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msnbc.com News— ELKHART, Ind. - If there were a report card for the promises President Barack Obama made a year ago in this struggling city in northern Indiana, he would probably get a C. It’s a passing grade, but it’s not the strong performance that people might have hoped for in a town with one of the highest jobless rates in the country.
One year ago, on Feb. 9, 2009, Obama went to Concord High School in Elkhart to promise jobs for the city and for the nation. He argued the case for the $862 billion American Recovery and Reinvestment Act (ARRA) which Congress would pass just four days later.
Now, a year later, some statements he made in that speech have proven true and a few have proven to be dubious. For several others, it’s too soon to judge.
Like the president himself, the Recovery Act and the economic recovery itself haven’t yet fully met expectations.
So, with unemployment near 10 percent and elections eight months away, congressional Democrats are reacting. House Democrats passed a second stimulus, dubbed the “Jobs for Main Street Act.” At about $159 billion, it’s less than one-fifth the size of the stimulus enacted last February.
The Senate is set to begin action on its own job creation bill this week.
Rep. Joe Donnelly, D-Ind., whose district includes most of the city of Elkhart, voted for the first stimulus bill in 2009, but against the second bill last December.
"We still have a lot of ARRA funds to spend," Donnelly said. "We’re working non-stop to create jobs, but I want to make sure that we give the stimulus funds the opportunity to get out there, and be felt, and create jobs. I said, ‘Why don’t we just let the stimulus work its way through, rather than adding on even more debt?’”
Some argue the reason to not wait is the 14.8 million unemployed Americans as of January. The Labor Department reported on Friday that the unemployment rate dipped from 10 percent to 9.7 percent last month, but businesses shed 20,000 jobs.
Here are some of the statements Obama made in that speech, and how they're working so far.
Since the president spoke on that day, more than 3 million jobs have been lost, according to the Bureau of Labor Statistics.
Job losses are no longer running at a pace of nearly 700,000 per month, as they were when Obama spoke in February, however.
“The Recovery Act has already funded about 2 million jobs across the country, and remains on track to meet the President’s goal of 3.5 million jobs by the end of this year,” said Jim Gilio, White House spokesman for the Recovery Act.
Gilio said that direct stimulus spending (as opposed to tax cuts) for projects overall are expected to double in the first two quarters of 2010 and thus “there is even more employment bang for the buck to come.”
In Elkhart County, meanwhile, the unemployment rate has declined from 18 percent last February to 14.8 percent in December, the last month for which the BLS has local data.
But the labor force has shrunk in Elkhart, and around the nation, too. There were 4,365 fewer jobless in Elkhart County in December than there were when Obama spoke last February — a drop of 24 percent in the number of unemployed. But there were also 4,017 fewer people with jobs, a decline of 5 percent in the number employed.
The president has delivered on this promise.
According to the Congressional Budget Office, by the end of September, the Recovery Act will have paid out $58 billion in unemployment benefits, 17 percent of the total stimulus outlays.
It will take until February 2011 to determine if the president was correct in his claims.
His own Council of Economic Advisors, in its Jan. 13 report, estimated that 48,000 jobs had been created in Indiana due to the Recovery Act. The CEA said the stimulus had “raised employment relative to what it would otherwise have been” by 1.5 million to 2 million nationwide.
The Obama administration’s view is that the stimulus dollars are rippling through the economy: the public school teacher kept on the job due to Recovery Act money will spend her paychecks on groceries, car repairs, a new deck for her house — so the grocer, the car repair shop, and the carpenter all benefit from stimulus money. They will in turn spend their income on buying goods and services.
But Jackie Walorski, the Republican state representative whose district includes part of the city of Elkhart and southern Elkhart County, dismisses the stimulus effect.
“Nobody was going to say ‘don’t bring money here if it’s available’ but it was a short infusion of cash,” she said. “It’s not a long-term fix and it hasn’t really produced a lot of sustainable, long-term tangible, counted jobs.”
Walorski is trying to unseat Donnelly in this November's election.
Donnelly defended the stimulus by pointing to
a $689,000 grant to the Heart City Health Center as stimulus money that had an immediate impact, allowing the clinic to hire a doctor and to serve more patients, and to a $39 million grant to Navistar to manufacture electric trucks in Wakarusa, a town just south of Elkhart.
He was somewhat wide of the mark.
Whatever the merits of Recovery.gov may be, it does not make the case that Obama and his aides are trying to make: that the combination of direct and indirect spending — the multiplier effect — has caused 1.5 million to 2 million jobs to be "created or saved."
Here's why: Congress requires private-sector recipients of Recovery Act grants, contracts, and loans to submit their own estimates of the number of jobs created or retained by their funding.
But, as the Government Accountability Office (GAO), the independent auditing arm of Congress, explained, “neither individuals nor recipients receiving funds through entitlement programs, such as Medicaid, or through tax programs are required to report.”
Of the $173 billion in funds paid out by the end of last October, only 25 percent were covered by the Recovery Act’s reporting requirement.
That’s one reason why there’s a discrepancy between the 48,000 Indiana jobs that Obama’s economic advisors claim have been created or saved by the stimulus, and the figure for jobs created or saved in Indiana on the Obama administration’s Recovery.gov Web site: 15,278.
The Recovery Act has delivered on that pledge.
Although they aren’t as visible as the $10 million, ARRA-funded project to widen U.S. highway 33 in Elkhart, for example, the tax cuts in the Recovery Act last fiscal year and this fiscal year are 14 times larger than the transportation projects funded by stimulus money.
According to the Congressional Budget Office, 44 percent of the stimulus in FY 2009 and FY 2010 is in the form of tax cuts, ranging from a tax break for first-time home buyers to an $800 tax credit for married couples.
That appears to be in some doubt, at least for now, as a chunk of the stimulus went to state and local governments that used some of the funds to save employees' jobs.
According to GAO, by Dec. 31, 2009, more than $78 billion in Recovery Act funds had gone to states and localities. More than three quarters of that was matching funds to the states to help pay for Medicaid, the insurance program for the indigent, and to the State Fiscal Stabilization Fund which helps states keep public school employees on the payroll.
The GAO said the Recovery Act’s Medicaid and education funds freed up money that the states otherwise would have had to spend from their own coffers. This allowed state and local governments to retain some employees that they otherwise would have let go.
States “most commonly reported using or planning to use these freed-up funds in fiscal year 2010 to cover increased Medicaid caseloads, maintain Medicaid eligibility levels, and finance general state budget needs,” the GAO said in a report last December.
Elkhart city officials estimate that to date $41 million in direct and indirect stimulus funding has created or saved 385 jobs in Elkhart, with the biggest single amount being the $14.3 million going to the Elkhart public schools.
Elkhart applied for stimulus money under the U.S. Department of Transportation's TIGER (Transportation Investment Generating Economic Recovery) grants program. The department will announce the winners of the grants in the next few weeks.
He returned to Elkhart last August to tout a $39 million grant to Navistar, which produces commercial and military trucks and designs and manufactures diesel engines for pickup trucks, vans and SUVs, among other things.
Navistar spokesman Roy Wiley said he could not estimate how many jobs the project would create since it “will depend upon initial daily production rates, among other things."
"When the grant was announced, we stated that our electric truck production would initially create 700 jobs, but not necessarily all in Elkhart County. And some will be suppliers,” he said.
Another vehicle manufacturer, the Norwegian firm THINK, is planning to make electric cars in Elkhart, with Recovery Act help.
According to company spokesman Brendan Prebo, THINK received a tax credit of $16.9 million under the Advanced Energy Manufacturing program. The firm has also applied for a loan under the Advanced Technology Vehicle Manufacturing (ATVM) loan program. THINK expects to create 415 manufacturing jobs in Elkhart by 2013. The plant begins operations in the first quarter of next year.
The Obama administration has pointed to the THINK tax break as a prime example of what the president meant when he said in Elkhart last year, “I think it's important for us to give tax breaks to companies that are investing right here in Elkhart.”
Prebo noted that THINK was looking at the United States as a manufacturing location prior to the announcement of the Recovery Act's incentives, but the ATVM program encouraged the company to build more vehicles in the U.S. sooner than it would have otherwise.
However, the Recovery Act “had very little impact on the selection of Elkhart specifically. I would attribute our decision to select Indiana almost wholly to the efforts of the state,” he said.
Public school construction is one place where Obama had hoped the Recovery Act would create jobs but where it hasn’t — at least not directly.
Obama referred three more times in the speech to what he saw as the need for stimulus money to pay for building and rehabilitating public schools.
The House version of the stimulus bill included $20 billion for school construction. But the Senate deleted those funds. This was done largely at the urging of Sen. Susan Collins of Maine, a Republican whose vote was needed to get the 60 to pass the bill.
Collins’ decisive role last February was an early indicator that even with large Democratic majorities in Congress, Obama’s agenda for Elkhart and the rest of America would hinge on a few Republican senators. From health insurance reform to a second stimulus bill, they remain as crucial today as they were last February.
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