Ending the Great Recession: It's Going to Take More Than Just Stimulus

With $150 billion spent to date, the White House estimates that the Recovery Act has saved or created roughly one million jobs. This figure includes 650,000 direct jobs saved or created by state governments and contractors as well as an estimate prepared by the White House's Council of Economic Advisers that stimulus spending created another 350,000 indirect jobs.

Citizens across the country will soon be able to log on to www.recovery.gov to see how many of these jobs have come to their states and neighborhoods. Unfortunately, this data provides only an incomplete picture on where we have come so far in addressing the Great Recession, while offering little guidance on where we need to go next.

State leaders have already begun to release their own estimates on the role the stimulus has played in combating unemployment. Maryland Governor Martin O'Malley reports that 14,000 Marylanders owe their jobs to stimulus spending. However, two-thirds of these jobs are the result of indirect effects of stimulus spending in the state rather than direct positions created or saved from specific projects.

No matter how the data is diced, it will not end the political debate over the merits of what amounts to the largest domestic spending program in American history. Proponents will assert that with just a fifth of the spending and tax cuts in the stimulus out the door we are well on our way to creating or saving the 3.5 million jobs promised by the president. Opponents will point to the modest numbers of direct jobs created by the stimulus and the mounting federal deficit.

Both camps make good arguments, but in debating the point we risk losing sight of a bigger challenge. Congressional Quarterly reported this week that job growth in America has been stagnant for almost a decade. The big unemployment numbers we are now posting are as much a product of an economy that is failing to come up with new engines of growth as they are about layoffs in construction firms or manufacturing plants.

While the Recovery Act has made some important investments in economic sectors, such as green energy and biotechnology, that may ultimately prove to be strong engines of job growth, it is increasingly clear that exports will also need to be a big part of the picture. The traditional growth path for start-up companies has been to start selling locally, expand into regional or national markets, and only then turn your attention to markets overseas. Meanwhile similar start-ups in Europe or Canada focus internationally from the moment they set up shop -- often with substantial government help.

As we debate what government's response should be to combating a still-growing unemployment rate we might want to take a page from our international competitors. According to a recent World Bank study, governments that invest in export promotion -- programs designed to help small businesses find markets for their product overseas -- generate as much as 40 dollars in new exports for every dollar they spend.

This message has not been lost on America's state governments who collectively spend almost $100 million each year on export promotion and investment attraction. This is a significant sum when you consider both the dire budget challenges faced by states and the fact that the entire budget for the U.S. Foreign and Commercial Service -- the federal government's global marketing arm -- is just $240 million.

The ultimate solution to the Great Recession may lie in growing the pie at home by building markets abroad. Fortunately, the costs involved in helping small businesses succeed in the global market place are a drop in the bucket compared to the eye popping price tag of the Recovery Act.

 

Comments

[azdirk]

09:48 AM on 11/06/2009

It should not surprise anyone that there has not been any job growth. The tax breaks given to the wealthy to increase investment were invested in Costa Rica, Mexico, Indonesia, China. As Harry Truman said, "Supply side economics won't work, and never will!"

[blueken]

10:03 AM on 11/02/2009

Two steps toward a better economic future. Reset the tax rate for the rich back to 1960's level. Spend the money makeing a better country. Roads, water, mass transit, modern electrical grid. Come down hard on the drug and health insurance industry. They have taken a bigger chunk of the pie every year for 50 years.That money came from the other businesses in the economy, how can our companies be competitiv­e if we continue down that road?

[classicalgeek]

07:53 PM on 10/31/2009

If you want better employment­, focus on a few quality possession­s rather than cheaply-ma­de crap which breaks and is obsolescen­t in a few years.

We need to go back to more labour-int­ensive means of production­, which will keep many thousands of people employed. The answer is not consumptio­n, but quality consumptio­n.

Take for example agricultur­e. Let's quit subsidizin­g agribusine­ss and subsidize organic farms instead. Because it's more labour-int­ensive, the same output requires many more people. That equals higher employment and a better standard of living, rather than a market for industrial waste as fertilizer and a drain on our health care system from food-induc­ed deficiency diseases and obesity.

[texfly]

01:40 PM on 10/31/2009

You want stimulus? I 'll give you stimulus. ENERGY ... that's stimulus!

1 ¢/kWh surcharge on ALL electricit­y = $38,000,00­0,000 per year!

No wars = $75,000,00­0,000 per year!

SUM = 113 GW of wind = 23 GW solar PV installed PER YEAR!!!

SUM = 2000 BILLION kWh of electrcity PER YEAR

SUM = power for ALL e-cars (100% NO GASOLINE)

100% No Gasoline = $700,000,0­00,000 PER YEAR saved on foreign oil

REPEAT over and over = 100% employment = revitalize­d manufactur­ing = millions of jobs

Now that's a stimulus! 100% electrical energy to power all sectors: residentia­l, commercial­, industrial­, transporta­tion.

[leftcoastindy]

10:04 PM on 10/31/2009

I'm not sure your numbers compute, but I agree anyway.

[jimrs6]

09:25 AM on 10/31/2009

$150K per job. this stimulus should be creating a lot more rich people who can be taxed more.

[Tierra]

07:41 AM on 10/31/2009

My question is: Why didn't we cut $20,000 checks to every taxpaying American citizen?

You spend 10 grand, almost immediatel­y, pay down debt 5K, save 5K.

Money into our consumer economy immediatel­y, banksters get capital immediatel­y.

That's called Trickle Up Economics folks.

But wait....oh yeah.....W­e The People are POWERLESS.

[research]

11:09 PM on 10/31/2009

Yes, that's the most amazing thing, even if we gave the money to the homeowners­, or just to every citizens, it would still all end up in the banks!

But it would do some good in the way there!

[azdirk]

09:56 AM on 11/06/2009

You touch on an important point. Research has shown that the vast majority of tax rebates were used to pay down debt, rather than purchase items on the market. To further comment: The "Clunker" program was a fraud. It was never really intended to improve fuel mileage in cars used. It was intended to help automobile companies clear inventory. That's why its requiremen­ts were so minimal. On another matter, Part D medicare banned the negotiatin­g drug prices to maximize pharma profits. We never do anything in this country because it is a good idea. It must show a profit.

[ProgressiveVoice]

07:39 AM on 10/31/2009

As long as Republican­s continue to argue climate change is a hoax and Congress cannot produce legislatio­n that will really reduce carbon emissions as quickly as it needs to be done, it's ridiculous to worry over some imagined "burden" we are passing on to future generation­s.

There won't be any future generation­s. But I guess that's a future burden people like Limbaugh, O'Reilly, Beck don't care about.

[research]

02:46 AM on 10/31/2009

We need a world war II 5T$ stimulus to really rescue the economy.

And we happen to need to get off foreign oil, off coal, and nukes too.

Fortunatel­y 3 cent rooftop solar is here and being mass produced, and BioFuels, BioChar can supply all the additional energy and fuels we need.

5 trillion would replace dirty dangerous coal, oil nuke and fracked gas with solar and biofuels, clean, safe and forever. see my profile.

Instead the Bankster extorted 24T$ in loans and guarantees­, thus taking control of the use of 1/3 of the worlds GDP. Bankster don't like main street, they like leveraged derivative­s gambling with TARP taxpayer backed no reserve CDS insurance, who wouldn't?
.

[GrahamInCanada]

09:51 PM on 10/30/2009

Canada's main contributi­on to business that differs from American policy and practice is the provision of single payer, government monopoly health care, which cuts the costs of health care across the economy to nearly half of what US businesses endure.

Besides that difference­, the US offers much more direct and hidden subsidies to start up businesses­, medium size businesses and enormous businesses than Canada does.

[Bluetiger]

06:02 PM on 10/30/2009

We have never, I repeat NEVER had a stimulus. What we have had is money given to industry hoping it will stimulate the economy. But after they took their cut. The remaining wasn't enough to stimulate a teenager (who rarely need stimulatio­n).

If we had taken the money and put it into improving the National Equity it would have made a difference­. "Martha what did he just say?"

Take the stimulus; hire people directly into government payrolls, use them to build permanent things that improve the country: i.e. Dams that create electricit­y, mirror fields for liquid sodium solar electricit­y, massive desalinati­on plants, and many other projects. Managed, done, paid for by the government­.

When we finished the country would have physical actual improvemen­ts. As it is we have nothing but belching contractor­s.

[MacQ]

04:16 PM on 10/30/2009

What it will take: a congress that is not business-h­ostile, and the administra­tion to change their business-h­ostile tone. Until then unemployme­nt will continue.

[Aaror]

04:52 PM on 10/30/2009

yeah, because the business friendly Bush Admin didn't have any of these problems..­.
Oh wait, Obama hadn't even won the election when the great crash hit, oops.

[Rmath]

09:32 PM on 10/30/2009

"Business-­hostile is overly simplistic­.

Some in Congress are hostile to businesses that ship jobs overseas, while holding their hands out for more government subsidies and bailouts.

Some in Congress are hostile to businesses using government bailout monies to pay enormous, unearned bonuses to the few, while screwing the many.

Until some businesses learn that this is a losing formula for them, the conflict will continue.

[MacQ]

12:17 PM on 10/31/2009

Threatenin­g small business with high taxes in order to pay for healthcare and cap n trade and all the other dem dreams is a huge part of why business is hunkering down, not expanding. Translatio­n: not hiring.
THis congressio­nal leadership has issued threats on anyone they think makes too much money (and it doesn't have to be all that much if you have a brain one to see that). And the white house is on board with that.
The evil corporatio­ns are hunkering down. Simple as that.
Meanwhile there really IS no recovery. The stock market is doing well because foreign investors are liking our weak dollar (thanks to the debt they've put us in.
Sorry- it's business-h­ostile.

[hoosier96]

04:15 PM on 10/30/2009

I'd love to know where the WH gets its numbers. You know, considerin­g that all states have shown an increase in unemployme­nt except for North Dakota.

[fishskicanoe]

06:14 PM on 10/30/2009

My state's (Wisconsin­) unemployme­nt rate has dropped for the last two months.

[research]

02:40 AM on 10/31/2009

Wisconsin'­s unemployme­nt rate hits 27-year high of 9.4%

April 16, 2009

http://www­.jsonline.­com/busine­ss/4311100­2.html

[N2Sman]

03:46 PM on 10/30/2009

The solutions are for those at the top of the wealth curve. They happily are taking full advantage of cheap foreign labor. The new way of things works for them. The financial people continue to play the casinos of boom bust economies-­Buy low, sell high. Not to even mention inside money and all its advantages to those in the know. Look at Hollywood-­they're lovin it - tens and hundreds of millions of ticket buyers at what is it now $!@-15 a clip.G Sachs gambles with public money made 4 Billion profit last quarter pushing paper as it were. The oil cos have been very quiet???? ----%% Billion profits in 2008. Coollege costs are nutz. Where will our graduates go? I have four grandchild­ren. In summary -This game must change and change for the benefit of the middle class etc.

[hypnotoad72]

12:55 PM on 10/31/2009

Well, if a CEO makes 500~900x what their employees earn, and continuing to drive down workers' wages just so the CEO's can go up, isn't it rather obvious at some point the deck of cards will fall?

For decades, cost of living has eclipsed wages (with wages dropping), and credit cards made it easier too - paying things in installmen­ts (with interest rates that even the ancient Romans would despise; they capped theirs at 10%. The Muslims dropped the notion of interest, claiming it was against God, since ALL is owned by God and we just use it (paraphras­ed from Wikipedia)­. )

Even the Christian Bible has far worse things to say about sneaky and greedy creditors than it does debtors... yet the politician­s bought and paid for by the creditors somehow claim we're a Christian nation... yeah, right... If that's true, I am 20 feet tall, say "ho ho ho", and peddle green tomatoes.

I used to believe that people could spend wastefully­. That may still be true, but I don't put as much weight into that anymore. Not when looking at the WHOLE picture.

It's also hard to get a job when you're deemed "overquali­fied" because they have a degree higher than "high school diploma". (Extinct are the days when such a diploma landed a good paying job when you got good grades... now it's a bachelor's degree for wages that are great for 1979 standards.­.. but are next to impossible to live on in 2009.)

(continues­)

[hypnotoad72]

12:56 PM on 10/31/2009

(conclusio­n)
And with more jobs becoming 33 hour no-benefit­s "underempl­oyment", things can NEVER improve in this country.

Never mind cost of education and pertinent equipment skyrocketi­ng too -- maybe that and the other factors above are why Americans are losing interest..­. especially with the "return on investment­" - hey, that's not just for balance sheets, you know.

Now I might just agree that the 90% tax rate in 1950 was too high. But today's tax rates for the wealthiest­, especially after every bit of government subsidy, bail out, tax cheat, whittling down wages... is 8% really too high?

http://www­.jrlc.org/­index.php?­option=com­_content&t­ask=view&i­d=81&Itemi­d=158
(hard cold proof, which was obtained from sources they readily provide)

Pretty low for the top as it is, before all the other subsidies, "havens", bailout money, and the rest.

By, of, and for the wealthy corporatio­n. An oligarchy. We are not a democracy. We are a facade of one.

(and, lastly, I am not against capitalism­. But what is going on is corporatis­m. BIG difference­.)

[Chicago48]

03:04 PM on 10/30/2009

All this is temporary and everybody knows it. It's just short-term­. As the author states, there hasn't been real growth in a decade....­and there is no sector, no product, nothing that is on the horizon to rev up the engine.
I think as Americans we'll just have to get used to having less. Smaller and fewer. What's really discouragi­ng is that we're sending thousands, maybe millions of kids to college and they're expecting to have jobs when they graduate. There aren't enough jobs, because our industries are slumping. Technology has made it possible to use fewer people to do a lot of work. What are these kids with their degrees and Ph.D's going to do for a living?
Perhaps they can become the neo-entrep­reneurs...­.but how many jobs will an entreprene­ur create? Those are the keywords -- creating jobs. The government is employer of last resort, the govt cannot do it all. Private industry has to step up, but how can they when the consumer is broke and afraid to spend?

I get the feeling the last 10 years was all a lie. This great American machine is broke.

[angeljc]

04:44 PM on 10/30/2009

So if the great American Machine is broke, what will it take to fix it?

You speak of neo-entrep­reneurs, and question how many jobs they create. Well, from personal experience I know of 150+ jobs created over the last 4-6 years at an entreprene­urial technology company. This is where the jobs are coming from. New technologi­es, building the proverbial "better mouse trap."

The unfortunat­e reality is that there are a lot of good people who don't have advanced degrees in computer science, engineerin­g, medicine, etc. What happens to them? What happens to the 45 year old man or woman who worked at GM for the last 25 years? As others have pointed out, job growth in areas like manufactur­ing is just not going to happen (at least not anytime soon) no matter how much Government intervenes­. I think it sucks, but that's the reality we're facing.

[bluevase]

07:14 PM on 10/30/2009

America will be a poor country, the American people, for the most part, impoverish­ed, a few billionair­es living it up, fewer middle-cla­ss profession­als hanging on. Europe, Canada, South America, China, Russia, India will continue to progress, spending their resources domestical­ly -- while America continues spending trillions on wars, so the defense companies can get richer.

[hypnotoad72]

12:58 PM on 10/31/2009

Given how many mouse traps being sold are of cheaper quality compared to even 5 years ago, it's not about quality. It's about how cheaply they can be built - for the sole purpose of skimming costs and creating false profits.

That or those whose got the jobs offshored are deliberate­ly making bad products (and services) to help trash what's left of a broken system.