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EconomicPolicyInstitute October 16, 2009

“I consider President Obama to be in the situation of having inherited a burning apartment building,” EPI President Lawrence Mishel told Congress in an October 8 testimony where he projected that unemployment would continue to rise at least through the middle of 2010, and outlined how the government needs to do more to create jobs. President Obama, Mishel said, has already managed to douse the fires in half the floors yet his critics attack him for the flames that remain. Those critics, he stressed, are the ones who lit the fire in the first place.

Mishel presented evidence that the current jobs crisis is rooted in policies that pre-date President Obama, and will lead to a multitude of social ills, including increased poverty and damage to future income growth potential. In his testimony before the House Ways and Means Subcommittee on Income Security and Family Support, Mishel said increased federal assistance was urgently needed. He outlined a five-part approach to create and preserve jobs, including strengthening the social safety net, providing more aid to states, creating more public service  jobs, investing more in national infrastructure, and passing a new job tax credit to spur job creation in the public and private sector. EPI next week will release its proposal for a jobs creation tax credit and more fiscal aid to state and local governments.

Once again, it’s the economy, stupid!
This push for more federal intervention is rapidly gaining momentum. As reported earlier this month in the survey Tracking the Recovery, which Hart Research conducted for EPI,  44% of households have experienced a job loss or a cut in pay or hours over the past year. The survey results were picked up widely in the media. “Until the American people say the recession is over, it’s not over,” said Chris Matthews, host of MSNBC’s Hardball. Matthews said the survey findings should make the Obama administration’s policy priorities clear: “It’s the economy, stupid.”

A New York Times column by Bob Herbert cited the survey results to highlight the disconnect between the concerns of average people and the policies in Washington. “We’re running on a treadmill that is carrying us backward,” Herbert wrote. “Something approaching 10 million new jobs would have to be created just to get back to where we were when the recession began in December 2007. There is nothing currently in the works to jump-start job creation on that scale.”

About those Recovery.gov numbers
The $787 billion Recovery Act passed last February included a number of transparency measures, requiring recipients of stimulus funds to report back on the number of jobs created. The first batch of recipient data was released by Recovery.gov on October 15, showing that 30,383 new jobs had been created so far. EPI’s Research and Policy Director John Irons outlined why this data should not be interpreted as an accurate count of all the jobs created by Recovery Act spending.

Irons’ analysis describes the initial recipient report as only the “partial monty.” It represents only $16 billion in awarded contracts, meaning that it excludes jobs created or saved by grants, loans, tax cuts, or any relief spending, such as unemployment insurance and food stamps or state fiscal assistance. In addition, this initial report only measures direct employment. It does not include jobs created from “respending”, such as those created or saved indirectly by workers’ new spending and consumption, or “upstream” jobs that are created or saved at companies that manufacture, transport, or sell the supplies used by recipients of Recovery Act investments. In the end, the Recovery Act’s full monty will look more like 3 to 4 million jobs created over two years.

Jobs and the global economy
Two recent EPI briefing papers discuss the role of global economic policies in creating and preserving jobs in the U.S. In the Briefing Paper Climate Change Policy, EPI Senior International Economist Robert Scott warns that the Senate needs to choose wisely in crafting a climate bill. While an effective policy will support job creation and establish a fair system among countries with disparate climate change policies, a poor climate change policy could  push high-carbon producing industries to countries without restrictions and result in higher emissions worldwide.  Scott’s paper stresses that the  United States needs to be mindful of international trade when creating these policies, and should include in a climate-change bill fees on the carbon content of goods imported from countries that don’t restrict  emissions. The report includes a state-by-state breakdown of the 4.1 million jobs that could be at risk if poor climate policies are adopted.

EPI research associate Usha Haley’s Briefing Paper, Through China’s Looking Glass, tracks the explosive growth in China’s glass industry in recent years. Haley, an Asia fellow at the Harvard Kennedy School, shows how Chinese government subsidies helped bolster this growth and have contributed to the loss of glass manufacturing jobs in the United States.

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