Federal Stimulus Failed to Reduce the Ranks of California’s Jobless

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California’s jobless rate rose to 12.4 percent last month, the state’s Employment Development Department reported this past Friday. The Golden State’s employers shed 33,500 jobs, the third straight month they reduced their payrolls.

The state of California’s labor market actually is much worse than EDD data shows. While the state’s unemployment rate includes some 2.3 million idle workers, it does not include another 926,000 jobless Californians who are so discouraged they have quit looking for work.

Against that backdrop, Vice President Joe Biden released a report last week listing 100 “innovative and effective” projects funded by the American Recovery and Reinvestment Act that “are not only putting people back to work now, but helping transform our economy for years to come.”

Among those transformative projects cited by the veep are a sampling here in California.
They include the expansion of the Caldecott Tunnel between Oakland and Contra Costa County, roadway construction in Nevada County, seismic retrofit of the San Francisco-Oakland Bay Bridge, manufacture of electrical recharging stations and watershed and flood prevention operations in San Jose.

We won’t quibble with Biden taking credit for infrastructure projects – construction of the Caldecott Tunnel’s fourth bore, the Bay Bridge’s seismic retrofit – that already were underway before the Recovery Act – the so-called federal stimulus – was enacted.

But even the Administration’s most ardent supporters have to question whether the billions of  Recovery Act dollars shipped to California have done much to create jobs in the state with the nation’s third highest unemployment rate.

Indeed, a report released last week by the city of Los Angeles provides prima facie evidence of how little return California cities and counties have gotten for their shares of federal stimulus funds.  “I’m disappointed,” said Wendy Grueul, L.A.’s city controller, “that we’ve only created or retained 55 jobs after receiving $111 million.”

That works out to a whopping $2 million per job.

The failure of the Recovery Act to make a dent in the unemployment rate in California and other states all but guarantees that Congress will not enact another “stimulus” before – or after – the November mid-term election.

Yet, with so many Americans out of work, lawmakers in Washington might be inclined to consider jobs legislation that’s not about subsidizing certain politically preferred industries – like “clean” energy over oil – or certain politically select workers – like unionized public school teachers over, say, non-unionized flight attendants – but that provides incentives to all employers and benefits all jobless workers.

For instance, the federal government could pay a certain portion of the salary or wages of each net new worker a private employer hires. The first year, the government might pay 25 percent; the second year, 15 percent.

Congress also could declare a one-year moratorium on FICA, Social Security and Medicare taxes jointly paid by employers and their employees. FICA is an economic disincentive to employers to add workers to their payrolls. Meanwhile, for 80 percent of American workers, payroll taxes are actually higher than income taxes.

Then lawmakers could increase the maximum Small Business Administration loan guarantee on transactions between private banks and small businesses to 95 percent from 85 percent. Increased availability of credit would allow small businesses – which create a disproportionate percentage of new jobs in California and other states – to obtain the capital they need to grow their businesses and create those news jobs.

If Washington had spent $100 billion on an authentic jobs program, including the aforementioned measures, rather than squandering $800 billion on the Recovery Act, California’s unemployment rate almost certainly would be going down now rather than up.

And Vice President Biden truly would have something to boast about.

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