Stimulating the Economy: Lessons Learned

If the president and Congress can ever get together and compromise on their conflicted plans for creating jobs and getting the millions of unemployed back to work, they might want to look at the last stimulus program to see what worked and what didn't.

With the national unemployment rate at 9.1% and their approval ratings in the basement, it's time for the president and Congress to hash out a compromise that has a laser-like focus on job creation without increasing the federal deficit. It can be done.

The political posturing by both sides is obvious and transparent. President Obama wants to tax the rich to pay for the jobs plan, and the Republicans call it "class warfare." Fine. Let's forget the Jobs Bill road tour and the lame press conferences by House Speaker John Boehner about excessive federal regulations stifling business. Would someone just sit down and hammer out the details of a viable plan? The American public is frustrated and sick of inaction, but not in revolt mode yet, as New York Mayor Michael Bloomberg has warned.

The 2009 American Recovery and Reinvestment Act was a hodgepodge of well meaning programs that helped bail out ailing state and local governments. It created more than 555,000 jobs, but it didn't produce the bang for the buck many expected.

In fact, according to recovery.gov -- the official US government Website that tracks how and where the act's funds were spent -- the stimulus has exceeded its original $787 billion cost, with approximately $840 billion either under contract or expended.

Originally pegged as an infrastructure bill, the 2009 stimulus included $282 billion of tax benefits, $284 billion of entitlements, and $275 billion of contracts, grants, and loans. The funding allocation was enormous. But in the end, it attempted to do too much and did not lead the nation out of recession.

The infrastructure components included $30.3 billion for highway infrastructure, high-speed rail corridors, and railroad and airport grants, as well as $22 billion for broadband, federal building, highway construction, rural water, and waste disposal work. The federal government estimates that transportation-related work accounted for 35,582 jobs, but a number of noted transportation officials claim many states simply used stimulus funding to make up for funding shortfalls in their own transportation programs. In other words, the federal funds, while useful, were earmarked for projects that should already have been funded in the first place.

The 2009 stimulus focused on shovel-ready transportation projects. In New York State, there weren't many shovel-ready endeavors available. Therefore, a good portion of the stimulus, according to local building trade officials, went to small "mill and till" projects normally funded by the state. Few stimulus-funded programs involved projects that enhanced the infrastructure of the Empire State. Therefore, the effort did not create any real good will or political capital.

To my point of trying to do too much, here's a rundown of some of the major funding allocations under the 2009 plan: $136.4 billion for individual tax credits; $104.1 billion for "Making Work Pay," which offered tax credits of $400 for working individuals and $800 for working married couples; $85.6 billion of education money that provided funding for State Fiscal Stabilization Fund, student aid, training, and other programs; $85.4 billion for state Medicaid/Medicare grants and other programs; $60.8 billion for unemployment insurance programs; nearly $29 billion for two energy/environment-related funding streams; and nearly $16.5 billion in housing construction and homeowner, rental, and low-income assistance programs.

The top job generators by far, according to federal estimates, were education-funded programs. The Department of Education reported 317,761 jobs generated from the 2009 stimulus. No. 2 on the list was the Department of Health and Human Services (with an estimated 49,028 jobs generated), followed by the Department of Energy (45,900) and the aforementioned Department of Transportation. The fifth-highest job generator as reported by contract or award recipients was the Department of Housing and Urban Development (21,388).

For the new and improved Obama jobs bill to work both economically and politically -- for both parties -- the funding must go to projects that will stimulate job growth and not simply to fund projects that should have been financed by state or municipal governments.

Here's one high-profile idea. How about the Tappan Zee Bridge in suburban New York? Replacing the bridge would cost about $9 billion. What a shot in the arm that would be for the New York region! That project is stuck in environmental approvals and is definitely needed. Right now, a big fat zero is earmarked for its construction. Building a new bridge would create thousands of jobs and would likely garner support from both parties.

Also, the jobs bill should not be just a mechanism to move a project up six to 12 months. This was a criticism of the $8,000 federal first-time homebuyer's tax credit, which propped up the housing market for about six months, only to see sales tumble once the tax credit expired in September of last year. That turned out to be an artificial stimulus and was not sustainable.

If the president and Congress agree on another stimulus, they must address the weaknesses of prior efforts. The last thing we need is another half a billion dollars expended with the only tangible result being more political fodder against any further stimulus programs.