Imagine you were trying to measure the size of an iceberg and you only considered the part above the water.   You’d be missing most of the picture, right?

That’s much like what happened in this story on the cost of construction jobs created by the Act.  The article considers only the tip of the iceberg, misses what’s going on underneath, and thus gives a huge over-estimate of the cost of creating these jobs.

Technically, what’s missing here is the multiplier analysis (Keynes would be aghast!).  Think about what it takes to build a road: when a state awards a contract to a road building firm, that firm has to purchase cement and other materials, and those purchases create jobs for producers of raw materials and manufacturers.  They may have to buy or lease heavy construction equipment, supporting upstream jobs at factories.  Hiring an actual crew to build the road is often the last step.

Interestingly, the story notes that money for construction projects isn’t just spent on direct hires--it pays for equipment and supplies too.   What’s missing is that buying that equipment and supplies also creates jobs.  By leaving out all those indirect jobs, the analysis undercounts the number jobs created by the contract and comes up with a cost per job that is way too high. 

That problem is compounded by looking at just three months worth of job creation.  About 75 percent of the recipients that reported said that their projects are less than half complete – pointing to future hiring off of those same dollars yet to come as projects ramp up.

As President Obama has stressed, we need to do much more to help get America get back to work.  But when we’re looking at what we’ve done so far, let’s make sure we’re seeing the full picture.

Jared Bernstein is Chief Economist to Vice President Biden, and Executive Director of the Middle Class Task Force
 

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Take a look at what independent economists and economic observers from across the political spectrum have had to say about the success of the Recovery Act on its one-year anniversary:

Stuart Hoffman, chief economist at PNC Bank: "The stimulus worked," said Stuart Hoffman, chief economist at PNC Bank. Without it, "the unemployment rate would probably be closer to 11 percent" and the economy might not have grown at all last year.” [ABC News, 2/18/10]

Economist Stephen Herzenberg: “Cut through all the numbers, though, and this is what you find: The American Recovery and Reinvestment Act saved us from plunging into a second Great Depression… The Recovery Act brought the economy back from the brink.  And these figures probably underestimate its impact, because they don't take market psychology into account. When the legislation passed, the economy was plunging at a pace similar to that of the 1930s. If Congress had sat on its hands, unemployment now could easily be 12 percent to 15 percent - and on its way to 20 percent.”  [Philadelphia Inquirer, 1/17/10]

Mark Zandi of Moody’s Economy.com: “The economy has shed some three million jobs over the past year, but it would have lost closer to five million without stimulus,” said Mark Zandi, who is currently advising Congressional Democrats but also advised Senator John McCain, the 2008 Republican presidential nominee. “The economy is still struggling, but it would have been much worse without stimulus.” [New York Times, 1/17/10]

Lawrence Mishel, President of the Economic Policy Institute: “If you go to the economic forecasters, who make their money doing this, they confirm that the -- you know, we have saved around two million jobs in the process.  If you look at what actually happened in the economy, in the beginning of 2009, we were losing 750,000 jobs a month. In the last three months, we were losing about 35,000. This wasn't by accident that we went from a deep, you know, decline in the economy to an actual growing economy…. And the administration's actually done something pretty marvelous of trying to actually track where all the money went, who got it, and how many jobs were created. And, if anything, they understate the amount of jobs being created. Yes, so, I think there's been a tremendous effort to actually document the impact of this.”  [PBS Newshour, 2/17/10]

Nariman Behravesh, chief economist of IHS/Global Insight: “It prevented things from getting much worse than they otherwise would have been,’ Nariman Behravesh, Global Insight’s chief economist, says. ‘I think everyone would have to acknowledge that’s a good thing.” [New York Times, 2/17/2010]

OMB Watch: “[T]he one thing that cannot be denied is that the Act has substantially advanced the cause of fiscal transparency.  We could complain that the transparency provisions of the Act are not perfect, but without the Act, we wouldn't even have anything to gripe about.  We'd still be stuck arguing whether timely recipient reporting is a feasible goal or not.  In this sense, the Recovery Act provided a convenient pilot program for fiscal transparency.  Now, one year later, the Act has not only proved that broad-based recipient reporting is feasible, it has shown that the reporting is useful.  By showing how multiple levels of recipients (although not all levels of sub-recipients) have used their federal funding, the Recovery Act has provided the government and its citizens an unprecedented ability to see where its money has gone.”  [OMBWatch.org, 2/17/10]

Associated General Contractors economist Ken Simonson: “’The stimulus is saving construction jobs, driving demand for new equipment and delivering better and more efficient infrastructure,’ said Ken Simonson, an economist with Associated General Contractors, which represents a large part of the construction industry.  Simonson calculated that roughly 15,000 jobs have been created or preserved for every $1 billion the government has spent on infrastructure projects, which is well above the association’s year-ago estimate of 9,700 jobs. He said that stimulus-funded road construction projects alone have created 280,000 jobs over the past year, as well as an unknown number of ancillary jobs for subcontractors supplying equipment and raw materials.”  [San Diego Union Tribune, 2/17/10]

Rhone Resch, President and CEO of the Solar Energy Industries Association: “One year ago today, President Obama visited a solar installation to sign the American Recovery and Reinvestment Act. The purpose of the bill was to stimulate immediate job growth with a strong emphasis on clean energy technologies like solar. And that is exactly what happened. In 2009, the Recovery Act helped the solar industry create 18,000 new American jobs. More than 50 new solar energy manufacturing plants are under construction now with the support of ARRA.” [Solar Energy Industries Association, 2/17/10]

Michael Graetz, a former George H.W. Bush Treasury official: "’It was right 40 years ago, and it's right today, and it's nice that something good comes out of the stimulus,’ says Michael Graetz, a Columbia Law School tax professor who did a stint at Treasury in the George H. W. Bush years.  Today, beneath partisan gunfire and ideological clashes in Washington, one of the few things on which Democrats and Republicans in the Senate agree is that Build America Bonds should be made permanent.  It probably will be.”  [Wall Street Journal, 2/17/10]

Liz Oxhorn is Recovery Act Communications Director

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Cross-posted from Blogband, the blog of Broadband.gov.

In a month, the Federal Communications Commission will deliver a National Broadband Plan, as it was asked to do by Congress and the President in the Recovery Act. 

This will be a meaningful plan for U.S. global leadership in high-speed Internet to create jobs and spur economic growth; to unleash new waves of innovation and investment; and to improve education, health care, energy efficiency, public safety, and the vibrancy of our democracy. 

I believe this plan is vitally important to America's future. 

Studies from the Brookings Institute, MIT, the World Bank, and others all tell us the same thing -- that even modest increases in broadband adoption can yield hundreds of thousands of new jobs. Broadband empowers small businesses to compete and grow and will ensure that the jobs and industries of tomorrow are created in the United States. 

The economic benefits of broadband go hand-in-hand with social benefits and the potential for vast improvements in the quality of life for all Americans. 

The National Broadband Plan will describe concrete ways in which broadband can be a part of 21st century solutions to some of our nation’s most pressing challenges, including:

Extending the availability and lowering the costs of quality care by putting digital health tools in the hands of doctors and hospitals across the country and removing geographic barriers for patient treatment.   Providing our kids with a world class, 21st century education, connecting them to the global library and giving them the digital skills they need for the future. Making our electric grid smart and efficient and providing Americans with the information they need to make their homes and buildings smarter.   Ensuring that law enforcement officers and first responders across the country have cutting-edge, reliable communications technologies to respond to emergencies efficiently and effectively. 

These are real benefits for real people -- like the unemployed forty-seven-year-old I met in the Bronx who got job training over the Internet to become a telecom technician. And the employees of Blue Valley Meats, in the small town of Diller, Nebraska, which doubled its workforce and saw 40 percent growth by setting up a website and selling its beef online -- once Diller got broadband. 

But right now, we are at a crossroads. For while the United States invented the Internet, when it comes to broadband we are lagging behind where we should be.

Roughly 14 million Americans do not have access to broadband, and more than 100 million Americans who could and should have broadband don't. That’s an adoption rate of roughly 65 percent of U.S. households, compared with 88 percent adoption in Singapore, and 95 percent adoption in South Korea. The U.S. adoption rate is even lower among low-income, minority, rural, tribal, and disabled households.

This country can and must do better.  In today’s global economy, leading the world in broadband is leading the world. 

This is where the National Broadband Plan comes in.  By setting ambitious goals and laying out proposals to connect all Americans to a world-class broadband infrastructure, we will help secure our country's global competitiveness for generations to come.

The FCC's National Broadband Plan will include the following key recommendations:

100 Squared Initiative: 100 million households at a minimum of 100 megabits per second (Mbs) -- the world’s largest market of high-speed broadband users -- to ensure that new businesses are created in America and stay in America. Broadband Testbeds: Encourage the creation of ultra high-speed broadband testbeds as fast, or faster, than any Internet service in the world, so that America is hosting the experiments that produce tomorrow's ideas and industries. Digital Opportunities: Expand digital opportunities by moving our adoption rates from roughly 65 percent to more than 90 percent and making sure that every child in America is digitally literate by the time he or she leaves high school. 

The quantitative and qualitative benefits of these proposals -- and the many others that the FCC's plan will contain -- are vast.  Connecting the country to higher speeds means more jobs, more innovation, and more economic growth.

The National Broadband Plan will chart a clear path forward -- ensuring that broadband is our enduring engine for creating jobs and growing our economy, for spreading knowledge and enhancing civic engagement, for advancing a healthier, sustainable way of life.

Pursuing the opportunity of universal broadband is, I believe, a universal goal. Our technology future is one that we can -- and must -- create together.

Julius Genachowski is Chairman of the Federal Communications Commission

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There's been a lot of commentrary today about the Recovery Act that you might have missed.  Christina Romer, Chair of the Council of Economic Advisors, writes on her new blog about the employment effects and investments in the clean energy economy, complete with the usual illustrative charts.  If you haven't subscribed to the White House email list, you may have missed the email this morning form Vice President Biden -- subscribe now so you don't miss the next one.  And agencies across government are taking stock of where they are and how they are contributing to recovery, and of course pushing ahead.   Check out the video of construction worker Rhea Mayolo filmed by DOT and the new innovative transportation awards they announced today; the U.S. Fish and Wildlife Service has an outstanding map of all their Recovery Act projects; and for an amazing in-depth look at one particular project, check out California's High Speed Rail Authority.

In the video below, the Department of Education brings home one of the most important benefits of the Recovery Act, one that most parents may never know it provided for their kids -- keeping their teachers, guidance counselors, and other educators on the job. 

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As a White House Fellow in the Office of the Vice President, part of my job is monitoring how the Recovery Act is helping put communities across the county on a path toward economic recovery.  Yesterday I had the opportunity to see the Recovery Act in action when I traveled to Saginaw, Michigan with Vice President Biden ahead of the program's one-year anniversary.

Saginaw has been hard hit by the economic downturn and changes in the automotive industry, but it is quickly reinventing itself to be competitive in the 21st century economy with investments in the renewable energy industry.

We started the day at Delta College where students, with support from the Recovery Act, are getting trained for jobs in manufacturing in the solar industry. The Vice President received a heartfelt introduction from Justo Gonzalez, a recent graduate of the job training program.  Justo began by explaining how almost one year ago, he was laid off from his job in the automotive industry. But after going through training at Delta College, he was recently hired at Hemlock Semiconductor as a Reactor Care Operator.  Justo looked to his wife and two daughters in the crowd and nodded as the Vice President later spoke about how a job is more than just a pay check, it’s about dignity and knowing you can care for your family.

Then we were off to Fuzzy's Diner in downtown Saginaw for a discussion with local business leaders and community members over lunch. Paul Furlo, the CEO of Morley Companies Inc., spoke about how a recent loan that was backed by the Small Business Administration through the Recovery Act, has allowed him to expand his company’s capacity and hire another 650 associates.

And it all came full circle when we ended the day at Hemlock Semiconductor, Justo’s new employer and a recipient of an energy manufacturing tax credit.  Justo's words from that morning came alive, "This is a new era.  Like when the automotive industry took over the lumber industry here in the Saginaw Bay Region, the solar industry is now taking us forward into the future. We are just at the early stages and with the sky not just being the limit, it's another source of energy.  With solar and wind energies our growth is unlimited. Michigan has a vast knowledge of manufacturing products. We need to stay positive."

We're only part-way through the Recovery Act and there is still much work to do – but it’s clear it’s making a difference for people like Paul and Justo all over the country.

Annie Maxwell is a White House Fellow in the Office of the Vice President

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Today, on the one year anniversary of the signing of the Recovery Act, like clockwork we're seeing opponents of the bill on the attack on cable TV and in the newspaper.  That's no surprise.  What is surprising, though, is that many of these very same Members who voted against the bill and take every opportunity to go on national television and attack it have actually celebrated and taken credit for Recovery Act money making an impact in their own districts.

House Minority Whip Eric Cantor (R-VA) voted against the Recovery Act twice, but then touted the job-creation and economic development potential of a stimulus-funded high speed rail project in Virginia.  Senate Minority Leader Mitch McConnell (R-KY) voted against the Recovery Act twice but then touted a military project in Kentucky funded by the stimulus as "a source of significant employment." 

They can't really have it both ways.  Yet Recovery Act opponents across the country are trying to do just that: bash the Recovery Act in Washington while taking credit for it at home.  Just take a look at some of these stories from the Washington Times and the Wall Street Journal for more examples.

As David Leonhardt highlighted in the New York Times today, the bottom line is that the Recovery Act has created jobs that otherwise would not have existed and cushioned the blow of the economic downturn.  Well-known independent economic research firms IHS Global Insight, Macroeconomic Advisers and Moody's Economy.com have all estimated that the Recovery Act has added 1.6 million to 1.8 million jobs to the economy so far, and the non-partisan Congressional Budget Office estimate of jobs created thus far is even higher: 2.4 million.  While we won't be satisfied until we begin to see net job growth, the fact is that job losses today are a fraction of what they were a year ago before the Recovery Act was passed. 

The President is also working with Congress on additional jobs measures, many of which are rooted in the early successes of the Recovery Act.  The President continues to work every day to find more ways to create more jobs and drive economic growth and he won’t be satisfied until our economy is back on firm footing.

Dan Pfeiffer is White House Communications Director

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In order to fully understand the scope of the Recovery Act, there are three levels to consider: the national, the local, and the individual.

Recovery Act: The National Level

This morning the Vice President – who has overseen the implementation of the Recovery Act as one of his primary responsibilities – marked the one-year anniversary with his first annual report to the President on progress (pdf). A White House release, "Recovery by the Numbers," breaks out some key bullet points – here are just a few:

Jobs

CBO: According to the nonpartisan CBO, the Recovery Act is already responsible for as many as 2.4 million jobs through the end of 2009. CEA, Other Private Forecasters: Analysis by the Council of Economic Advisers also found that the Recovery Act is responsible for about 2 million jobs – a figure in line with estimates from private forecasters like IHS Global, Moody’s Economy and even the conservative American Enterprise Institute.

The Economy

GDP/Economic Growth: In the fourth quarter of 2009, the economy grew 5.7 percent – – the largest gain in six years and something many economists say is largely due to the Recovery Act.  Before the Recovery Act, the economy was shrinking by about 6 percent. Job Losses: Job losses for the fourth quarter of 2009 were one-seventh what they were in the first quarter of 2009 when the Recovery Act was passed.

There's plenty more in there, including breakdowns on infrastructure, technology and innovation, immediate relief, and aid to state and local governments. The Vice President also penned an op-ed in USA Today where he discussed the job creation estimates and the role the Recovery Act played in bringing us back from the brink of outright depression, but also what lies ahead:

And yet, to me, the most exciting thing about the Recovery Act is not what we've done, but what lies ahead. Many Recovery Act programs that will build the groundwork for the economy of the 21st century will be implemented in the next few months. Broadband access for small and rural communities. New factories where electric cars and clean fuel cells will be made. Wind farms, solar panels — and the facilities to construct them. New health technologies and smarter electrical power grids will be creating jobs this year thanks to the Recovery Act. Truly, the best is yet to come.

In remarks this morning, the President touched on another top level guiding principle of the Recovery Act – creating a new foundation for the American economy. From building a clean energy economy and creating a smarter energy grid, to revitalizing America’s infrastructure and transportation, to making our health records electronic and efficient, to rewarding excellence in teaching our children, people were put to work building a better future for America.

Recovery Act: The Local Level

Here at WhiteHouse.gov/Recovery, we looked at a more local level, with an interactive map looking at a sample of key projects, and the video below featuring the Mayors of Charleston, SC, Philadelphia, PA, Des Moines, IA, Columbus, OH, and Fresno, CA, all telling the story of how the Recovery Act affected cities and towns across the country:

Recovery Act: The Individual Level

With job losses, it always feels like missing the point to talk about numbers and figures, when every job lost can mean almost infinite pain and struggle for a given family. And in the same way that the President and Vice President understand the tough times Americans are going through with that lens, that is also the most meaningful way to look at what the Recovery Act has accomplished.  Joining the President this morning, the Vice President took a moment to talk about just one person:

Just yesterday, as I said, in Saginaw, Michigan, I was with a gentleman who has his B.A. -- his name is Gonzalez -- Mr. Gonzalez.  He worked for an automobile company and he got laid off.  His wife and two kids were there at this event.  But because of the Recovery Act and the job training program at a community college in his town, he went back and took a 16-hour course in being able to begin to deal with -- 16-week course -- in being able to deal with chemicals related to how they produced solar panels.  And DOW Corning has a plant nearby.  They added a thousand people over the last year because of some help they got as well, and in their great reach, he's now working.  He's working at a decent salary.  And that community college is going to train this year -- another hundred people are going to go right from that training program directly to a job. 

The President closed out his remarks referring critics to two other individuals: Blake Jones, Co-Founder of Namaste Solar in Boulder, and Charles Niederriter of Golden Triangle Construction Co. in Imperial, PA, who joined him and the Vice President today:

But for those skeptics who refuse to believe the Recovery Act has done any good, who continue to insist that the bill didn't work, I'd ask you to take that argument up with Blake and his employees. Take that argument up with Chuck and his construction workers. Take it up with the Americans who are working in those battery plants, or building those new highways, or teaching our children new skills -- all because the Recovery Act made it possible.

There's Blake:

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Yesterday the White House released the annual Economic Report of the President – a detailed analysis of actions taken by the Administration to address our Nation’s economic challenges over the past year and the President’s plans to rebuild and rebalance our economy for the future. As part of White House’s commitment to make government more accessible, the Economic Report of the President is now available as an eBook for your Amazon Kindle, Barnes & Noble nook, Sony Reader and a number of other devices. We are always looking for ways to bring people closer to their government through new technology.

The 2010 Report includes an overview by the President of the Administration’s economic policies and goals, a 300-page analysis of the Administration’s first year and over 100 pages of key economic statistics. Now the 2010 Report isn’t just more convenient, it’s also more environmentally friendly.

The full report is available for download as a free eBook through WhiteHouse.gov or through Amazon, Barnes & Noble or the Sony Reader store.

Dan Pfeiffer is White House Communications Director

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The Middle Class Task Force recently announced a number of initiatives that are designed to strengthen the retirement system and help provide a more secure retirement to millions of American workers.  These initiatives are part of President Obama’s FY 2011 budget, and this Administration will be working hard with Congress to get these proposals passed into law this year.

You don’t need us to tell you how important it is to strengthen the retirement system, but in the wake of the financial crisis and the market collapse, it’s become clearer than ever that we need to do more to help  American workers save for a secure retirement.  Many workers have seen their 401(k)s and IRAs decline by thirty or forty percent, and many more have seen the value of their home - the single most important asset for many middle-class families - fall just as far.  So families across the country are acutely feeling the need for us to do more to help provide a secure retirement for hardworking Americans.

But there are also some longer-term problems with the retirement system, and we think it’s important to address those as well.  Far too many workers don’t have access to a retirement plan through their employer, and even among Americans who have been saving since they got their first job, too many are seeing the returns on their savings eaten away by high fees, leaving them with less than they’d hoped for when they retire.

That’s why we’ve proposed this package of retirement initiatives – we want to make sure that Americans have access to good options to save for retirement.

That means making sure more workers have workplace retirement plans by requiring employers who don’t offer a retirement plan at the workplace to automatically enroll their workers in a direct-deposit IRA, to give workers an easy and effective way to save.  Workers will be able to opt out if they choose, and the smallest employers will be exempt, but this proposal will provide an important new way to save for many of the seventy eight million Americans – about half the workforce – who currently do not have a retirement plan at work.

It also means matching the savings of many families to help them save more.  We’re proposing to simplify and expand the Saver’s Credit to provide a fifty percent match on the first $1,000 of retirement savings for families making up to $65,000, and to provide a partial credit for families making up to $85,000.  So if you save $1,000, you get a tax credit for an additional $500 to help you build up your retirement savings.  And we’re proposing to make the credit fully refundable, helping families who are just starting to save a nest egg and helping lower-income families to rise into the middle class.

Finally, it means updating and strengthening regulations to make sure there are good savings options available to American workers.  Too many workers are seeing high fees erode the returns on their retirement savings year after year, so we’re proposing new regulations that would make sure American workers have all the information they need to make the best choices with their retirement savings.

We’re already getting good reactions on these proposals from retirement experts across the ideological spectrum.  For example, Nancy LeaMond, Executive Vice President of AARP, said in a statement,

“Millions of hard-working Americans don’t have access to a traditional pension or a 401(k), making it difficult for them to save for retirement. Studies have shown that when workers have the ability to enroll in an automatic workplace retirement savings plan, they are more likely to save.  AARP firmly believes that the an automatic workplace savings account or “Auto IRA” is a low-cost, high-impact way to help millions of Americans save for their retirement – experts estimate such a proposal could help 50 million Americans. The Auto IRA proposal has earned bipartisan support among leaders in Congress as well as among employers. More importantly, according to a recent AARP survey, eighty percent of Americans support for the proposal as a way to improve individuals’ retirement security.”

Robert Greenstein, Executive Director of the Center on Budget and Policy Priorities, said of our package of retirement initiatives,

“Taken together, these proposals should induce significant increases in retirement saving.  Such an increase in saving would both help families in old age and strengthen U.S. long-term economic growth by increasing the pool of national savings that can be tapped for private investment in new plant and equipment.”

The Corporation for Enterprise Development also praised our efforts to help American workers save more, writing in a statement,

“We commend the Obama Administration for prioritizing asset building as part of their solution to financial distress for America’s middle class families.  The President and his team are right to seek solutions to rising levels of asset poverty.”

Meanwhile, David John at the Heritage Foundation describes our Automatic IRA proposal as a “common-sense idea that could help to increase Americans’ retirement security.”  He writes:

“This simple, easy-to-understand way for workers to save some of their own money each payday is important, because almost 78 million American workers--about half of all workers--are employed by companies that do not offer any sort of pension plan or 401(k)-type retirement saving plan. … The Automatic IRA has wide bipartisan support from the left and right and was endorsed in 2008 by both the McCain and Obama campaigns. It is a simple, cross-ideological, and practical solution to a serious problem.”

Of course, we don’t think these proposals will solve the problem of retirement insecurity overnight; especially in the aftermath of the market crash, it will take time and hard work for Americans to build up their retirement savings.  But we believe these initiatives are an important step toward making sure that American workers have good choices to save for the secure retirement they deserve.

Tobin Marcus is the Assistant to the Chief Economist for the Vice President

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Today, we are releasing the Economic Report of the President for 2010.  For more than sixty years, the Economic Report has provided a nearly contemporaneous record of how Administrations have interpreted economic developments, the motivation for policy actions, and the results of those interventions.  This year’s volume has attempted to stay true to this proud legacy.  It provides a detailed economic history of the first year of the Obama Administration.  It examines the economic challenges that we face as a Nation, the many policy actions that have already been taken to address these challenges, and the President’s proposals for further action.

The economic challenges facing the Nation when President Obama took office were among the greatest in our history.  Last January, the American economy was truly in freefall.  Real GDP was falling at an annual rate of more than 6 percent and the U.S. economy was losing jobs at the devastating rate of almost 800,000 per month.  Our financial markets, having narrowly avoided collapse in the financial panic of the early fall of 2008, were paralyzed with fear, and borrowers of all sorts, from households to small businesses to large corporations, were having trouble accessing the credit necessary for normal economic activity.  As a scholar of the 1930s, I can say that the threat of a second Great Depression was both genuine and terrifying.

But as great as the immediate challenges were, our country’s economic problems were also deeper and more long-standing.  For nearly a decade, typical American families had seen their incomes stagnate, instead of rising steadily as they had for generations.  Much of the economic growth that the United States experienced in the past decade was fueled by consumers and the government running up large debts, aided by a financial system better at making short-term profits than managing long-term risks.  Rapidly rising health care costs were squeezing both family incomes and the government’s budget.  And as a country, we were failing to invest as we needed to in education, new energy technologies, and basic research and development.

Over the past year, the President, working with Congress, has sought to rescue the economy from the immediate crisis, rebalance the economy toward greater investment and exports and away from unsustainable budget deficits, and begin the process of rebuilding the economy on a stronger foundation of quality, affordable health care, better education and job training, clean energy, and innovation.  The Economic Report of the President details both the actions we have taken so far and the President’s plans for continued progress.

While it is impossible to describe the whole volume in detail, let me highlight the findings from three chapters and discuss how the other chapters fit into the Report.

Rescuing an Economy in Freefall

The Employment Act of 1946, which created both the Council of Economic Advisers (CEA) and the Joint Economic Committee, made explicit that it was the role of the Federal Government “to promote maximum employment, production, and purchasing power.”  Chapter 2 of the Economic Report discusses the unprecedented actions that have been taken to end the Great Recession of 2008 and 2009.  It is no surprise that this chapter is the longest in the book; the actions that have been taken are many.  They include not only the American Recovery and Reinvestment Act of 2009, but a number of smaller fiscal actions such as the “cash for clunkers” program to stimulate the automobile industry and important extensions of key tax cuts and unemployment benefits.  They include a range of financial sector interventions, such as the stress test of the nineteen largest financial institutions, new lending programs, and support for the government sponsored enterprises.  Rescue actions also include programs to stabilize the housing market and help responsible homeowners avoid foreclosure, as well as conventional and extraordinary monetary policy measures conducted by the Federal Reserve.

Chapter 2 also discusses the evidence that these actions have had a tremendous impact.  Our financial markets are secure again and credit spreads, a common measure of financial market unease, are down almost to historical norms.  Despite overwhelming downward momentum, the trajectory of the economy has changed radically.  By the third quarter of 2009, real GDP was growing again, and last Friday we learned that the unemployment rate fell three-tenths of a percentage point in January.  Experts across the ideological spectrum credit the unprecedented policy actions with preventing an economic cataclysm and putting us on the road to recovery.

Here I want to discuss particularly the impact of the Recovery Act.  This Act is the great unsung hero of the past year.  It has provided a tax cut to 95 percent of America’s working families and thousands of small businesses.  It has meant the difference between hanging on and destitution for millions of unemployed workers who had exhausted their conventional unemployment insurance benefits.  It has kept hundreds of thousands of teachers, police, and firefighters employed by helping to fill the yawning hole in state and local budgets.  And, it has made crucial long-run investments in our country’s infrastructure and jump-started the transition to the clean energy economy.  All told, the Recovery Act has saved or created some 1½ to 2 million jobs so far, and is on track to have raised employment relative to what it otherwise would have been by 3.5 million by the end of this year.  When the political rancor of the moment passes and dispassionate analysis is done by experts, I have no doubt that the American Recovery and Reinvestment Act of 2009 will be viewed as one of the great triumphs of timely, effective, countercyclical macroeconomic policy—just exactly the type of policy the Employment Act of 1946 was designed to facilitate.

While conditions are far better than they would have been without the actions that were taken, it is clear that substantial challenges remain.  The unemployment rate is 9.7 percent and the revised data show that employment has fallen 8.4 million from its peak in December 2007.  For this reason, the President has called for important targeted actions to spur job creation.  One of these is the Small Business Jobs and Wages Tax Cut.  The Council’s analysis suggests that such a tax cut for hiring could be a particularly cost-effective way to generate substantial increases in employment at this point in the recovery.  The Administration also supports continuation of essential relief measures to aid the unemployed and to keep teachers, police, and first responders employed by strapped state and local governments.

In another chapter on rescue measures, the Economic Report discusses the worldwide response to the crisis.  It shows that a coordinated move to monetary and fiscal expansion allowed countries around the globe to climb out of the crisis simultaneously.  In this way, worldwide growth helped to support the growth in each individual country.

Rebalancing the Economy on the Path to Full Employment

In his State of the Union address, the President highlighted the problem of the Federal budget deficit.  As described in Chapter 5 of the Economic Report, the Federal budget situation had deteriorated substantially before the recession.  Largely because of two tax cuts, two wars, and a major new Medicare drug benefit that were not paid for, the budget surpluses of the 1990s had been replaced by substantial actual and projected future deficits long before the recession began at the end of 2007.  The recession obviously made the deficit larger, as did the actions to address the recession, such as the Recovery Act.  But by the end of the decade, the rescue actions raise the deficit by just one-quarter of one percent of GDP.  The much more significant factors in accounting for the long-run deficit are the unpaid-for policies of the past decade and Medicare, Medicaid, and Social Security costs.  Whatever their cause, the medium- and long-run deficits that are projected are unsustainable, and will gradually crowd out investment and impede growth if they are not addressed.

Chapter 5 explains the logic of the Administration’s proposed fiscal target.  By balancing the primary deficit (that is, the deficit net of interest costs) in the medium run, we will stabilize the debt-to-GDP ratio.  To achieve this, the Administration has proposed a sensible plan that includes a three-year freeze of nonsecurity discretionary spending and a bipartisan commission to build consensus on other needed actions.  At the same time, our budget contains $100 billion for further targeted jobs measures and additional funds for continuing relief efforts.  Such a blending of near-term emergency spending and a medium- and long-term plan for fiscal sustainability is the sensible policy for this point in the recovery.

Other chapters of the Economic Report build on the theme of restoring balance to the American economy.  CEA analysis suggests that American families are likely to be saving more in the future than they did in the past decade.  To fill the gap left in demand, business investment and net exports will need to rise.  The Administration has proposed a number of policies to encourage this healthy transition.  Likewise, our financial regulatory system needs to be revamped to match 21st century financial innovation.  We need to put in place sensible rules of the road to ensure that we do not return to the bubble and bust economy that has wreaked such havoc on the American economy in the past decade.

Rebuilding a Stronger Economy

In no area are the long-run challenges facing the American economy greater than in health care.  We are all too aware of the statistics on the millions of Americans without health insurance.  But, as we discuss in Chapter 7 of the Economic Report, the troubles are broader than that.  American families with insurance face further stagnation and eventual decline in take-home wages as rising health insurance costs consume a larger and larger fraction of total compensation.  Federal, State, and local governments face unsustainable pressure on their budgets as government health expenditures rise along with overall health care costs.  That is why the President has made health insurance reform a top priority.

Working with Congress, we have already achieved a great deal. The extension of the Children’s Health Insurance Program will bring coverage to as many as 4 million more children.  The Recovery Act provided support for unemployed workers to help them maintain health insurance benefits and made pioneering investments in health information technology, health centers, and research into which treatments are likely to work best.  Both houses of Congress have passed reform legislation that would do so much more to slow the growth rate of health care costs, and make insurance coverage more secure for those who have it and affordable for the millions of Americans who do not.  Successful completion of reform legislation is essential to our long-run economic prosperity, taming our government budget deficit, and making American families more secure in their health insurance coverage.

Three other chapters of the Economic Report discuss additional areas where the President believes we need to rebuild our economy stronger than before.  Education is a key ingredient to improved productivity and wages.  Clean energy holds the promise of generating good jobs at the same time that we reduce harmful greenhouse gas emissions.  And innovation is the ultimate engine of economic growth.  In each of these areas, the President and Congress have already made key substantive investments.  But, as these chapters describe, there is much more that can and should be done to ensure a brighter future for our children and our country.

As I have described, this year’s Economic Report of the President is a blend of history, analysis, and prescription.  It describes what we have been through during the past very difficult year.  It describes the many actions we have taken to address both the near-term crisis and our longer-run problems.  And, it contains an important agenda of policy actions that will help to ensure that the American economy not only recovers completely, but comes back even stronger than before.

Before I close, I want to acknowledge the outstanding staff of the Council of Economic Advisers who contributed to this report.  The CEA is unique among government agencies in that most of the staff turns over every year.  Our senior economists are typically professors on leave from universities, and our junior staff are typically students on leave from Ph.D. studies in economics or undergraduate economics majors.  This past year, the Council has been blessed with staff of a caliber not seen since the glory days of the CEA in the 1960s, when future Nobel laureates Robert Solow and Kenneth Arrow were senior economists and James Tobin was a member.  Leading experts in every field of economics joined the CEA staff this year to try to bring the best professional expertise to the tremendous economic challenges facing the country.  The junior staff is equally gifted and has worked eighty hours a week with a cheerfulness and enthusiasm that is truly inspiring.  I am indebted to all them, and to the dedicated permanent staff, and this volume reflects their collective wisdom and months of very hard work.

Christina Romer is Chair of the Council of Economic Advisers 

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