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Democrats Contemplate Direct Government Hiring

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As desperate Democratic lawmakers cast about for ways to create jobs from Capitol Hill, a 1970s-era jobs program is getting a fresh look.

Known as CETA -- the Comprehensive Employment and Training Act -- the program provided direct government funding to hire temporary workers. At its peak in 1978, it had created 725,000 public service jobs and shaved roughly one point off the unemployment figure.

A one-point drop in the unemployment rate -- not to mention the ancillary benefit of hundreds of thousands of people having money to spend on other goods and services -- would give politicians something concrete to point to before the mid-term elections.

"That's certainly one of the options being discussed, the CETA program back in the 70s," House Majority Leader Steny Hoyer (D-Md.) told HuffPost in a recent interview, when asked if leadership was considering direct government hiring as a partial answer to the deepening unemployment.

But skepticism abounds, both among Democrats and economists. There are much more efficient ways to create jobs -- or prevent them from being lost -- such as direct aid to states that would otherwise layoff teachers, cops, firefighters and bureaucrats. That doesn't require creating a new bureaucracy, it's just a matter of cutting the check.

"Most economists are not sure that [CETA] works as well as some other things that they think would be better, like infrastructure investment and assistance to the states, which helps them retain jobs," said Hoyer. "In other words, if you're creating jobs while the states are jettisoning jobs because they are under such financial stress, obviously you have a net zero [effect]. So you want to keep the state jobs and invest in creating jobs in the private sector."

Aid to strapped states is one of the top priorities for Democrats, but conservative members of the party, such as Nebraska Sen. Ben Nelson, as well as potentially allied Republicans such as Olympia Snowe and Susan Collins, have fought to limit such assistance. Roughly $40 billion in aid to states was cut from the first stimulus package in response to conservative concerns about overspending. As a result, thousands of teachers and cops have lost their jobs.

With deficit hawks standing in the way of fully assisting distressed states, the CETA program becomes more politically attractive to Democrats. It carries with it the hope of bipartisan support, since there's something in it for the business community.

The version of CETA being discussed by Democrats would be some type of public-private partnership through which the government would pay part of an employee's salary, while he or she would train under and work for a private firm. The hope would be that the firm ends up hiring the employee with its own money when the government subsidy dries up, but in either case, the worker gets training that assists in the job hunt.

Business groups might have to lobby the GOP to get them to yes, however.

Michael Steel, a spokesman for Minority Leader John Boehner (R-Ohio) gave CETA the instant thumbs down. "American families are asking 'where are the jobs?' but out-of-touch Washington Democrats are more intent on growing government," Steel wrote in an e-mail. "After squandering one trillion dollars on a 'stimulus' that just isn't working, they want to double-down: Borrowing more money from China and the Middle East to spend pleasing their special interest allies, and passing the tab to our kids and grandkids. Enough is enough."

Nonprofit organizations with liberal ambitions could also benefit from the subsidized labor, and more government workers would be needed to prevent waste and fraud.

Indeed, abuse of the program would likely be one of the biggest problems it would face.

"The more money you put on the table, the more incentive you're giving people to defraud it," said Dean Baker, an economist with the liberal-leaning Center for Economic Policy and Research. Baker favors subsidizing businesses that cut down on worker hours. Such an innovative proposal would free up demand for more labor while mitigating the pain of a full layoff.

CETA, said Baker, would be better than nothing. "It's certainly better than having people be unemployed," he said. But he added that it could come at a big political price when reporters inevitably find some chump claiming to be employing his brother while splitting the government paycheck.

Requiring businesses to pick up a portion of the tab would cut down on fraud, Baker suggested.

A bigger problem comes in when you consider that employers, even in a down economy, are hiring some four million new workers every month due to turnover and attrition. It would be difficult for the law to prevent companies from taking a subsidy for hiring they had planned to do anyway.

"You're going to hire someone anyhow," said Baker, "so why not have the government pick up the tab?"

One benefit of the program is that the costs are predictable. Even if some of the money is ripped off, the government can limit its spending by subsidizing only a certain number of jobs. A million full-time salaries at $10 an hour, for instance, would cost $20 billion per year, plus supervisory costs. And even the money that's obtained fraudulently is entering the economy. Unemployment benefits, after all, go to people who aren't working (by definition) and have a stimulative economic effect regardless.

Walter Shapiro, who worked in the Jimmy Carter administration -- the last to push such a public-works program -- said that the earlier iteration of the program underperformed because it wasn't bold enough.

"[T]he problem with CETA was not that it embodied Big Government, but that it was not big enough. CETA left behind no lasting monuments like LaGuardia Airport and the Hoover Dam, no evocative art like the WPA murals in post offices and libraries. The administration of CETA was lax, but almost all of its scandals were small-bore local corruption," he writes for Politics Daily.

"Today, even more than in the 1970s, there is a moral argument for public service employment. While Barack Obama's stimulus package was advertised as shovel-ready, a public jobs program would be people-ready. The societal waste and the wrecked lives from double-digit unemployment will leave scars that may take decades to heal. But what liberals should have learned long ago from CETA is that effective management matters -- and that an ill-designed program can turn a laudable idea into a laughing stock."

The moral argument for some sort of relief is being made with increasing fervor by progressive organizations. Last week, major liberal groups put out an "urgent call to action to stem the U.S. job crisis."

The statement was signed by the AFL-CIO, NAACP, and the National Council of La Raza, among other groups.

Meanwhile, Republicans have put forth few ideas to create jobs beyond cutting taxes, so joining Democrats in backing CETA would at least give them something to tout.

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