimated about 137.6 million Americans would be employed at the end of 2010 if the stimulus were implemented, 2 million more than the current employment of 135.5 million. Without the stimulus, the aides predicted, about 133.9 million people would be employed, leading them to conclude that the plan could create or save nearly 4 million jobs.

The report predicted that the largest number of jobs added would be in construction and manufacturing, estimating that more than 678,000 new positions would be created by public works projects such as road-building. Wages from the jobs created through the stimulus plan would vary widely from the national median wage of $15 per hour in 2007, the aides said; positions in hotels and restaurants might pay less while operations managers on some construction projects earn more than $40 per hour.

The advisers also expect the stimulus package would allow businesses to move about 2.7 million workers from part time to full time.

Bernstein, slated be to chief economic adviser to Vice President-elect Joseph R. Biden Jr., and Romer, who is the administration's designate to chair the Council of Economic Advisers, cautioned that their assumptions could miss the mark.

"It should be noted that all of the estimates presented in this memo are subject to significant margins of error," the pair wrote, adding: "The current recession is unusual both in its fundamental causes and its severity."

Mark Zandi, chief economist and co-founder of Moody's Economy.com, said he wishes the Obama team had not proposed spending money on the business tax credits, but he said the estimates on the job growth were "very close to my own."

"The results are in line with what we should see, about 3 to 4 million jobs," said Zandi, whose modeling on job creation was used in the Obama team's report.

David Shulman, a senior economist at UCLA's Anderson Forecast, which analyzes economic trends, said he agreed with the need for stimulus. But he questioned whether there were enough projects ready over the next two years for the Obama team to meet its projections on creating jobs in energy and infrastructure. The advisers predicted that the stimulus package's energy projects would create more than 450,000 jobs and that infrastructure projects would create 377,000.

"There's not enough shovel-ready, so to speak," he said. "I'm skeptical of how you're going to do that in a two-year period."

Staff writers Lori Montgomery, Neil Irwin and Michael A. Fletcher and staff researcher Magda Jean-Louis contributed to this report.

View all comments that have been posted about this article.

© 2009 The Washington Post Company