Democrats get little boost from stimulus

By Shailagh Murray
Washington Post Staff Writer
Saturday, August 7, 2010; A01

ELYRIA, OHIO -- Republican House candidate Tom Ganley sold more than 800 cars last summer through the "Cash for Clunkers" government rebate program. But does Uncle Sam get a thank you?

"Let's talk about Cash for Clunkers," the voluble millionaire, who owns the largest auto dealership group in Ohio, told a group of voters here recently. "It created a 30-day surge in auto sales. After it ended, there was no business. It was like the faucet was shut off."

As the nation struggled through a painful recession, the Democratic-led Congress rushed through nearly $1 trillion in spending and tax cuts, aiming to jump-start business investment, keep state and local governments afloat and put people to work, if only temporarily.

Most economists say the nationwide stimulus effort has generally paid off, although they differ on how much. But the cash infusion appears to have done little to restore public confidence either in the federal government or in the Democratic Party. The stimulus may have created or saved up to 3.6 million jobs, as the White House contends, but the jobless rate in Ohio still hovers at a crippling 10.4 percent.

That has left Democrats such as Ganley's opponent, Rep. Betty Sutton, trying to convince voters that the stimulus made a bad situation somewhat less bad.

Doesn't exactly pop off a bumper sticker.

Sutton, a longtime state representative who was elected to Congress in 2006, led the effort to pass Cash for Clunkers. Her northern Ohio district, a blue-collar swath that stretches from Akron to Lake Erie, is heavily dependent on the auto industry.

Sutton thought she scored a legislative coup when President Obama signed the Clunkers bill into law. The rebates of up to $4,500 for people who traded in old cars for more-fuel-efficient new models were one of the few stimulus programs to attract broad bipartisan support. It was so popular that it required a second federal cash infusion.

But Sutton is a top target of Republicans, in part because of her support for the program. Her opponent's 31 dealerships sold an estimated $17 million worth of cars through Clunkers rebates, but he now denounces the program as a fiscal folly.

"I'm against government intervention of any kind," Ganley asserts.

The stimulus "creates work and not jobs," Ganley told the gathering of voters. "That may sound like a contradiction, but as we drove out here today there were all the orange barrels out on the highway, and all this work was being done with money from the stimulus. But as soon as that road's finished, the work's gone."

Polls have shown that many Americans view the stimulus as a bust. Sutton -- who has been stuck working in Washington for most of the summer as Ganley campaigns in the state -- said she realizes that it won't be easy to convince some voters that Democrats did the right thing.

"There are trust issues," Sutton said in an interview in her Capitol Hill office. The loss of faith in government "hurts our country in politics and in spirit. There's a lot of anxiety, and I understand the anxiety."

How can nearly $1 trillion flush through the U.S. economy, with tangible results, and still leave voters dubious?

Some blame Obama and Democratic leaders in Congress for failing to set clear and realistic expectations.

The centerpiece of the stimulus effort, the $787 billion American Recovery and Reinvestment Act approved in February 2009, included a sprawling array of policy initiatives. Obama got to deliver on campaign promises to invest in alternative energy and advance high-speed rail development. Liberals got their funding for Head Start and community food banks, and centrists got middle-class tax breaks. (Republicans saw very little in the package that they liked; only three GOP Senators and no Republican House members voted for it.)

It proved difficult to keep track of all that spending, and the White House and Democratic leaders had a hard time showing how it was contributing to the recovery.

"The branding and marketing was done very poorly," said Alan Blinder, a Princeton University economist who supported the stimulus. "When you spend that much money, there should be more recognition."

About $2 billion of the stimulus money flowed to Sutton's Ohio District. The funds are paying for 628 projects, making it one of the largest concentrations of federal spending in the Midwest.

The list includes $400 million to replace the decrepit Inner Belt Bridge in suburban Cleveland and $25 million to expand a BASF Catalysts lithium-ion battery plant in Elyria. The Akron Urban League received $2 million to expand broadband Internet service to 3,500 users, creating 13 jobs. The town of Lorain secured $15,390 to retrofit seven school buses with pollution-control gear, and the Ohio Department of Transportation won a $2,500 grant to buy spare parts for the Brunswick municipal fleet. And the Car Allowance Rebate System, better known as Cash for Clunkers, lured customers into auto showrooms, staving off layoffs at the local Ford factory and its suppliers.

Yet it could take months, even years, to see the benefits from some stimulus projects. A year ago, Akron-based First Energy Service Co. applied for a $36 million U.S. Department of Energy grant to install 5,000 high-tech meters in Cleveland area homes, a project that would turn the region into a test market for "smart grid" technology aimed at reducing energy consumption.

Energy was one of Obama's stimulus priorities. With plans to eventually reach 44,000 households, the company could wind up creating an estimated 1,200 jobs in installation services, infrastructure upgrades and meter manufacturing.

A year later, the project has yet to get underway. First Energy's application was approved in late October, but Ohio hasn't come through with $36 million in matching funds. "There is a lot that goes into preparing something like this before the first dollar is spent or the customer sees any effect," First Energy spokeswoman Ellen Raines said.

Don Kelsey, a 50-year-old fabric store employee, stopped to greet Ganley at the Summit County Fair, intrigued by the candidate's pitch that he is "a businessman, not a politician." Kelsey didn't buy a new car last year, and he had never heard of a "smart" electricity meter. "I'm fighting from paycheck to paycheck," Kelsey told Ganley. "I don't understand why everyone's getting help but me."

Sutton hopes that voters will look beyond the road projects that are putting people to work short term and recognize the benefits of longer-term investments in new industries and a better-prepared work force. Lorain County Community College, which Obama visited in January, has retrained 600 unemployed residents using stimulus money, and about half have found jobs. Hundreds more are continuing to enroll.

Ten years ago, about a third of Lorain County's jobs were in manufacturing. Today that figure is about 15 percent. "It's not a short-term proposition," said Marcia Ballinger, the college's vice president for strategic development. "There are short-term pieces of it, but the problems just run so deep."

Even Cash for Clunkers is difficult to measure empirically. Ganley is a critic, but some of his competitors are big fans. "It jump-started the entire industry, and it couldn't have come at a more opportune time," said Alan Spitzer, chief executive of Spitzer Auto Group, who urged Sutton to push the rebate program and whose 23 dealerships sold about 1,000 cars through Cash for Clunkers.

Joseph Lee, plant manager of the Avon Lake Ford plant, said the steady decline in production, which forced 200 layoffs in 2009, started to level off when Cash for Clunkers took effect. That was true even though his plant makes gas-guzzling Econoline vans, not the compact cars that were selling best. "All I know is my plant was shutting down week after week. And then we weren't."

A year ago, even Ganley had a rosier assessment of the program. He told the Cleveland Plain Dealer that it "certainly primed the pump," although he complained about its execution.

"It's a little duplicitous," Spitzer said of Ganley's reversal. "This program woke up the market. It was an unqualified success."

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