President Obama signs $26 billion jobs bill to aid state payrolls

By Lori Montgomery and Nick Anderson
Washington Post Staff Writers
Wednesday, August 11, 2010; A12

President Obama approved a final spurt of spending Tuesday to shore up the sluggish recovery, signing into law a $26 billion plan to save the jobs of thousands of teachers and other government workers. The measure brings total direct federal spending on the economy to nearly $1.2 trillion since the nation descended into recession in late 2007.

With economic growth faltering and unemployment stuck at 9.5 percent, some economists are urging additional action. But senior Democrats and administration officials said the package of state aid is likely to be the last major effort at economic stimulus -- at least until after November congressional elections, for which the soaring national debt has become a major issue.

House Speaker Nancy Pelosi (D-Calif.), determined to demonstrate a commitment to fighting job losses, summoned lawmakers back from their August vacation for an unusual one-day session to vote on the package. Democrats argued that it would preserve the jobs of more than 300,000 workers by helping state governors plug their own budget holes.

"We can't stand by and do nothing while pink slips are given to the men and women who educate our children and keep our communities safe," Obama said at a Rose Garden news conference, flanked by Education Secretary Arne Duncan and two public school teachers.

Republicans derided the measure as a handout to teachers' unions, a key Democratic constituency, and argued that it would be no more successful at promoting a robust economy than the massive stimulus package Obama signed shortly after taking office in January 2009.

"This is a bailout. This is another bailout. . . . Let's not do this!" Rep. Steve Buyer (R-Ind.) yelled during House debate. "We're facing almost a $1.5 trillion budget deficit. America, please, please wake up. And remember in November."

In the Washington area, where budget troubles have forced school boards to freeze salaries, trim programs or cut staff, the bill would provide about $70 million for the District, $450 million for Maryland and $540 million for Virginia, according to the Center on Budget and Policy Priorities. Maryland's schools superintendent, Nancy S. Grasmick, said the "money will be helpful" in reducing class sizes and rehiring reading teachers and other specialists.

In a midday vote, the House approved the bill 247 to 161, with all but two Republicans voting no. The measure would provide governors with an additional six months of federal assistance: $10 billion for education and about $16 billion for Medicaid, which will allow them to avoid shifting cash away from other priorities.

The sum is about half what Obama requested. Democratic leaders were forced to scale back the package by rank-and-file Democrats concerned about how more spending would play with angry voters. They also had to cover the cost of the measure so that it would not increase future deficits. The bill includes nearly $10 billion in new taxes on U.S. multinational corporations that do business abroad, and it rescinds after 2014 an increase in food stamp payments enacted in last year's $862 billion stimulus package.

That measure was by far the largest attempt by the federal government to stimulate economic activity. It was not the only such measure enacted to combat the recent recession, however. A $170 billion package, composed mainly of tax cuts, was enacted in 2008 under President George W. Bush, and other measures have been approved under Obama, including multiple extensions of long-term unemployment benefits and the "Cash for Clunkers" auto program.

All told, according to a recent paper by economists Alan S. Blinder of Princeton University and Mark Zandi of Moody's Analytics, Congress has authorized more than $1 trillion in fiscal stimulus. Rescue efforts for the financial system, including the Troubled Assets Relief Program and actions by the Federal Reserve, are not included. The authors -- supporters of the stimulus -- estimate that the ultimate cost to taxpayers for all federal actions in response to the recession will be around $1.6 trillion.

Despite those expenditures, the economy continues to struggle. The prospect of layoffs or tax increases by state officials who are almost uniformly required to balance their budgets remains a major worry. The package approved Tuesday represents less than a quarter of the $116 billion shortfall that states face over the next two years, according to the National Governors Association. "This isn't plugging the hole. This is helping to transition," said David Quam, NGA director of federal relations.

Schools have been particularly hard hit. With the start of school just a few weeks away, class sizes have been on the rise across the country, school bus routes have been cut and a plethora of programs, including summer school, arts, physical education, and health and counseling services, have been slashed. Some school systems even trimmed the length of the school year to make ends meet. As of this month, it remained unclear exactly how many workers had been let go.

By voice vote, the House also approved a $600 million bill to shore up surveillance and security along the troubled U.S.-Mexico border. Senate leaders said they could return to Washington to push that measure to final passage as soon as next week.

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