They’re Never Really Right Anyway…
Since forecasters are rarely right anyway, but it’s clear that life will never be quite the same again, we all need to be figuring out what’s NEXT, right? Time to take a fresh look at what works and what you want to do that works for you. Necessity is, of course, the mother of all invention.
Economic Report Sings Blues on Jobs
By JONATHAN WEISMAN And GREG HITT
WASHINGTON—President Barack Obama’s first official economic report to Congress predicts lackluster employment growth this year and next, even after including the impact of a jobs bill whose prospects appeared uncertain in the Senate.
Senate Majority Leader Harry Reid (D., Nev.) rejected a bipartisan jobs bill Thursday from the Senate Finance Committee in favor of a much slimmer proposal. Mr. Reid is looking at a $15 billion measure, the biggest piece of it focused on tax breaks for small businesses that hire new employees. Other costlier provisions the president wants, such as an extension of unemployment insurance, infrastructure spending and aid to struggling states, have to wait.
In the annual Economic Report of the President released Thursday, the White House Council of Economic Advisers projected employers will add an average of 95,000 jobs a month this year, 190,000 in 2011 and 251,000 in 2012, assuming a jobs package of around $100 billion.
Even then, the unemployment rate would remain at 10% in 2010, falling slowly to 8.2% in 2012 and not reaching the pre-recession level of 5% this decade.
Job creation has become the central focus of Democrats in Washington as the 2010 election season begins. Such economic reports are usually dry affairs, but the new version is a political document, devoting its longest chapter to efforts by the White House, Congress and the Federal Reserve to thwart a “second Great Depression.” It lays the blame for budget deficits, middle-class stagnation and the economic crisis at the feet of Wall Street and Republican policies.
“While Wall Street gambled without regard for the consequences, Washington looked the other way,” Mr. Obama wrote in a seven-page message to Congress, more than twice as long as reports going back to the Clinton presidency.
The report credits last year’s $787 billion stimulus law with boosting economic growth in the last three quarters of 2009. But the CEA is not forecasting a sharp rebound. “We are still facing headwinds,” CEA Chairwoman Christina Romer said.
Republicans said the White House report backed up their criticism of Obama economic policies. “The Obama Administration’s report is full of blame for the policies of the past, praise for its own failed policies, and promises about their ideological agenda to grow government,” said House Minority Whip Eric Cantor (R., Va.).
Even with the gloomy forecasts and related hostile political climate, Democrats in Congress are struggling to agree on legislation to tackle unemployment.
The bipartisan leadership of the Senate Finance Committee, bidding to show cross-party cooperation, unveiled an $85 billion draft bill Thursday, with a $13 billion centerpiece that would allow firms to forgo paying Social Security payroll taxes for workers hired this year.
The bill would also extend long-term unemployment benefits through the end of May, at a cost of $22 billion. And it would renew several popular tax breaks that expired at the end of 2009, including the business research and development tax credit. The breaks would be renewed for another year at a $31 billion cost.
Within hours, Mr. Reid balked, saying the tax-break extenders would “confuse” the jobs bill, or open him up to charges that the bill was “written by lobbyists downtown.”
“We have a bill that is a jobs bill. No one can dispute that we have a jobs bill,” Mr. Reid said.
Even stripped down, its passage is uncertain. Late Thursday, Mr. Reid introduced the bill on the floor and immediately moved to shut off debate, setting the stage for a vote Feb. 22 on the question. Sixty votes will be needed to shut off debate, and Mr. Reid, who now has a 59-seat majority, is betting some Republicans will find the narrower jobs bill attractive. Broadly, Republicans have vowed to filibuster any measure they see as unnecessary government spending, and some conservative Democrats have suggested deficit fears could trump concern over joblessness.
Mr. Reid portrayed his bill as bipartisan, but added he wasn’t clear whether Republicans would support the package. “I have a long list of disappointments where we start out by holding hands and wind up pointing fingers at each other.”
The House narrowly passed a $154 billion jobs bill in December, so another intraparty Democratic clash over the scope of a final version appears inevitable.
The White House report paints a picture of a U.S. economy that has been federalized by the government response to crisis. At the height of the economic crisis, when small businesses were frozen out of private lending, average monthly volume of Small Business Administration-backed loans was $830 million. That volume reached $1.9 billion in September as the administration pumped money into the SBA and loosened its lending rules.
In 2006, private lenders provided 60% of the capital for housing loans, with the rest coming from government agencies such as the Federal Housing Agency and quasi-government lenders Fannie Mae and Freddie Mac. By last November, 97% of mortgages were guaranteed by federal entities.
The U.S. savings rate is expected to stabilize at between 4% and 7%, the report says, meaning other parts of the economy will have to make up for the consumer spending binge that has ended for good. Construction and homeownership rates also are not expected to reach their pre-recession peak.