Battlelines: The Political-economy of Recovery

President-elect Obama's economic recovery package could help create or save between 3 and 4 million jobs in a variety of job markets over the next two years, according to a report authored by Christina Romer, Obama's designee to chair the Council of Economic Advisors, and Jared Bernstein, Vice President-elect Joe Biden's top economic advisor.

The bulk of the resources in the approximately $800 billion recovery package appear to be concentrated in four major areas: investments in public infrastructure, aid to states and public anti-poverty programs (unemployment insurance and food stamps), new investments in modernizing health care and renewable energy resources, and tax cuts.

Investments in job creating public infrastructure programs would be spread across several key sectors from construction to manufacturing and mining. But its indirect effects would boost economic activity in retail and other industries, the report noted.

One issue of particular concern has been raised by women's equality advocates who have urged the incoming administration not to simply focus on industries dominated by male workers, such as construction. In a video prepared by the Obama Transition Team, Romer addressed that key question and indicated that these concerns are shared by the Transition Team. 'I've been one of the strong proponents of the balance of the program, that it does have the investments in education and health care. It does have the state fiscal relief. It does have the middle class tax cuts,' she said.

'All of those kind of pieces are creating jobs in some of the sectors like health care, education and retail trade where women are a disproportionately large fraction.' Romer argued.

The report, which was not written to address all aspects of the proposed stimulus package, took into account the disparity of the impact by race caused by recessions and growing unemployment rates. 'African American, Hispanic, young, less-educated, and male workers all tend to suffer disproportionately during recessions. The experience in the current downturn is typical: unemployment rates among these groups have risen substantially more than the overall unemployment rate,' the report noted.

While these groups historically have seen strong employment gains as recovery starts to happen, the report added, certain groups of women workers typically see slower rates of employment gains. Thus, special attention needs to be paid to how investments in the recovery package impact women workers and produce jobs in sectors in which they are disproportionately represented.

The report, however, did not discuss a policy or mechanism for reducing persistent disparities in the unemployment by race and ethnicity and age. Currently, while the Bureau of Labor Statistics reported last week a national unemployment rate of 7.2 percent at the close of 2008, African Americans face an unemployment of almost 12 percent, Latinos over 9 percent, and youth between 16 and 19 are hovering around the 19 percent mark.

The report also predicted that 90 percent of the jobs created or saved would be in the private sector and would reduce job insecurity by moving many part-time workers to full-time work. In the public sector, jobs created or saved would result from aid to states. The fiscal relief for states would allow them to avoid new budget cuts that might eliminate jobs in education and health care.

Other likely elements in the economic stimulus package such as aid to homeowners facing foreclosure, as indicated by Obama and other congressional Democrats, went undiscussed in the report as well.

In sum, the report predicted a swifter economic recovery, the creation of more jobs, and a higher economic growth rate (about 3.7 percent over the next two years) than without a package. Without the recovery package, the reported estimated, unemployment could rise to as much as 9 percent and the recession would be deeper and longer.

The report also addressed concerns about whether or not the tax cuts in the recovery package, estimated by some media reports to total about $150 billion for workers and $100 billion for businesses, promote job growth. In her video-recorded comments Dr. Romer asserted that tax cuts for working families give them more cash on hand to spend in the economy, stimulating growth. Other experts have emphasized, however, that tax cuts have less of an impact on job creation than direct investments.

The tax cut portion of the recovery package is likely more of a political move than an economic one, however. Obama has emphasized that the proposed tax cut for working families fulfills his campaign pledge to provide working families with relief. And though he has denied that this was his main motive for including it in the plan, the tax cut portion has already reduced some Republican opposition to the package, especially in the US Senate, where Republicans hold enough seats to filibuster any bill for any reason.

Still, Republican leaders are holding a hard line, even if only in a desperate attempt to remain relevant in the debate. Despite the worst unemployment figures the Bush-41 recession in 1992, Republican House Minority Leader Rep. John Boehner told reporters that he isn't convinced that an economic stimulus package is even needed. He called on his political allies to drag their feet during the legislative process and to stall the package with delaying tactics.

After a trouncing on November 4th, Boehner and congressional Republicans have failed to understand the popular shift in views on the economy and the right policies to pursue. The Republican's unshakeable belief that working families should be left on their own won't fly anymore. This week, thousands of people across the country will be visiting their congressional representatives and Senators to demand swift action on an economic recovery package that helps working families. They will be delivering petitions insisting that economic recovery be as much a priority for Congress as it is for working families.

See a video on why the economic recovery package is needed and how it will work: