October 11, 2011
By: Annie Lowrey
When the recovery started to flag in 2010, the Obama White House and Congressional Democrats attempted to pass a series of stimulus bills. A $150 billion, spending-heavy jobs package became $17.5 billion in tax cuts. Proposals for aid for the unemployed and the extension of Recovery Act programs faltered. But one bill that did pass was the Small Business Jobs Act, a law designed to funnel cheap money to small businesses.
The signature portion of the bill was the Small Business Lending Fund, a $30-billion pool of money for small banks meant to facilitate lending to small businesses. Little, local companies, the White House had long held, were the “engine” of the recovery and the creators of job growth. Help them, and you’d help the economy get back to growing.
Reading Treasury Department’s recent reports on the Small Business Lending Fund, you might think it had actually worked. “Billions of dollars in SBLF funds are now being put to use in communities all across the nation, spurring small business growth and job creation,” Deputy Secretary of the Treasury Neal Wolin said in a press release last month. The investment “is good for our economy and good for America’s small businesses.”
Treasury’s sunny spin aside, the program has largely flopped. It expired at the end of September having disbursed not $30 billion, or $15 billion, or even $5 billion. The SBLF is returning $26 billion to the government’s coffers. According to the Treasury Department, just 933 out of the country’s 7,700 or so community banks applied to the program. They requested just $12 billion in loans. And one-third of that sum got approved.
What happened? Well, first off, community banking organizations and small banks themselves argue that Treasury and the Federal Reserve made the program’s requirements too stringent and that they were too slow to get it off the ground. Treasury only started approving applications in early July, three months before the program’s expiration date.
The Independent Community Bankers of America lobbying group, for instance, sent repeated public letters to Treasury, asking it to clarify and loosen requirements and speed the application process. In September, with the program’s sunset in sight, it wrote: “[We] again implore Treasury and all the bank regulators to do everything in their power to ensure all SBLF applicants’ concerns are addressed … We urge Treasury to respond expeditiously to the community banks that still have questions and concerns … [W]e ask that Treasury take a hard second look.” In its defense, Treasury says that many of the community banks’ applications just did not pass muster: The banks could not prove they could make required dividend payments, or they already had missed a Treasury payment, or they were on a problem-bank list.
More troubling, the $4 billion in loans the government did make might not really help small businesses anyway. A Wall Street Journal analysis of Treasury data found that about half of the banks that took cash from the fund used some of it to pay back the Troubled Asset Relief Program. Rather than giving money to the restaurant around the corner or the startup in your neighbor’s garage, the banks gave it right back to Uncle Sam, bettering their balance sheets but doing little to spur business expansion or job growth. The Chamber of Commerce howled, branding the program little better than a bailout for small banks.
But there is another reason the program faltered—and might never have been able to succeed in the first place. Small businesses need credit to grow, to acquire equipment and hire workers to make sure more and more customers come in. But if small businesses don’t really believe that those customers are going to come in, well, they tend not to want to take on any debt. At some point, the problem isn’t a lack of credit. It’s an economy-wide lack of demand.
Have we hit that point? Almost certainly, and we’ve been there for years. According to the National Federation of Independent Business, the small business lobbying group, company owners routinely cite a lack of sales as the biggest problem for their business, more so than onerous regulatory requirements, high taxes, or trouble getting loans.
At a congressional hearing last week, Rep. Nydia Velazquez, D-N.Y., therefore argued that the whole program was misguided, “[wasting] today’s resources on yesterday’s problems.” In response, Treasury Secretary Timothy Geithner admitted, “We’re a little surprised by the take up” but maintained the program was “well targeted.”
In a way, they both right. Small businesses could use loans, and Treasury should be taking on risk and bending over backwards to make sure small banks are throwing free money at them. But that free money through the back door is no substitute for a flood of customers through your front door.
November 17th, 2010
By: Declan McCullagh
Two months ago, Homeland Security Secretary Janet Napolitano announced that the federal stimulus legislation would pay for the purchase of hundreds of controversial full-body scanners.
“Through the Recovery Act, we are able to continue our accelerated deployment of enhanced technology as part of our layered approach to security at airports nationwide,” Napolitano said at the time.
The number of scanners has roughly doubled since Napolitano’s announcement and they are now found in 68 U.S. airports, and the Transportation Security Administration says the controversial devices have proven to be a success.
“We have received minimal complaints,” a TSA spokeswoman told CNET yesterday. She said that the agency, part of DHS, keeps track of air traveler complaints and has not seen a significant rise.
A growing number of airline passengers, labor unions, and advocacy groups, however, say the new procedures–a choice of full-body scans or what the TSA delicately calls “enhanced pat-downs”–go too far. (They were implemented without much fanfare in late October, amid lingering questions (PDF) about whether travelers are always offered a choice of manual screening.)
Unions representing U.S. Airways pilots, American Airlines pilots, and some flight attendants are advising their members to skip the full-body scans, even if it means that their genitals are touched. Air travelers are speaking out online, with a woman saying in a YouTube video her breasts were “twisted,” and ExpressJet pilot Michael Roberts emerging as an instant hero after he rejected both the body scanning and “enhanced pat-downs” options and was unceremoniously ejected from the security line from Memphis International Airport.
One lawsuit has been filed and at least two more are being contemplated. There are snarky suggestions for what TSA actually stands for, attempts at grope-induced erotic fiction, and now even a movie.
These privacy concerns, and in a few cases even outright rebellion, come as an estimated 24 million travelers are expected to fly during the 2010 Thanksgiving holiday season. One Web site, OptOutDay.com, is recommending what might be called strict civil obedience: it suggests that all air travelers on November 24, the day before Thanksgiving, choose “to opt-out of the naked body scanner machines” that amount to “virtual strip searches.”
Normally, that kind of public outcry might be enough to spur TSA to back down–after all, in 2004 it relaxed its metal detector procedures to allow passengers a second try, and a year later it relaxed its rules to allow scissors in carry-on bags. Plus, the U.S. House of Representatives (but not the Senate) approved a bill saying that “whole-body imaging technology may not be used as the sole or primary method of screening a passenger.”
But with a lame duck Congress not even in session until next week, no hearings on full-body scanners currently scheduled, and renewed concerns about explosives in printer cartridges, an immediate reversal seems unlikely.
Instead, TSA is defending its practice. “TSA constantly evaluates and updates screening procedures to stay ahead of evolving threats, and we have done so several times already this year,” a spokeswoman said. “As such, TSA has implemented an enhanced pat-down at security checkpoints as one of our many layers of security to keep the traveling public safe.”
“Administrator John Pistole is committed to intelligence-driven security measures, including advanced imaging technology and the pat-down procedure and ordered a review of certain policies shortly after taking office to reinforce TSA’s risk-based approach to security,” TSA said. “We look forward to further discussion with pilots on these important issues.”
TSA’s official blogger, who uses the apparent pseudonym Blogger Bob, went so far as to say this week that: “There is no fondling, squeezing, groping, or any sort of sexual assault taking place at airports. You have a professional workforce carrying out procedures they were trained to perform to keep aviation security safe.”
Another possible catalyst for an eventual change in screening procedures is a lawsuit that the Electronic Privacy Information Center, a nonprofit advocacy group, filed against the TSA and Homeland Security last week.
“The agency went off the rails in the spring of 2009 when it decided on its own authority to make body scanners the primary screening technique in the United States,” says Marc Rotenberg, EPIC’s executive director. “We think there had to be a public rulemaking. We think the conduct implicates freedom of religion. We think it implicates the Privacy Act.”
EPIC’s lawsuit is ambitious. It says that TSA should have conducted a formal, 90-day public rulemaking to “fully evaluate all privacy, security, and health risks” and wants the D.C. Circuit to require the agency to conduct one. In addition, making full-body scanners the primary method of screening violates the Fourth Amendment, the suit says, because the scans are “far more invasive than necessary.”
In September, the D.C. Circuit shot down EPIC’s initial request for an emergency halt, saying the standards for a preliminary injunction against TSA were not met. Rotenberg remains optimistic, saying “these are obligations that are written into federal law” that TSA must follow. (This time, EPIC is not asking for an emergency injunction.)
The ACLU says it’s also weighing a lawsuit but has not filed one so far.
TSA has “always done pat-downs,” but until recently they haven’t been so aggressive, says Chris Calabrese, legislative counsel at the ACLU in Washington, D.C. “The pat-downs never used to go up a woman’s skirt.”
“It’s become troubling,” Calabrese says. “You’ve got these controversial naked strip search machines that they’re rolling out at airports across America. And if you choose not to go through the naked strip search machine, you’re subject to this (level of intrusive physical contact). It seems punitive. It seems designed to drive you to the naked strip search machine.”
July 15, 2010
By: Jonathan Karl and Gregory Simmons
As the midterm election season approaches, new road signs are popping up everywhere – millions of dollars worth of signs touting “The American Reinvestment and Recovery Act” and reminding passers-by that the program is “Putting America Back to Work.”
On the road leading to Dulles Airport outside Washington, DC there’s a 10′ x 11′ road sign touting a runway improvement project funded by the federal stimulus. The project cost nearly $15 million and has created 17 jobs, according to recovery.gov.
However, there’s another number that caught the eye of ABC News: $10,000. That’s how much money the Washington Airports Authority tells ABC News it spent to make and install the sign – a single sign – announcing that the project is “Funded by The American Reinvestment and Recovery Act” and is “Putting America Back to Work.” The money for the sign was taken out of the budget for the runway improvement project.
ABC News has reached out to a number of states about spending on stimulus signs and learned the state of Illinois has spent $650,000 on about 950 signs and Pennsylvania has spent $157,000 on 70 signs. Other states, like Virginia, Vermont, and Arizona do not sanction any signs.
One state brags it posts signs but manages to keep the process cost-effective. The Tennessee Department of Transportation boasts, “There are a total of 324 signs statewide for a total cost of $12,931 and an average of $37.67 each.” The reason for the small cost, they say, is that their signs are small– about equal to a speed limit sign.
In response to questions by ABC News, Jill Zuckman of the Department of Transportation said, “The best estimate is that states have spent about $5 million of the $28 billion spent on road projects on signs – or less than .02 percent of overall project spending.”
Still, some Republicans are crying foul. Congressman Darrell Issa, Chairman of the House Committee on Oversight and Government Reform, sent a letter to Earl Devaney, Chairman of the Recovery Act and Transparency and Accountability Board, requesting an investigation to “determine the scope and impact of the Obama administration’s guidance” regarding signs to stimulus recipients.
Rep. Issa writes that the passage of the Stimulus Bill, “has provided an opportunity for the Obama administration to claim political credit for the various projects around the country that have been funded by this redistribution of taxpayer dollars.”
At the center of the controversy are a series of guidelines provided to stimulus recipients. In the letter, Rep. Issa cites what he calls “perhaps the most overly political guidance on stimulus advertising” involving the Department of Housing and Urban Development and a stimulus recipient. According to investigators from the oversight committee, HUD provided the Office of Native American Programs with information on “signage requirements.” The document suggested a sign template informing the public the projects had been, “Funded By: American Recovery and Reinvestment Act, Barack Obama, President.”
Congressman Aaron Schock (R-IL) has joined the chorus of Republican outrage over stimulus signs and claims at least $20 million has been spent on them. He told ABC News, “I think it’s a bit of an oxymoron to spend tens of millions of dollars of taxpayer money, borrowed money, on a bunch of signs to tell them how we are spending their taxpayer money.”
Schock’s office provided ABC News with administration guidance on stimulus signs sent to him from a constituent. The document, dated March of 2009, outlines the “General Guidelines for Emblem and Logo Applications.” The Recovery Act logo which was provided not only looks oddly similar to the Obama logo from the 2008 campaign but its stated purpose, according to the document, is to act as “a symbol of President Obama’s commitment to the American people to invest their tax dollars wisely and put Americans back to work.”
Rep. Schock argues that the signs are not a wise investment at all, but rather, a waste of money. He took to the House floor today to offer a bill, “to prevent funding from the American Recovery and Reinvestment Act of 2009 from being used for physical signage indicating that a project is funded by such Act, and for other purposes.”
Massachusetts Democrat James McGovern fired back, “This is the best we can get? Not putting up signs?” He continued, “How about paying for the tax cuts for the rich that my friends on the other side of the aisle passed? Hundreds of billions of dollars in debt that you put on the backs of my kids and my grandkids so that the wealthiest of the wealthy in this country can get a tax break.”
When asked about Republican outcry over spending on stimulus signs, White House Press Secretary Robert Gibbs quipped, ” I’m glad the Republicans have noticed the several – nearly 11,000 road projects that are underway this summer.”
February 23, 2010
The Vancouver Sun
By Harvey Enchin
It has been one year since U.S. President Barack Obama signed the $787-billion stimulus bill, the Recovery Act, to lift the U.S. out of recession, and threw an additional $50-billion lifeline to American homeowners facing foreclosure. The package was subsequently enriched and is now estimated at $862 billion, while the pledge to stem foreclosures has risen to $275 billion.
“One year later, thanks to the Recovery Act, we can stand here again and say that a second depression is no longer a possibility,” Obama said in marking the anniversary last week.
Oh no? Take another look at the numbers.
After all that spending — actual and committed (Congress passed an additional $155 billion in aid in December) — claims of job creation and economic growth remain highly suspect. The U.S. economy has shed more than eight million jobs since the recession began, and losses continue with 20,000 fewer jobs in January alone. A White House advisory council forecast that the economy will create 95,000 jobs per month this year. For forecasters, the year is not off to a good start. Unless the job generator shifts into a higher gear, one analysis concluded, it will take more than seven years to replace the jobs lost since 2007.
The U.S. Labor Department recorded 473,000 new jobless claims last week, up from 442,000 a week earlier, while the number of people on extended benefits (those who have exhausted the regular 26 weeks of benefits) rose by 274,000 to six million. The official unemployment rate eased to 9.7 per cent in January from 10.1 per cent in October, but few believe the Obama administration’s boast that the stimulus has generated nearly two million jobs. According to a recent CBS News/ New York Times poll, only six per cent of Americans think the stimulus has created any jobs at all, and public support for the plan has dropped from 55 per cent in June to 38 per cent.
If the stimulus package has created jobs, they are in the public sector, displacing jobs that could have been created more efficiently in the private sector, costing taxpayers far more for each job than the sum of salary and benefits. That’s what happens when capital is diverted from productive endeavours that create wealth to government spending programs that dissipate it.
Beyond the jobs front, things are even worse. Loans in foreclosure now represent 4.6 per cent of all mortgages, and the number of mortgages more than 90 days overdue has climbed to 5.1 per cent.
A Congressional panel reported earlier this month that half of approximately $1.4 trillion in commercial loans coming due over the next four years are under water, and hundreds of small-and mid-sized banks face insolvency. It warned of an impending commercial real estate crisis with property values down 40 per cent since 2007 and 18 per cent of office space sitting vacant.
The move last week by the Federal Reserve to raise its emergency loan rate looked more like public relations than economic policy, an attempt to signal that GDP growth — seen at three per cent this year and four per cent in 2011 — is real and that inflation remains a threat. But strip out energy prices and consumer prices fell 0.1 per cent in January, the first month of deflation since 1982.
Underlying the economic gloom is a national debt of $12.4 trillion. Obama, apparently unfazed, signed a law this month that raised the limit on public debt to $14.3 trillion. Government debt now amounts to more than $40,000 for each American, $113,000 for each taxpayer. Given its ballooning budget deficit, which is seen at $1.6 trillion this year, or 10.6 per cent of GDP — a post-Second World War record — it’s difficult to see how the administration can put its fiscal house in order without massive spending cuts. But with soaring health care costs, an aging population, the environmental agenda, military commitments and more Obama-inspired social initiatives, spending cuts are unlikely.
China has indicated its lack of confidence in the crumbling U.S. economy by unloading $34.2 billion in U.S. bonds in December, relinquishing its status as the largest holder of U.S. foreign debt to Japan. As U.S. debt grows, so too does pressure on the interest rate on bills and bonds used to finance it. Rising debt service costs, perhaps accompanied by a downgrade from global ratings agencies, would help expose the phantom recovery for the charade it is.