Even though the word “stimulus” isn’t a big part of Democrats’ political vocabulary any more, the reality of federal spending is still a major factor in the U.S. economy.
Some congressional Democrats who voted for the $830 billion stimulus bill in 2009 no longer use the word “stimulus,” but one prominent Democrat, Sen. Chuck Schumer of New York, wasn’t shy about doing so Thursday in making the case for the $109 billion transportation bill the Senate is likely to vote on next week.
Schumer cited the estimate by the American Public Transport Association that every $1 billion in federal spending on highways creates 36,000 jobs.
“At this point in time, that kind of stimulus, in a sense, would serve the economy well and would be needed,” Schumer told Federal Reserve chairman Ben Bernanke as he tried to get him to endorse the concept of more federal spending on highways.
Bernanke was cautious about playing along with Schumer: “Well senator, you know, there are different ways to provide stimulus. Infrastructure -- if it’s well designed and has a good return -- I think is often a good approach, but you understand that I don’t want to endorse a specific bill,” he told Schumer.
The economy is still sluggish, as Bernanke said in his testimony this week: “The job market remains far from normal; the unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high.”
And the economy is still highly dependent on federal spending -- a point also made in a different way this week by the chairman of the Joint Chiefs of Staff, Gen. Martin Dempsey, in his testimony to the Senate Budget Committee.
Defense contractors, he warned, are already beginning to brace themselves for the effect of the automatic sequester -- the cut of an additional $55 billion in defense spending in the fiscal year that begins on Oct. 1 if Congress and Obama can’t figure out a way to avoid the sequester.
“It's already beginning to have an effect on our defense industrial base,” Dempsey told the Budget Committee. “Although we can wait until the summer (to figure out how to avert the sequester), there are some corporations in our defense industrial base who, with the specter of sequestration hanging over them, are already making some decisions about their workforce. And so this is an immediate problem for them that will become a problem for us eventually.”