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Job Creation or Deficit Reduction — How Should We Spend Your Money?

Job Creation or Deficit Reduction — How Should We Spend Your Money?

Should the unused TARP funds go to support middle class job creation or be used to pay down the deficit?

The question has arisen recently after the Treasury reported that its losses on the 350 billion dollars that Congress provided for the administration’s Troubled Assets Relief Program (TARP) are expected to be much lower than originally predicted.

The President and Democratic leaders are calling for a portion of the remaining funds (as much as $200 billiion) to be used for job creation programs.  The President has outlined several ideas that the administration believes could help bring unemployment rates down faster than at the current rate of economic recovery:

  1. Small business financial assistance and tax breaks
  2. Unemployment benefits, cobra subsidies, and emergency assistence to seniors
  3. Additional infrastructure and incentives for home energy conservation 

However, this money could alternatively be used to pay down the deficit and Republicans are calling for committing all of the funds to deficit reduction.

The PBS Newshour recently featured a brief debate between Princeton Professor and Nobel Laureat economist Paul Krugman and columnist and former Treasury official and Reagan administration advisor Bruce Bartlett on whether President Obama should direct unused TARP funds towards creating jobs or paying down the deficit.

Krugman called for action on the basis that the unemployment rate was devastating and unacceptable.  He noted that unemployment was expected to remain far higher than normal in the next two years.  Extended unemployment would cause lasting harm to people who were forced to use up their savings and cause long-term damage to future employment prospects, he argued.

Bartlett cautioned that Congress had appropriated the money specifically to help financial institutions under TARP and that it should not be rerouted without congressional approval.  While he said he was “agnostic” about the President’s ideas for job creation, he did not support action now because Congress had already enacted substantial stimulus legislation.

Paul Krugman:  “And we have what is really an ongoing economic emergency. I mean, this — it’s not just that we’re not creating jobs. The level of unemployment we have got is doing enormous damage. So, I think the president is justified in reaching for whatever mechanism he can.

If — if he can say — you know, it really doesn’t make a difference in terms of the economics, where it’s funded from. If he can say, look, what we’re doing is redirecting funds, and make it happen, then he needs to do it, because, ultimately, what we have is a jobs crisis. Action must be taken. I think the paperwork is relatively less important at this point.”

BRUCE BARTLETT:  “Well, I thought, if we were facing the kind of crisis situation that we were when TARP and the original stimulus were enacted, that would be one thing.  But I don’t think we’re facing that. I think we have — we did enact the stimulus. The money is — there’s a lot of money still to come from that in the pipeline. I think we have only spent about a fourth of it so far.

The unemployment rate is coming down. I think that there’s a case for, let’s wait a little while. Why not wait until after the president submits his budget in February? Why rush to act this minute?”

With high deficits and high unemployment there are strong competing interests for the money.  What do you think is the most important priority at this time?

For a podcast conversation on jobs stimulus between care2.com blogger Jessica Pieklo and myself, follow this link and click on the December 9, 2009, podcast.

Follow me on Twitter

For more care2.com reporting on the President’s Jobs Speech:  Obama Rolls Out Jobs Initiatives


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36 comments

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6:35AM PST on Dec 21, 2009

How many new businesses would this need create? The taxes created by those jobs and businesses would help to pay down the deficit.

If they can give billions to those who have raped the system, put all of our well being in jeopardy; then they darn sure can afford to give some of that money back to us to help turn around the economy and other situations in this country that need addressing.

6:29AM PST on Dec 21, 2009

As it is quite clearly put, this is our money, our tax dollars that we are talking about. For years they have been using it to subsidize many different corporate conglomerates -- Wall street and the banks are just the tip of the iceberg. Meanwhile it is the general public that is losing their jobs, their incomes, their homes.

We have another huge issue that they want US to face, take on and change - Climate control and the reduction of dependence on fossil fuels. The government is GIVING grants to businesses, corporate conglomerates, the agri-conglomerates to install solar and wind, but you cannot find one cent of grant money for the everyday Jane and Joe taxpayer/homeowner to do the same.

The cost of installing solar for our home (depending on how much we want to cut our elec. bill) would run anywhere between $20,000 to $100,000.00. The wonderful benefits we would get first of all don't kick in UNTIL we have taken out a loan, paid in full for and installed the system. Then we get a huge $1,000.00 rebate for our utility, $2,000. from the state in a tax CREDIT, and 30% up to a certain limit from the feds here again in a CREDIT -- NOT a rebate check to help pay off the loan we would have to take out.

Now how many homes are there in this country that would like to and be willling to install Solar/Wind? How many jobs would the manufacture, installation, service/maintenance of these systems provide to those who are unemployed? cont'd next posting

3:03PM PST on Dec 15, 2009

Creating jobs.

11:00AM PST on Dec 14, 2009

Job reduction should equal deficit reduction, unless you have a bunch of sticky fingered, unethical, unprincipaled, bunch of misfits we have running government at present.

Remember, W Bush came into office with a surplus. He stated that the surplus was the peoples money and preceded with a tax cut for the rich and a war that put us on track to a 60 trillion dollar debt (counting medicare and medicaid unfunded mandates).

Then Mr. wonderful Obama thought it fair and wise to reward bankers on Wall street who took us to the brink of a depression by opening up the peoples treasury to them with no responsibilities on the bankers to at least lend to us who bailed them out.

Meanwhile, 'we the people' are thrown out of our jobs, thrown out of our homes, and are about to be devoured by the heatlth insurance and pharmiceutical industry once again.

Yes, job creation should equal deficit reduction. But with a clause that the American peoples benefit is truly being considered.

9:32AM PST on Dec 14, 2009

Creating jobs should help lower the deficit, because these workers will pay taxes, their health insurance and their debts and not need governmental aid.

6:52AM PST on Dec 14, 2009

We will get out of the deficit when either revenues grow past expenditures or expenditures drop below revenue, neither of which is in the current Washington forecast.

Borrowing money to pay down debt is an interesting concept. When people and businesses do it, it generally leads to bankruptcy.

6:24AM PST on Dec 14, 2009

i wonder if we will ever get out of this deficit

5:22PM PST on Dec 13, 2009

I think they should focus more on job creation. It makes more sense to me to be worried more about our people, then the deficit. When everybody is up and working and the economy is stable again, then the government can focus on the deficit.

8:51AM PST on Dec 12, 2009

interesting comments....

7:25PM PST on Dec 11, 2009

This is an either/or question. You can't vote yes or no. Come on Care2 people, you know better than this! It should be "Do you favor paying down the debt over job creation?" Or "Do you favor job creation over paying down the debt?"

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