$1.9 Trillion Should Be Step One. More Stimulus Is Needed.
By Stanley Litow
The debate over President Joe Biden’s propose $1.9 trillion relief package begins and ends with a simple question. Does the U.S. government need to spend money to stimulate an economic recovery or is that recovery well underway?
What are the facts? Some cite an unemployment rate of 6.3% for January, down from 6.7% a month earlier, as evidence of real progress.
Closer analysis shows that the unemployment rate only reflects those actively searching for work. It also fails to recognize that millions of Americans who are working part-time do so not because they want to, but because they have to.
Labor economist John Komlos examined a wider range of economic and employment factors and pegged the unemployment rate in May at 24.4%, with rates significantly higher for people of color, those who are low income, and those with less education.
The Bureau of Labor Statistics was reporting a rate of 13.3% at the time.
Unemployment data alone also obscures the high level of economic distress faced by so many Americans.
One in six are estimated to not have enough to eat.
Small businesses, engines for economic growth, have also been hard hit.
As a consequence of the pandemic 100,000 small businesses have already shut their doors with more closing every day.
In one small state, Connecticut, 37% have closed. The stimulus package, though vitally needed, is by definition designed for short-term benefit.
All this reveals the severe economic distress that dictates serious and prompt action to stimulate economic growth.
Step one is providing emergency assistance to many Americans, along with a focus on safe school and college reopenings, vaccine deployment, and a range of other emergency measures.
While the $1.9 trillion price tag is large, it will not be enough to turn the economy around and generate the needed level of job growth.
The next funding request, and there will definitely need to be one, must go beyond emergency efforts and stimulate economic recovery.
That is why infrastructure spending, especially with a focus on “green” and competitive jobs, must be a high priority.
There are ample examples of how this can be successful.
Work done by the Aspen Institute highlights programs in Stockton, Calif. and Batesville, Ark. school districts that spent money to increase energy efficiency by using solar panels.
In Stockton, their efforts resulted in $15 million in energy savings, and in Batesville the energy savings actually prevented teacher layoffs and increased teacher pay.
A U.S.-wide investment in energy conservation focused on schools and colleges would not only create jobs, but the energy savings could be put into educational improvement.
These efforts could also be connected directly to students having a path to employment, allowing students to engage in internships, apprenticeships, and work opportunities to prepare for these green jobs.
Making this work would require government funding, but it could also involve matching private investment.
Funding incentives via public-private partnerships would decrease the overall cost and expand the number of people that would benefit, especifically small businesses and those owned by women and minorities.
The Billion Dollar Roundtable, a group of companies that commit to spending at least $1 billion on women and minority-owned suppliers, is another opportunity for shared investment.
Excelon, the first energy company to join a group that includes IBM, JPMorgan Chase, and Merck, increased the percentage of goods and services they purchase from minority suppliers by almost 30% in just one year.
AT&T committed to spend $3 billion with Black suppliers.
Coca Cola committed to a minority supplier spending goal of $1 billion by the end of 2020.
This goal to expand sourcing from women- and minority-owned businesses should be how all Fortune 500 companies do their business.
Imagine the value of adding hundreds of billions of dollars in private spending into the bottom lines of thousands of vulnerable small businesses that are women and minority-owned.
Those who spend in this fashion deserve to be publicly recognized so they can display such praise to their employees and their customers.
And this kind of public-private partnership can grow to include shared spending on education and skills in a host of areas, especially technology, advanced manufacturing, and health care—all areas of job growth.
This is not the time to cut corners. We need to turn the economic crisis around. The Biden stimulus spending plan is only step one.
While it is essential and needs to be enacted, more needs to be done.
There will likely need to be further stimulus spending in the hundreds of billion dollars.
Whatever amount is approved, it must be directly tied to job growth and leveraged with private sector investments.
This spending on infrastructure, green jobs, and small business growth will move recovery into a much higher gear.
Stanley Litow is a professor at Duke and Columbia universities, and serves as innovator-in-residence at Duke. He is a trustee and chair of the Academic Affairs Committee at the State University of New York. He previously served as deputy chancellor of schools for New York and as president of the IBM Foundation.
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