Look Who’s Killing Jobs Now

Posted on Sep 30, 2010

By Ruth Marcus

Republicans like to denounce President Obama and congressional Democrats for what they describe as “job-killing” policies. But in those red-hot rhetorical terms, congressional Republicans are guilty of mass murder when it comes to job creation.

They left town for their pre-election recess having blocked the extension of a successful jobs program—praised by conservatives from Mississippi Gov. Haley Barbour to economist Kevin Hassett of the American Enterprise Institute—that provided 250,000 jobs for low-income parents and youths. 

A $2.5 billion version of the extension passed the House, twice. The Senate whittled it back to $1.5 billion but still could not dislodge Republican opposition—even though the cost would have been fully paid for.

The program was a sliver of the giant stimulus measure, but one of the most effective in terms of job creation. And it sounded as if it came straight out of the GOP playbook. The money was used overwhelmingly for private-sector jobs. It went to employers, to subsidize—depending on the state—all or part of wages for newly hired workers who would otherwise have been on unemployment rolls or receiving welfare. It was a particular boon to small business, helping them expand at a time when they would not have otherwise had the financial leeway to do so.

The stimulus included a $5 billion pot of money to help states with welfare programs stretched by the recession. One of the permitted uses was for job subsidies, and ultimately 37 states and the District of Columbia ended up launching such efforts.

Barbour, for example, used the federal money to create a program called Mississippi STEPS (Subsidized Transitional Employment Program and Services) that subsidized wages for new employees; the subsidy diminished over six months. Barbour described it as “much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities.”

Hassett, an economic adviser to the campaigns of George W. Bush and John McCain, urged that the program be significantly expanded. “After all, a worker participating in the program gets a job,” he testified back in February. “A firm gets an extended period of production from the worker at a heavily subsidized cost. This low cost input should increase the firm’s profits, and increase the chances that they will lift their capital investments. It is like an indirect tax cut from the perspective of the firm.”

Did I hear tax cut? Republicans should have been leaping on this opportunity. 

Except that the program was part of the stimulus plan, the American Recovery and Reinvestment Act (ARRA). And ARRA is a four-letter word to Republicans, who—like the church dealing with Galileo—refuse to acknowledge that it had any positive effect on job creation.

Job subsidies aren’t a perfect answer. Some firms may use the money for jobs they would have filled anyway, but that risk is offset by the fact that the subsidy is targeted to people in greatest need of work. There is no guarantee that the jobs will continue once the subsidy is withdrawn—but even so, there is a benefit from having worked. As Hassett explained, “The literature is clear. Someone separated from the labor force runs the real risk of permanently separating from the normal economy. It is crucial that we reconnect as many people as possible before it is too late.”

That would be now. There’s a slim chance the program could be revived in a lame-duck session. Otherwise, Republicans can pontificate, as in the Pledge to America, about how “joblessness is the single most important challenge facing America today” and extol the “pride and dignity that comes with an honest day’s work and a steady paycheck.” But laid-off workers forced onto welfare because of unthinking obstructionism will know better.

Ruth Marcus’ e-mail address is marcusr(at symbol)washpost.com.

© 2010, Washington Post Writers Group

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