In the aftermath of last Friday’s dismal December 2008 unemployment report President-elect Barack Obama used his weekly radio address to reiterate his call for Congress to pass his economic recovery plan. As he nears his historic swearing-in next week, the President-elect is working at a feverish pace to win support on Capitol Hill for his plan. In the last week he has run into some opposition from within his own party over the inclusion of business tax cuts, a provision that Republicans support and Obama says should be part of a multi-pronged strategy to resuscitate the economy.
In his address Mr. Obama said, “The jobs we create will be in businesses large and small across a wide range of industries. And they’ll be the kind of jobs that don’t just put people to work in the short term, but position our economy to lead the world in the long-term.” The President-elect announced the release of a report that outlines his proposal. The analysis was prepared by his nominee for Chair of the Council of Economic Advisers, Dr. Christina Romer, and the Vice President-Elect’s Chief Economic Adviser, Dr. Jared Bernstein.
The key components of the Obama plan, as detailed in the report, are 1) investments in infrastructure, health and energy 2) temporary assistance to vulnerable populations 3) state fiscal relief to help restore cuts in healthcare, education and prevent tax increases at the state and local level 4) business investment incentives and 5) a middle class tax cut. The report also puts the tab at slightly over the $775 billion figure that has been frequently cited in news reports over the last two weeks.
Mr. Obama noted, “The report confirms that our plan will likely save or create three to four million jobs. 90 percent of these jobs will be created in the private sector – the remaining 10 percent are mainly public sector jobs we save, like the teachers, police officers, firefighters and others who provide vital services in our communities.”
While the mechanics of the plan have yet to be finalized, and will require a significant amount of negotiating to reach a bipartisan consensus, the President-elect has identified four sectors in which job creation will be focused and efforts to save jobs or transition part-time work to full-time work will be a priority. The areas are energy, where the goal will be the development of “green jobs,” those that are tied to protecting the environment; infrastructure, with spending on new construction and repair of roads, bridges, and mass transit; health care, a sector that is one of the few that has generated jobs over the last twelve months; and education, where some of the focus will involve school construction and retrofitting buildings to make them more environmentally sensitive. By the authors of the reports calculations the plan could conceivably create 3.7 million jobs by the fourth quarter of 2010.
The report also calls attention to the disproportionate impact the economic downturn has on certain demographic groups. Specifically, African-Americans, Hispanics, young adults, the less educated and male workers are cited as the most vulnerable. The authors note, “The experience in the current downturn is typical: unemployment rates among these groups have risen substantially more than the overall unemployment rate.”
One of the challenges facing the Obama administration is the rate at which the economy is shedding jobs. Over the last two months of 2008 over 1 million jobs were lost and the economy has shed 2.6 million jobs since the peak of the business cycle in December 2007. There is a potential loss of another 3 or 4 million jobs over the course of the recession, expected to last into 2010. Even with the Obama plan’s projected job growth, at best it will prevent the unemployment rate from ballooning to 8.8 percent by 2010. By the report’s analysis the rate should hold at 7 percent if the economic recovery plan is implemented.
In the coming week Mr. Obama is expected to press his case with Congressional leaders in the hope of reaching some consensus on the specific elements of the plan. Originally, he had hoped to have legislation ready for his signature after his inauguration on January 20 but that timetable has been pushed back in recognition of the need to build support for the proposal on Capitol Hill. The goal is now to have legislation ready for hearings and debate in early February with a bill on Mr. Obama’s desk shortly thereafter.