By Neil Irwin, Lori Montgomery and Alec MacGillis
Washington Post Staff Writer
Thursday, February 18, 2010; A01
The giant economic stimulus package enacted a year ago has helped stabilize the economy but has not made much of a dent in the nation's vast unemployment.
The Obama administration is acknowledging that its program of spending cuts and tax breaks has yet to ease joblessness, and White House officials are increasingly engaged in shaping the details of new legislation to boost job creation.
"You can argue, rightly, that we haven't made as much progress as we need to make when it comes to spurring job creation," President Obama said Wednesday in marking the program's anniversary. "That's part of the reason why I expect Congress to pass additional measures as quickly as possible that will help our small-business owners create new jobs, give them more of an incentive to hire."
The debate over how much credit the $862 billion stimulus program deserves for the nascent economic recovery escalated Wednesday with Obama and Republican leaders trading barbs.
The nation's economy was shrinking rapidly last winter when Congress passed the stimulus package, formally known as the American Recovery and Reinvestment Act. The economy began expanding again over the summer, and most analysts attribute that turnaround to a combination of the stimulus bill, near-zero interest rates and other dramatic action by the Federal Reserve, as well as the healing of the financial system.
Many economic analysts also agree with the administration's claims that the stimulus law has created or preserved 2 million jobs and that the number will total 3.5 million by the time the spending ultimately plays out.
But the recovery has so far been too weak to plug the yawning hole in U.S. employment. The economy has shed 8.4 million jobs since the recession began in December 2007, including 20,000 in January, and the unemployment rate stands at 9.7 percent. Add to that the danger that the private sector will fail to grow fast enough to keep the economic expansion going when the stimulus money fades in the second half of 2010.
Against that grim backdrop -- and with Democrats facing difficult electoral prospects in congressional midterms in November -- the Obama administration is seeking more aggressive steps to shore up growth. As recently as January, it was noncommittal about efforts in Congress to craft a new spending and tax-cut package aimed at job creation, endorsing the concept without discussing many specifics.
Now, though, the administration is both talking specifics and contemplating ideas that go beyond what's envisioned in Congress. The administration has penciled $267 billion -- about one-third the size of last year's stimulus -- into its proposed budget to support job creation, and a top presidential adviser has described action on that scale as "absolutely critical."
"At 9.7 percent, unemployment is still a crisis, and we should be doing as much as possible," Christina Romer, chairman of the Council of Economic Advisers, said in an interview. "As the president has said, we should take every responsible action to jump-start job creation."
In the budget it released this month, the White House called for $167 billion to extend tax cuts and spending in the original stimulus package, including the president's signature Making Work Pay tax credit, worth $400 per year to individuals and $800 to married couples. Obama is also recommending additional aid for cash-strapped state governments; extension of unemployment benefits through much of this year; and an additional $250 lump-sum "economic recovery" payment to Social Security recipients, who otherwise would see no increase in benefits this year.
The administration also wants to put an additional $100 billion toward an immediate jobs bill. One of the most significant ideas would award tax credits worth as much as $5,000 per new hire to employers that expand their payrolls this year. By the administration's calculations, the tax credit would create 600,000 jobs at a cost to the government of about $33 billion.
The administration's push has gotten a mixed reception on Capitol Hill. House leaders have rejected the idea of using tax credits to create jobs and are particularly skeptical of the administration's proposal to do that, calling it difficult to administer and prone to abuse.
The House passed a $154 billion jobs bill in December, and Senate leaders are struggling to build support for a much smaller, $15 billion package, which is set for its first vote Monday. The centerpiece of the measure is a $13 billion tax credit, authored by Sens. Charles E. Schumer (D-N.Y.) and Orrin G. Hatch (R-Utah), that would exempt companies from paying Social Security taxes for the remainder of 2010 on every new worker who had been unemployed for at least 60 days.
The White House is walking a delicate line in its defense of the original stimulus act. To address concerns that the money has not been moving out the door fast enough, White House officials have pointed to the funds that were spent quickly, including those for tax relief, fiscal aid to states and an expanded social safety net.
But White House officials take a different line when countering opponents who question whether the package will have a lasting impact on the economy. Officials argue that plenty of punch is yet to come as money works its way through the pipeline for infrastructure, such as road construction, and other projects.
"We're just now starting to see the infrastructure kick in and lead to job creation," said David Wyss, chief economist at Standard & Poor's. " 'Shovel-ready' doesn't always mean shovel-ready."
This year, spending will shift to investments in infrastructure, energy-efficiency upgrades, broadband and other areas. It is this spending that has been slow to ramp up. Of the $226 billion that was put toward these investments, only $31 billion has been spent.
The result, officials say, is going to be a major surge in this spending in coming months. Although only $3 billion in investments was spent per month on average last year, officials expect that rate to more than double, to $7 billion per month, from now until June.
Of the $20 billion for health technology upgrades, only $1 billion has been allocated, and none has been spent. Most of the $4.5 billion for "smart grid" upgrades has been allocated, but none has been spent. Similarly, virtually none of the $8 billion for high-speed rail and $7.2 billion for broadband expansion has been spent, though the administration recently announced which areas would be getting the money.