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Thousands Face Job Loss When Part of Stimulus Act Expires

Michael Cooper|The New York Times
Saturday, 25 Sep 2010 | 6:14 PM ET

Tens of thousands of people will lose their jobs within weeks unless Congress extends one of the more effective job-creating programs in the $787 billion stimulus act: a $1 billion New Deal-style program that directly paid the salaries of unemployed people so they could get jobs in government, at nonprofit organizations and at many small businesses.

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In rural Perry County, Tenn., the program helped pay for roughly 400 new jobs in the public and private sectors. But in a county of 7,600 people, those jobs had a big impact: they reduced Perry County’s unemployment rate to less than 14 percent this August, from the Depression-like levels of more than 25 percent that it hit last year after its biggest employer, an auto parts factory, moved to Mexico.

If the stimulus program ends on schedule next week, Perry County officials said, an estimated 300 people there will lose their jobs — the equivalent of another factory closing.

“It’s very scary, because there’s just no work,” said Brian Davis, a 36-year-old father of four, who got a stimulus-subsidized job with the City of Lobelville after he lost his job of 17 years at an auto parts plant that shed hundreds of jobs. Now he faces the prospect of unemployment again.

“This was a huge help,” Mr. Davis said. “The way the economy’s been and the way people are struggling, you’re worried about putting food on the table for your children and keeping the electricity on.”

The money that pays Mr. Davis’s salary, and the salaries of tens of thousands of other people around the country, will dry up after next Thursday, when the welfare program in the stimulus act that pays the bills for those jobs is set to expire. While the Obama administration and Democrats in Congress want to extend the program, they are meeting stiff resistance from Republicans, many of whom oppose all things stimulus.

If the program has encountered hostility from Republicans on Capitol Hill, it has been embraced by some Republican governors who have used it to create jobs in their states.

In Mississippi, an innovative program used the money to pay private companies to hire nearly 3,200 workers, and to pay their salaries on a sliding scale so that the employers would end up paying the entire amount after six months.

Gov. Haley Barbour, a Republican, described the initiative there as “welfare to work.” Mr. Barbour, the chairman of the Republican Governors Association, said in an interview last winter that he hoped the program would be extended past this month, since it took so long for the state’s program to get federal approval.

The federal program has helped employ nearly 130,000 adults and has paid for nearly an equal number of summer jobs for young people, according to an analysis by the Center for Budget and Policy Priorities, a liberal policy institute in Washington.

If the program is allowed to lapse, up to 26,000 workers in Illinois will lose their jobs in the coming weeks, along with 12,000 workers in Pennsylvania and thousands more in other states, according to LaDonna Pavetti, the director of the center’s welfare reform and income support division.

“I think that given what we know about the number of people that have been impacted by the recession and the limited jobs available, this has been a lifeline for many families with kids who would otherwise not know when their next rent payment or meal would be coming in,” Dr. Pavetti said.

The money came from a pot of $5 billion that was included in the stimulus package as an emergency fund for the Temporary Assistance for Needy Families program, the main cash welfare program for families with children. Of the $4.3 billion that has been approved so far, $1.4 billion has gone toward basic assistance, $1.8 billion has been used to help families pay one-time emergency expenses like rent and utility bills, and a little over $1 billion has been used to subsidize jobs.

Some economists consider subsidized jobs one of the most cost-effective ways to stimulate employment: there is no overhead or profit, as there is when firms win bids to perform work for the government.

Gov. Phil Bredesen of Tennessee, a Democrat who championed the idea of creating jobs in hard-hit Perry County and other places with high unemployment, said he would like to see the program extended because it had a more direct impact than other components of the stimulus act, like infrastructure projects and tax cuts.

“I thought we were able to make very efficient use of these funds,” he said in an interview on Friday, “with the money not going off into the ether to create jobs on a spreadsheet, but going where you could go find people who had jobs today who did not have them before.”

There are success stories in Tennessee. After the Armstrong Pie Company hired 12 workers with stimulus money, it was able to expand its production, add delivery routes and increase sales, said Dalyn Patterson, who owns the company with her husband, Bert. The business increased enough that she said she expected to keep 11 of the 12 workers.

But if the program was supposed to act as a bridge to keep people working until the economy started adding jobs in large numbers again, officials in Tennessee said that it was ending a bit early. And many of the 300 workers who are set to lose their stimulus jobs in Perry County may not be able to collect unemployment benefits. So while people there are grateful for the program, they are nervous about what comes next.

“It was very much a Band-Aid,” said Mayor Robby J. Moore of Lobelville, Tenn. “And now the Band-Aid is coming off.”

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