News Column

The Stimulus Package: Where Did the Money Go?

May, 2010

Rob Kuznia, Staff Writer

Ever since the U.S. economy imploded two years ago, some 8 million American jobs have vanished.

Among the legions of clobbered companies across the land is New Bedford Panoramex, a 49-year-old airport lighting manufacturer out of Los Angeles.

In the beginning months of the recession, owner Steven Ozuna was dreadfully positive that 15 of his 50 employees would soon be unemployed.

Then, just weeks after President Obama signed into law the historic stimulus bill in February of 2009, Mr. Ozuna got an unexpected phone call.

It was an official with the Federal Aviation Administration. He asked if Mr. Ozuna's company could take a $3 million stimulus-funded contract manufacturing and installing new runway lighting systems at about a dozen airports around the country. Given how the company typically takes in about $8 million a year, it was a huge shot in the arm.

"They said 'When can you start?'" Mr. Ozuna remembers, speaking by phone to Hispanic Business magazine. "I said, 'We can start yesterday.'"

All 15 jobs were saved and the highly skilled employees are still working -- for now.

The American Recovery and Reinvestment Act of 2009 -- better known as the stimulus package -- has been a historic effort to save the economy from utter catastrophe. The $787 billion package is enormously far reaching and complex, but broadly speaking breaks down into two categories: Tax breaks, which constitute about a third of the total amount, and expenditures -- namely on transportation, schools, infrastructure, health care, housing and energy efficiency -- which make up the balance.

By April, roughly 40 percent of the money had been spent. It is slated to be 100 percent spent by 2012.

Nationwide, the stimulus package has saved or created nearly 2 million jobs, most economists agree. That's about a
quarter the amount of jobs that have disappeared in the past two years.

But the unemployment rate has been stuck for months at 9.7 percent. Among Hispanics, it has reached a troubling 12.4 percent -- double the rate at the start of the recession.

Has the stimulus been a success? The answer, like so many others in Washington D.C. these days, has become political.

Republicans say no. They often point to the Obama administration's assurances, before the stimulus passed, that the bill would prevent the U.S. unemployment rate from exceeding 8 percent, and would create 4 million jobs. On this, the administration was wrong.

"I am appalled at the dismal failure of the so-called 'stimulus' bill," said outgoing Congressman Lincoln Diaz-Balart (R-Florida). "The legislation has created very few jobs, and the American people are left footing the bill for this wasteful and ill-conceived spending program."

Democrats, of course, disagree. They point to all the jobs saved, and say that without it, the nation's jobless rate would be as high as 11 percent right now.

"As a fiscal conservative, a blue-dog Democrat, I had a very difficult time voting for it," Congresswoman Loretta Sanchez (D-Calif.) told Hispanic Business magazine. "A year later I'm pretty excited about the fact that it has worked."

In many respects, the jury's still out. The last few weeks have been encouraging, but there is a long way to go.

In March, the economy added 162,000 jobs -- the third gain in five months and the largest jump since 2007. The service sector witnessed the largest expansion since 2006, and manufacturing grew for the eight straight month.

But the recovery has been slower than expected. And some worry about the possibility of another nosedive once the stimulus is spent.

Mr. Ozuna's company, which the FAA selected for its innovative methods in designing and installing airport lighting systems, offers a telling case in point. While the stimulus allowed him to save all 15 jobs, he didn't create any. Now, he's worried about his company's prospects once the stimulus work dries up this summer.

"We got hit with about a 30 percent decline in business right off the top (at the start of the recession), and it's almost continued to still be that way," he said.

One nagging problem about the current recovery is that it is relatively jobless. Employers, wary of another economic plunge, are trying to maximize the productivity of their surviving ranks.

A $15 billion jobs bill signed by President Obama in March attempts to address the matter, by offering tax incentives for companies to hire unemployed workers. But Congressman Raul Grijalva (D-Arizona) said he'd like to see the federal government tackle the problem more aggressively.

To date, he said, the stimulus package has made inroads on jobs in a manner that is largely passive.

"I think it's got to be more of an assertive role," Mr. Grijalva told Hispanic Business magazine.

He added, "If you're going to give incentives to businesses to expand, I think part of the incentive package needs to be additional incentives for hiring. That needs to be part of the equation, and hasn't been."

For Hispanic-owned businesses, the stimulus has been a "mixed bag," said Javier Palomarez, CEO and president of the U.S. Hispanic Chamber of Commerce.

Mr. Palomarez said while the bill has pumped a lot of money into infrastructure projects, not enough contracts are going to Hispanic-owned companies.

Hispanics own about 7 percent of all businesses in the United States, but Hispanic-owned businesses have received less than 2 percent of the $46 billion spent on federal contracts to date, he said.

"It's not really the fault of the federal government, as the federal government has put the plan in place," he told Hispanic Business magazine. "It really comes down to the local governments."

Less than half of the states, he said, have a disadvantaged business enterprise program in place. These programs ensure that small and minority-owned businesses get a fair share of contracts.

Nationwide, the true depth of the crisis is difficult to convey. In a nutshell, the 162,000 jobs gained in March represents just a sliver of the 8 million jobs lost. The best years of job creation in U.S. history came in the 1990s, when an average 242,000 new jobs were added every month.

Even if the economy resumed this level of job creation, it would take five years to knock the unemployment rate down to 5 percent, according to Jay Hancock, a financial columnist for the Baltimore Sun.

Still, the benefits of the stimulus package are palpable in places like Orange County, California, according to Congresswoman Sanchez.

In her district, it has meant that schools slated for closure have stayed open, police departments facing force reductions have kept cops on the street, creeks prone to flooding have found funding for restoration and clogged freeways have been widened.

Keeping the schools open, she said, has arguably been the most noteworthy benefit.

"That's a big deal, especially for Hispanics, since we send our kids to public schools," Ms. Sanchez said. "Can you imagine coming to school in the morning and seeing a chain-link fence and a lock? That's what we were facing a year ago."

Source: HispanicBusiness Magazine. All Rights Reserved.

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