This week the President's Council of Economic Advisors released a report claiming that the 2009 Stimulus Act had created or "saved" 3 million jobs. They further stated that the Act would be responsible for 3.5 million jobs by the end of the year. Coincidentally, this is the exact number of jobs predicted by the Council when the bill was passed.
Unfortunately, the actual unemployment figures don't square with these estimates. While the Council estimated that unemployment would be at 7.5 percent because of stimulus spending, we stand at 9.5 percent. We have actually lost 3 million jobs in the private sector since February 2009. In fact, the Recovery.gov website, which itself has been criticized for exaggerated jobs claims, says that the Act created 680,000 jobs.
So how did these economists reach their conclusion? To arrive at that figure the Council estimated that every $1 of government spending would create $2.50 of economic growth. On the contrary, Harvard Economist Richard Barro has found that each dollar of government spending only creates between $0.40 and $0.70 of economic growth.
When President Obama addressed Congress soon after passage of the bill he appointed Vice President Biden to prevent wasteful spending, saying, "Nobody messes with Joe." But week after week, House Republican Whip Eric Cantor has reported on wasteful projects. The Act has spent money on a study of cocaine-addicted monkeys, upgrading a half-empty federal building, and unnecessary chargers for luxury electric cars. All told, the projects highlighted by Cantor have cost taxpayers $8.7 billion.
We can't go on pretending that the Stimulus Act is successful. Much of the money still hasn't been spent and we should redirect these unobligated funds to better uses. If over $1 trillion of government spending can't create jobs, then what do we need to do?
First of all, we need to help those in need. I believe that we need to extend the Emergency Unemployment Compensation program. The program expired a few weeks ago because the Senate could not agree on how to fund the extension. By rescinding stimulus funds before they become stimulus waste, we could fund this important program without creating more debt.
Second, one of the greatest impediments to job growth is government created tax uncertainty. ObamaCare and cap and trade represent massive disruptions to tax policy. Reports this week indicate that nonfinancial companies are sitting on $1.8 trillion in cash. Companies of every size are sitting on the sidelines to see how changes to the tax code will affect their bottom line.
Third, we need to balance the federal budget and start paying off debt. University of Maryland economist Carmen Reinhart recently told the National Commission on Fiscal responsibility and Reform that the size of our debt is hitting the point where it will seriously harm the economy. She said that when government debt hits 90 percent of gross domestic product (GDP), economic growth "deteriorates markedly."
Fourth, we need more and cheaper energy. Everything we do in our economy requires gasoline, electricity, or some other form of energy. High energy prices not only suppress the creation of new jobs but also create a strong incentive to move factories to other countries.
Fifth, we need to regulate wisely. Yet another reason why companies are holding on to money is uncertainty over how government regulations will affect their bottom line. Regulations in the healthcare, banking and energy sectors all have a significant impact on the ability for the private sector to create jobs.
Sixth, we need to increase trade. We have three trade agreements waiting on Congressional consideration. Each of them would have a net positive impact on jobs in the United States.
Finally we need to build infrastructure, something that the government is directly responsible for. We can do this by redirecting stimulus dollars from wasteful projects to infrastructure and repealing outdated labor laws that add costs to every project.
My top priority in Congress is getting our economy moving again. I've written a detailed memorandum to my constituents on how to do that. This memo is available on my website, www.house.gov/pitts/JobsMemo.pdf. I believe it's my responsibility to clearly describe how I think we should tackle our toughest problems. America has a bright future. We just need to unleash the ingenuity and resourcefulness of the American people.