Jobs Program Touches Off Heated Debate
Clinton argues US needs stimulus, but GOP says it will hurt economy
WASHINGTON — THE chairwoman of the White House Council of Economic Advisers, Laura D'Andrea Tyson, warns that the failure of Congress to pass the president's $16.3 billion economic stimulus plan will result in "foregone job opportunities for Americans."
But analysts question whether the bill - which targets funds for emergency unemployment insurance, summer jobs for youth, and assorted grants to generate new employment - will create the 500,000 permanent jobs the administration promises.
When members of the president's economic team sent the 1994 federal budget proposals to Congress last week, they stated that the success of the budget's long-term goals depends upon passage of the short-term stimulus plan.
Despite President Clinton's effort to gain quick congressional approval for the stimulus, the plan was stalled by a GOP filibuster in the Senate. Congress will not take up the program until it returns from recess on April 19, but in the meantime, supporters and opponents of the plan are taking their cases to the public.
Addressing a group of reporters, Ms. Tyson says that the most persuasive argument for the stimulus is that although the economy has "been in recovery for 23 months," joblessness remains stubbornly high at 7 percent. The stimulus will help force that rate to "trend down," she says, to 6.9 percent this year and 6.7 percent in 1994.
If the plan is enacted, she adds, the nation's gross domestic product - its output of goods and services - will grow at 3.1 percent this year and 3.3 percent in 1994. "That's significantly better than the 1 to 1.5 percent in the 23 months of recovery," Tyson says.
Her analysis is supported by the recently released annual report from the Congressional Joint Economic Committee (JEC). "The economy is ... growing too slowly to produce any significant reduction in unemployment," the report says. "There is little evidence that the economy is poised for a strong recovery on its own."
The stimulus is needed, the JEC says, to help allay concern about layoffs that continues to erode consumer confidence and threaten the recovery.
But Republican critics counter that the chief impact of the stimulus plan will be to exacerbate the federal budget deficit. Unemployment, they argue, will continue to fall as the economy improves, even without the stimulus plan.
In fact, critics contend, the plan won't really stimulate the economy. In the District of Columbia, for instance, where the unemployment rate is 9 percent, local government plans to use its $28 million portion of the stimulus to pay youths for summer jobs and to hire more police officers. The district - and other major metropolitan areas - aren't planning to use the federal assistance to create long-term employment opportunities in cooperation with the private sector.
Business analysts contend that the president's stimulus package, which focuses on infrastructure spending, could be improved by focusing on private-sector investment - the engine of economic growth and better job prospects.
"A federal infrastructure program is at odds with the efficient use of scarce budget dollars," says Douglas Holtz-Eakin, a senior staff economist on former President Bush's White House Council of Economic Advisers. "Regardless of its short-run stimulative success, there is the virtual guarantee of having wasted significant investment funds on the wrong types of capital in all the wrong places...."
John Goodman, president of the Dallas-based National Center for Policy Analysis, a public-policy institute that forecasts the impact of major tax proposals, agrees that the stimulus would have a negative impact.
Mr. Goodman directly challenges Tyson's estimates. He says increased taxes for high-income investors, a higher corporate income tax rate, and an energy consumption tax will lower the United States' capital formation by $1.8 trillion through 1998.
"As a result," Goodman says, the nation's output of goods and services "will be four-tenths of a percentage point lower than it would have been.... Because of slower growth, 1.4 million fewer jobs will be created over the next five years."
Jerry Jasinowski, president of the National Association of Manufacturers, is also concerned that "the proposed tax increases on business are simply too large to be substantially offset by declining interest rates and the modest tax incentives."
Mr. Jasinowski is lobbying the administration to make changes, including the elimination of the short-term stimulus. "Though costly, [it] is largely symbolic and won't do much to affect long-term growth or create permanent jobs. This part of the package should be dropped," he says.
That is essentially the argument of Sen. Robert Dole (R) of Kansas, who led the filibuster against the stimulus plan. Although Democrats are trying to find a compromise to save the stimulus, the Senate minority leader said Sunday that the only part of the program the GOP is willing to support is the $4 billion extension of unemployment benefits.