Stimulus but no jobs

By Allan Chernoff, CNN senior correspondent


NEW YORK (CNNMoney.com) -- The $787 American Recovery and Reinvestment Act is supposed to help jump-start the economy and especially put Americans back to work. But the truth is, relatively little of the stimulus spending has directly led to new hiring.

"Most of the thrust has been in trying to prevent jobs from being lost," said Nigel Gault, Chief U.S. economist for Global Insight. "It probably hasn't created a lot of new jobs given where the money has gone."

The money so far has gone mainly for tax breaks and social service programs. Of the $265-billion cost to taxpayers during the Recovery Act's first 11-months, $100.6-billion (38%) has been injected into entitlement programs, mainly Medicaid, $92.8-billion (35%) for tax benefits, and just $71.5-billion (27%) for contracts, grants and loans.

While tax breaks can free up cash or provide incentives for consumers to spend, they don't directly create any jobs.

"Since there were no jobs created people are saying 'Where's the beef?'" said James Glassman, economist at JPMorgan Chase.

Entitlement program spending is injecting funds to health providers serving low-income patients on Medicaid, clinics like the Community Health Care Network in New York City, which has added seven employees thanks to Recovery Act funds.

"Community Health Care Network is still hiring looking for very good people, people who are dedicated to providing good health care for our community," said Dr. Suzanne Walker, a lead doctor at one of the non-profit's clinics in Queens, New York.

Yet Dr. Walker and many of her fellow employees could find work elsewhere because health care is the one sector of the economy that has continued adding jobs through the past year; it's recession-proof. Such entitlement spending, the Government Accountability Office finds, has done nothing to lower the nation's 10% unemployment rate.

"That has not created a lot of jobs. There wasn't a great deal of expectations that that would create jobs," said Christopher Mihm Managing Director for Strategic Issues, of the GAO.

Private companies and state and local governments that have received stimulus money claim they've created or saved 640,000 jobs as of October 30, the latest tally from the Recovery Accountability and Transparency Board, which oversees stimulus spending. But the Government Accountability Office finds that number is unreliable. Some employers are counting part-time jobs as full-time. And others reported jobs, but said they had received no stimulus funds.

"The vast majority of the saved/created jobs is on the saved side, probably 75% or more," said Dave Huether, chief economist of the National Association of Manufacturers.

Grants and loans to state and local governments, analysts say, are saving thousands of positions at schools, fire houses, police stations, but not adding significantly to the workforce.

The Recovery Act is a " job saver not a job creator," said Cary Leahey, senior economist with Decision Economics.

The real job-producing stimulus funding has only recently begun to be distributed: money for construction - roads, bridges, and even at Community Healthcare Network- an expansion to build 20 new exam rooms that should put 70 people to work.

But, the major impact of the American Recovery and Reinvestment Act is to serve not so much as a stimulus, but as a stabilizer for the economy, and as a social safety net for those hurt most by the recession. To top of page

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