The U.S. economy is breaking records—bad ones—at a frightening clip. The national unemployment rate of 7.6 percent is at a 16-year high, and today the government announced the economy lost another 598,000 jobs in January. Auto sales reached a 27- year low in January. Home foreclosures are showing no signs of slowing. And consumer spending fell by $102.4 billion in December compared to November 2008 as the economy contracted at the fastest pace in a quarter century.
Clearly, swift and dramatic action is necessary to drastically improve the state of the American economy. President Obama and progressives in the House of Represenatives and Senate understand the need for urgency, but conservatives in both chambers of Congress continue to block swift action.
President Barack Obama and House leaders last month responded rapidly to the growing economic crisis by crafting the American Recovery and Reinvestment Act, H.R.1. This bill would save existing jobs, create new jobs, help those who are out of work, and lay the foundation for future jobs. It accomplishes this by increasing government spending and investments, including more than $90 billion for clean energy programs and tax incentives. It would also cut taxes for struggling middle- and lower-income Americans. On January 28, the House of Representatives approved the package by a 224 to 188 vote. All 177 Republicans (one was absent) and 11 Democrats voted against the bill.
Senate progressives this month strongly support swift, comprehensive action, but additional support is necessary to reach a supermajority of 60 votes necessary to pass the recovery package. A group of Senate moderates led by Senators Susan Collins (R-ME) and Ben Nelson (D-NE) are trying to craft a less expensive package. This proposal may jettison or slash provisions that create jobs and save taxpayers money, such as funds to make federal buildings more energy efficient.
With or without a deal, however, the fate of economic recovery measures to save and create jobs may depend on Senate conservatives, many of whom voted for the $750 billion Wall Street financial rescue package last fall but who are balking at spending $800 billion to create millions of jobs on Main Street. The Senate has 35 conservatives who voted with the American Conservative Union two-thirds of the time or more in the 110th Congress. Of these, 22 voted for the $750 billion Emergency Economic Stabilization Act of 2008. These conservatives form a large pool of potential recovery supporters.
|State||Party||Senator||ACU Lifetime Score||State Unemployment Rate, December 2008||Roll Call 213, Emergency Economic Stabilization Act of 2008, 10/01/08|
Unfortunately, like their conservative House colleagues who unanimously opposed H.R.1, many of the senators who supported the record-breaking Wall Street rescue are among the most vocal critics of the Main Street recovery package. Senate Minority Leader Mitch McConnell (R-KY) strongly opposes the recovery bill in its current form. He denounced the House version as being “loaded with wasteful spending.” Sen. McConnell continued to condemn the bill, saying, “Unfortunately, the version Senate Democrats put together isn’t a whole lot better. I can’t believe that the president isn’t embarrassed about the products that have been produced so far.”
Sen. McConnell’s fellow conservative leaders agree. On “Fox News Sunday,” Sen. Jon Kyl (R-AZ) said that, “the basic approach of [the package] is wrong.” And Sen. Lamar Alexander (R-TN) denounced the bill because he believes that federal dollars “ought to be oriented directly toward those items that would specifically create jobs now.” All three senators voted for the Wall Street rescue last fall.
Senate conservatives also criticized the $78 billion in clean energy programs funded by the recovery package that would save and create jobs while reducing energy use. For instance, Sens. John Thune (R-SD) and Tom Coburn (R-OK) have attacked the $6 billion provision to make federal buildings more energy efficient. These senators claim this program would not produce output or increase wealth for Americans. Yet an Obama administration report found that making 75 percent of federal building space more efficient would save taxpayers $2 billion per year due to lower federal energy bills. In three years the savings from more energy efficient buildings would pay for themselves. And this program would create jobs for construction workers, as well increase employment at companies that manufacture high-tech windows, insulation, and other efficiency materials.
Sen. Thune swears he “happen[s] to be one who supports green technology [and] thinks we ought to be moving in that direction,” but he then adds that energy should be addressed in annual energy bills because “these programs do not create jobs.” This ignores the testimony by Congressional Budget Office Director Douglas Elmendorf, who explained that the House-passed American Recovery and Reinvestment Act, H.R. 1, “would increase GDP relative to the agency’s baseline forecast by between 1.2 percent and 3.5 percent by the fourth quarter of 2010 and increase employment at that point in time by 1.2 million to 3.6 million jobs.”
Sen. Coburn attacked all investments in energy measures provided for in the Senate recovery plan, declaring that renewable energy and efficiency programs should not be addressed in the bill in any capacity. He told his Senate colleagues:
There is about $47 billion for a variety of energy programs that are primarily focused on renewable energy. I am fine with spending that. But we ought to get something for it….This bill is the start of that [American] downfall. To abandon a market-oriented society and transfer it to a Soviet-style, government-centered, bureaucratic-run and mandated program, that is the thing that will put the stake in the heart of freedom in this country.
Yet Coburn supported the $750 billion in aid to financial institutions suffering from making risky investments gone bad.
Despite conservatives’ professed concerns about spending money on programs that would not have an immediate jobs impact, so far none of them objected to the inclusion of a proposal by Sen. Robert Bennett (R-UT) to add $50 billion for loan guarantees for “low-emission energy sources.” This program mostly guarantees loans for nuclear and “coal to liquid fuel” projects. Such investments would not save or create many jobs, particularly in 2009 and 2010. It will take at least three years to license new reactors, and at least six more years for construction.
Indeed, the Department of Energy has yet to spend $38.5 billion for this same program, which indicates it could be quite some time before it spends these new funds. Nuclear projects simply aren’t “shovel ready,” a condition for spending established by conservatives such as Senator Lindsey Graham (R-SC). And a dollar invested in energy efficiency or renewables creates at least three times more jobs compared to an investment in nuclear power.
Conservatives attack the government spending in the Senate recovery plan, favoring tax cuts instead. This ignores the many economists who believe that repairing highways and bridges, increasing energy efficiency, and other activities would create more jobs more quickly. They believe that government spending better stimulates the economy than simply cutting taxes, creating more jobs and fueling greater economic output. Chief Economist for Moody’s Economy.com Mark Zandi wrote in “The Economic Impact of the American Recovery and Reinvestment Act”:
“The temporary tax incentives to support business investment and hiring in the House stimulus plan do not provide a particularly large economic benefit….Increased government spending provides a large economic bang for the buck and thus significantly boosts the economy.” (italics added).
The preferred conservative economic prescription of tax cuts was tried for the past eight years. This approach yielded the least job growth of any president since the Truman administration.
The funds provided in the American Recovery and Reinvestment Act will go to programs that benefit people on Main Street. The package would promptly spur job creation and economic growth. The Center on Budget and Policy Priorities reports that 85 percent of the benefits resulting from the House bill will occur between 2009 and 2011, and 94 percent of the effects of the Senate bill will be realized in the same time period. The CBPP calls criticism of employment creation resulting from the recovery package “misguided.”
The American Recovery and Reinvestment Act would create an estimated 3,675,000 million jobs, including 459,000 jobs from investments in clean energy that Coburn and other conservatives oppose. These, as well as many of the other provisions targeted by conservatives—investments in health, education, clean water, youth job programs, and infrastructure maintenance—are vital and necessary measures to save and create jobs, help the unemployed, and lay a foundation for future long-term job growth.
The 22 conservative senators who voted to rescue Wall Street from its financial blunders must now help Americans on Main Street suffering from those same blunders. Support for the American Recovery and Reinvestment Act would spur employment via investments in bridge and highway repairs, more reliable electricity transmission, education assistance and other programs.
Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress Action Fund. Kalen Pruss is an intern at CAPAF and a junior at the University of Michigan majoring in environmental studies and history.
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Daniel J. Weiss