All-Time Record U.S. Deficit of $1.47 Trillion Forecast by the White House in 2010 With Little Improvement in 2011
The US Government is borrowing 41 cents of every dollar they are spending this fiscal year resulting in the largest single deficit in the history of the country at $1.47 trillion. And there is little improvement on the horizon, with a White House estimate of a $1.42 trillion deficit (or 37 cents of every dollar) in 2011.
But that’s not the bad news. The bad news is that the stimulus package seems to be only stimulating the deficit and not jobs – and more jobs are what it is going to take to truly get out of this recession. As shown on the U.S. Government site http://www.recovery.gov most of the stimulus has been directed towards non-jobs producing expenditures. Through July 16, 2010, expenditures have included:
Tax Benefits $223 billion
Contracts, Grants & Loans 127 billion
Entitlements 138 billion
Total Expenditure $488 billion
It is disappointing that the least amount of expenditure has been for Contracts, Grants and Loans, which result immediately in the most jobs produced. New jobs have a multiplying effect on the economy as they not only produce increased demand for goods and services, but they also pay taxes resulting in a reduced U.S. deficit.
So what do we have to show for the $488 billion of stimulus thus far? According to the U.S. Bureau of Labor Statistics (total U.S. Employment, Seasonally Adjusted), there have been 882,000 total jobs gained since the end of December 2009. That means we effectively spent $583,288 per net-new additional job created. But it gets worse. Of the 882 thousand new jobs, 339 thousand are temporary U.S. Census worker jobs (that would have been created regardless of the stimulus) that go away in the next three months. So that means we have spent not the $583,288 per job, but rather, $837,050 per job. Try to calculate a positive rate of return on that investment—not even new math will get you there.
So what do we do to get more jobs? Since 70 to 90 percent of all new jobs are created by small business, we need to redirect U.S. Government spending and incentives to increase the demand for the goods and services produced by small business. Providing a couple thousands dollars of tax credits aimed at new hires will not get you there—you must first increase their business. And we desperately need to boost consumer confidence giving Americans comfort in resuming investments and purchases of goods and services. See my blog from July 21 regarding plummeting consumer sentiment.
So let’s hear your suggestions on what needs to be done differently to get the demand up for the goods and services provided by small business and also to stimulate consumer confidence.