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Stimulus efforts not enough to halt economic decline

Marc H. Morial

Stimulus efforts not enough to halt economic decline

The news is in. In 2007, 1.3 million U.S. households faced some stage of foreclosure, up 79 percent from the previous year, according to the real estate Web site RealtyTrac. This startling statistic, coupled with declines in housing starts and sales, explains to some extent why our nation’s leaders want as soon as possible to stem the tide of economic decline in which the subprime mortgage debacle has no doubt played a role.

In light of topsy-turvy markets and skittish investors, and especially in the midst of a competitive election year, it should come as no surprise that the “powers that be” would spring to action. What they ultimately agree upon will determine just how stimulating their efforts will be.

In mid-January, U.S. House leaders and President George W. Bush struck an unlikely alliance in the name of stimulating the faltering economy. They must have realized that tightening pocketbooks and rising unemployment do little to quiet the ranks of restless Americans eager to vote.

Remember the 1992 presidential election, when economics emerged as a major issue thanks in part to independent candidate H. Ross Perot’s crusade for a balanced federal budget? The billionaire’s campaign helped give Bill Clinton an electoral edge over Bush’s father, then-incumbent President George Herbert Walker Bush.

Together, Bush, House Speaker Nancy Pelosi and Minority Leader John Boehner arrived at a $150 billion compromise that provides tax rebates of $300 and up to moderate- and low-income households, among other things. Much to the National Urban League’s approval, they also included a provision raising limits on Federal Housing Administration-backed home loans designed to help ease the credit crunch and to give homeowners a greater opportunity to refinance debilitating adjustable-rate mortgages.

There’s no doubt that every little bit helps, especially in lean times, when a few hundred dollars can ease the strain of living paycheck to paycheck like so many African Americans do. But in crafting their stimulus package, our nation’s leaders ignored tried-and-true strategies used in past recessions that have provided much bigger bang for the buck than what the House passed last month.

A few hundred dollars isn’t likely to give an unemployed American the kind of boost that an extra six months to find a new job is. Similarly, an extra $300 per child is not likely to improve a household’s bottom line as much as a summer job. To effect long-term positive change, our leaders need to invest in long-term strategies that teach its citizens how to fish — not just throw them a minnow, and even then, usually only in an election year.

The Urban League movement would prefer a more comprehensive effort that incorporates an extension of unemployment benefits, increased food stamps and greater investment in summer jobs for at-risk youth. According to a recent analysis by Moody.com chief economist Mark Zandi, extending unemployment insurance and increasing food stamp payments would generate $1.64 and $1.73 per $1 investment, respectively, compared to $1.26 per $1 cost of the House-proposed tax rebates.

With long-term unemployment up by 200,000 in 2007, an extension of unemployment insurance, coupled with increased food stamps, should be the first things put on the table. In the House, they aren’t. But in the Senate, they are. Even in prosperous times, blacks experience twice the rate of unemployment of whites. Just imagine how bad it is when the economy tanks. Increased food stamps not only help the unemployed, they also help both the underemployed and part-timers.

For black teens — over one-third of whom were unemployed in December 2007, more than twice the rate of white teens — summer jobs help connect them to the working world, giving them desperately needed skills and putting them on the road to economic self-sufficiency.

It’s wonderful that our nation’s leaders want to show their love to their constituents in an election year. But the real question here is: Will they still love us after Election Day? Is it worth digging our nation further into debt for a short-term, feel-good gain? Is it worth putting our future in jeopardy by investing in initiatives that fail to achieve the best result?

I would be remiss if I didn’t applaud our leaders for putting aside partisan politics to further efforts to help fiscally struggling Americans. This rare show of bipartisan cooperation gives me hope that comprehensive and effective stimulus legislation will eventually see the light of day. It is the National Urban League’s ultimate hope that final legislation will look more like what the U.S. Senate is considering — one that includes an extension of unemployment benefits, as well as increased food stamps — but also includes funds for summer jobs. Our leaders should also use their stimulus package as a springboard for future efforts to level the economic playing field for all Americans of all tax brackets.

Marc H. Morial is the president and CEO of the National Urban League.