AUGUSTA – In his recent State of the Union speech, President Obama said that ”jobs must be our No. 1 focus in 2010” and urged Congress to pass a new jobs bill.

With state unemployment at 8.3 percent in December and the Legislature struggling to close a $438 million budget shortfall, jobs are clearly our first priority here in Maine as well. This makes good common — and economic — sense.

While a vibrant private sector is the engine that drives economic growth and job creation over the longer term, government has a critical role to play creating jobs in times like these when that engine is sputtering.

Evidence confirms that government measures can boost demand and preserve and create jobs in tough economic times. The question isn’t whether government help creates jobs, but what are the most effective ways to assist the private economy’s recovery.

Last year, with the support of the entire Maine delegation, Congress passed and the president signed into law the American Recovery and Reinvestment Act (ARRA). It boosted consumer and government spending and pumped money into the economy at a time when sustaining demand is the crucial problem

Most ARRA spending so far has gone for three things: direct aid to the unemployed and other people who will spend quickly to meet their basic needs; aid to states to protect the jobs of teachers and police officers; and a tax cut for nearly all workers. The Council of Economic Advisers, required by law to assess the overall jobs impact of the act, estimates that the ARRA has preserved or created 10,000 jobs in Maine — steady paychecks infusing money into Maine’s economy!

ARRA increased federal Medicaid assistance to states and created a temporary state fiscal stabilization fund. Together, these provisions saved thousands of jobs. These two provisions have fulfilled expectations, helping states to close budget shortfalls in 2009, preserve essential services for our most vulnerable citizens, and save and create a substantial number of jobs in the private and public sectors.

The stabilization fund helps states facing steep shortfalls to protect jobs that provide educational and other indispensible services. The teachers and police officers who keep their jobs have more income to spend at local businesses.

Since government depends on private firms to provide many public services, private hospitals, clinics, and other health care businesses were beneficiaries of supplemental Medicaid funds. And of course, strong schools and safe communities clearly enhance Maine’s overall business climate.

Unfortunately, funds from these two provisions are running low and are scheduled to expire altogether. Enhanced federal Medicaid funding will expire on Dec. 31, in the middle of the next state fiscal year. What remains of the temporary state fiscal stabilization fund is not enough to forestall cuts in next year’s state budget.

Because unemployment is usually the last economic indicator to improve, state revenues generally take one to two years after a national recovery to rebound. Absent additional aid to states, Maine workers will lose as the Legislature is forced to make extremely painful choices before state finances fully recover.

A recent MECEP analysis projects that closing the current shortfall through cuts alone without consideration of other options at the state level could cause Maine to lose 7,000-10,000 Maine jobs — essentially the same number of jobs the ARRA saved.

This number could be even greater if fiscal relief to states is not extended because the state’s proposed supplemental budget assumes that $35 million (8 percent of the shortfall) in additional aid will be forthcoming.

Congress must not abandon Maine at this critical time. The House recently passed the Jobs for Main Street Act of 2010, which extends the Medicaid assistance and the state fiscal stabilization fund. The Senate has yet to act, but when it does, it too must extend these two vitally important provisions.

The jobs bill is not a partisan issue; it is a matter of economic necessity. Fortunately, the ARRA provides a blueprint for success as Congress hold the key for aid.

The jobs and livelihoods of thousands of Mainers and the renewed vitality of the state’s economy depend on it.

– Special to the Press Herald


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