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Obama jobs bill comes with costs for states

By   /   October 4, 2011  /   No Comments

By M.D. Kittle | Wisconsin Reporter

MADISON — President Barack Obama touts his $450-billion American Jobs Act Bill as the jump start the sputtering economy needs.

The infusion of cash would pump about $1.5 billion into the Badger State, with more than half-billion dollars marked for saving thousands of teacher and first responder jobs, according to the White House.

But the second stimulus, should it beat what political observers argue are long odds for full passage, may not offer an immediate jolt to an economy slugging through 9 percent unemployment — nearly 8 percent in Wisconsin — and basement-level consumer confidence.

And the bill, tax trackers assert, comes with a dangerous side effect for state governments — stimulus addiction.



Federal Reserve Chairman Ben Bernanke arguably offered the understatement of the day Tuesday, when he warned Congress that the recovery from the Great Recession “has been much less robust than we had hoped.”

The president stepped up his call for Congress to pass his jobs bill, which would include tax cuts for small businesses and employees, some $50 billion in infrastructure upgrades, and $35 billion for retaining and hiring educators, firefighters and law enforcement.

More than $575 million in “immediate” transportation investments is proposed for Wisconsin, but it is dubious how immediately those projects would begin.

“We’ve got the winter season in Wisconsin coming up. You’re not going to see an immediate impact of those construction jobs,” Dick Granchalek, president of La Crosse Area Chamber of Commerce, told Wisconsin Reporter.

Obama’s jobs proposal has garnered much of the same criticisms as the American Recovery and Reinvestment Act of 2009, which marked billions more for “shovel-ready” projects but were slowed by the usual process of planning and government regulations and permitting procedures.

“Shovel-ready was not as shovel-ready as we expected,” Obama joked to members of the Jobs and Competitiveness Council in July.

Saving jobs?

The president’s spending plan includes $35 billion to prevent layoffs of as many as 280,000 teachers nationwide, and hiring tens of thousands more, as well as “keeping cops and firefighters on the job.”

Obama’s bill targets $536 million for Wisconsin to pay for 7,400 educator and first-responder jobs.

That breaks down to about $72,432 per job — below the national average allotment of $74,757 per job, according to an analysis by Carolina Journal, an online watchdog news service.

Average teacher pay in Wisconsin was $49,093 in fiscal 2010, the most recent data provided, according to the state Department of Public Instruction.

Obama administration officials said there are no unfunded mandates tied to the proposal, but sections 204-209 of the bill include provisions requiring states to “meet the requirements” of the law for an additional two years.

While White House officials say states wouldn’t be expected to pick up the costs of the jobs money, the state would be on the hook to cover the check if it wants to maintain those teachers in the classrooms and first responders on the streets.

“Saying there are no mandates, to me, is kind of like saying there are no rules, and there clearly are rules in the bill,” said David Logan, economist at the Tax Foundation, a Washington, D.C.-based nonpartisan group that tracks tax policies.

State ‘bailouts’

More problematic to the Tax Foundation is that the stimulus funding would be paid for through about $400 billion in tax hikes on corporations and higher income earners over 10 years. So the initial spending, like so much money in a government with a $14 trillion debt, would be borrowed.

The bill’s backers argue those most able to pay should pay.

“This jobs bill will not add to the deficit, as it is paid for with added revenue raised by eliminating tax loopholes for corporate jets and other loopholes for the wealthy and corporations,” wrote Jeff Johnson, chairman of the Democratic Party of Marathon County in a recent column in the Wausau Daily Herald.

Like the American Recovery and Reinvestment Act, the jobs bill money would be available for a limited time.

“The challenge is, you get people into a spending and hiring mode and quickly turn off the spigot,” Granchalek said. “It creates a dangerous precedent.”
The bigger danger, Logan said, is breaking states of the taste for bailouts. As the stimulus of 2009 began to recede, Logan said states began tightening their belts, making tough decisions. He pointed to Wisconsin and its controversial budget repair law, a measure led by Gov. Scott Walker that curbed collective bargaining for unionized public employees and cut $800 million out of education en route to tackling a $3 billion-plus budget shortfall.
Logan said Obama’s jobs bill would “disincentivize” real budget reform.”
“The idea (that) spending goes to states to artificially prop up jobs is worrisome to me,” he said. “We started seeing fiscal responsibility within states, and now they are bailed out, in essence.”
States often find it hard to give up the federal programs and initiatives federal funds afford, and taxpayers end up footing the bill, research shows. 

Russell S. Sobel and George R. Crowley of West Virginia University studied data on federal aid to the states from 1995 to 2008 for a paper presented Friday at George Mason University’s Mercatus Center.

They found that every dollar caused an ongoing legacy cost increase requiring a 42-cent “own source” revenue increase, including 33-cents in higher taxes.

“… (S)pending programs create their own political constituencies that fight their discontinuations,” and “… encourage expansions in the directly unproductive lobbying industry that subsequently supports a higher level of government spending,” according to the study, “Do Intergovernmental Grants Create Ratchets in State and Local Taxes?”

Obama said the need for his jobs bill is urgent, that it will bolster business, which will create jobs, which will pump more tax revenue into state coffers.

Walker spokesman Cullen Werwie said the administration will evaluate the final version of the bill, should it pass Congress, before deciding whether to accept the federal cash.

“Governor Walker is encouraged that President Obama is focusing on growing the economy and helping the private sector create jobs,” Werwie told Wisconsin Reporter in an email. “The most important things we can do is to put more money back in the hands of consumers and job creators and increase consumer confidence and certainty for job creators.”