Expensive Jobs

Conservatives tell us that if the American Recovery and Reinvestment Plan (ARARP) is about creating or saving jobs – 3 million of ‘em according to the President – depending on what the final number turns out, we are spending somewhere between $250K and $300K for each such job created or saved… and we’ve already lost 3.6 million jobs since December 2007. States are getting $40 billion dollars less (than the earlier House version) under the evolving Senate version of the bill, even though most of them are hemorrhaging red ink… and beginning to lay off public employees (reducing jobs?).

Small business people are complaining too. According to the January 7^th New York Times: “‘Small businesses are a job engine for the economy,’ said David French, vice president for government relations at the International Franchise Association. ‘Unfortunately,’ he said, the stimulus package offers ‘a thimble-full of fuel for this engine.’ … By his estimation, only 0.05 percent of the House bill is dedicated to small-business lending programs, and the Senate version is only slightly better. ‘It’s not a lot of money relative to the scale of the credit market problems,’ Mr. French said.”

Nothing on the immediate horizon seems to be doing much to unfreeze the credit markets except for some stimuli for folks to buy homes. Sure the ARARP will probably contain somewhere between $500 and $620 million (yeah, “m”illion… we’re not used to seeing those numbers in any of these proposals) for Small Business Administration loans (with higher government guarantees), but as you may have guessed, that’s not a lot of money for all of the small businesses in the United States. Lots of businesses are asking for relief from the 6% payroll tax – as long as six months – to help lighten their payroll burdens, but there are no current bills pending that would effect that change.

Tuesday, Treasury secretary, Timothy F. Geithner, is expected to deliver his overview for the rescue of the financial markets, which, at least at this time, is not likely to propose any form of nationalization program for the nation’s failing banks. It is equally unlikely that his proposals will contain any requirements that banks begin active, mainstream lending again. The goal is for the government to insure that the bad assets carried on the balance sheet of private financial institutions do not fall anymore, making these instruments more attractive to private investors.

If private investors can’t lose money, they are more likely to buy these instruments (taking off the banks’ books), but the ultimate cost to the government could be extremely substantial if in fact there are further declines. While this program does help solidify financial balance sheets, it really does not trigger the much-need flow of business and consumer lending that is so necessary to stem this unemployment tide.

In short, this series of bailout packages is sure to have large sections bound to irritate almost any segment of the economy. There are no sure or easy solutions. And you can’t really measure how much you save by fixing dams and levees, if the underlying disaster truly is averted… although the latest predictions set forth in the February 6^th edition of the Journal of Science suggest we are fighting an ever-accelerating battle against melting ice and rising seas, much more than we had earlier predicted. The only thing that the accumulation of disappointment does mean, no matter how well-crafted these “bailouts” might be, is that we are likely to be continuing to “bail” out with massive new cash infusions, for the foreseeable future. The numbers just tell you this isn’t the end.

I’m Peter Dekom, and I approve this message.