Journal-News.com

As Congress wrestles in the coming weeks over the fine points of President Barack Obama's economic recovery plan, it should not lose sight of a key fact: To be effective, any effort to stimulate the nation's economy must address the needs of those who are suffering most.

This is not just "do-gooder" rhetoric. It is also sound economic policy.

In testimony before Congress this month, conservative economist Mark Zandi of Moody's Economy.Com said the fastest and most cost-effective form of government spending to jump-start the economy was "extending unemployment insurance benefits, expanding the food stamp program and increasing aid to hard-pressed state and local governments."

In Ohio, where unemployment reached 7.8 percent in December, growing numbers of middle-income workers are losing their incomes, their homes and their health care, and falling into poverty at an alarming rate. Obama's plan to create millions of jobs by boosting infrastructure programs to repair roads and schools and improve energy efficiency would provide much-needed relief, as well as a long-term investment in the future.

Money needed soon

But while those projects are being set up, an effective recovery plan must also get money into the economy as soon as possible. A report released this month by top Obama administration economic advisers found that 83 percent of jobs generated by increased spending to help the most vulnerable Americans would materialize this year. By contrast, 41 percent of the jobs generated by increased infrastructure spending would not be available until 2010 or 2011.

By directly increasing spending, programs aimed at low-income people provide an economic boost that in itself creates jobs or prevents job loss. For every dollar the government provides for food stamps, for example, $1.73 flows into the economy, according to numbers compiled by Zandi. Congress should act immediately to pass an economic recovery package that includes a substantial two-year increase in food stamps. The House bill increases the food stamp benefit by at least 13 percent, at a cost of $20 billion, creating or saving 185,000 jobs over two years.

Here's how: An increase in food stamp benefits would immediately result in many more people in low-income communities purchasing goods at their local store. That means that the store would not be forced to lay off people and might even be able to start hiring. What's more, the local grocer would also need to buy more goods from food wholesalers and farmers, boosting the economic and job-generating prospects for those businesses as well.

Extend benefits

In much the same way, extending unemployment benefits provides those without jobs with money to spend in their local communities. Zandi estimates that for every dollar spent on unemployment benefits, $1.63 is generated in economic growth. Extending unemployment benefits for those out of work for more than six months, increasing benefits by $25 a week and allowing more of those without jobs to qualify, would create or save 339,000 jobs over two years, according to estimates provided by the Economic Policy Institute.

An effective economic recovery plan must also address growing state budget deficits, which are expected to reach $350 billion in the next 2½ years and which have already resulted in cuts in jobs and services in nearly every state in the nation. In Ohio, the deficit is projected to climb to $2 billion in fiscal 2010, compounding an increasingly dire situation already faced by our state. Some local newspapers have said that Ohio's deficit will climb to billions more, causing drastic cuts to services, especially to the most vulnerable in our county.

This problem can be addressed quickly by increasing the share paid by the federal government for Medicaid, education and other vital state and local services. Without a decisive response, ballooning state budget deficits will lead to a deeper recession and further cuts in programs that help the jobless and others in need.

Tax cuts help, too

Finally, tax cuts aimed at low-income families will have a far greater economic payoff than decreases in corporate or capital gains taxes since, as with food stamps and unemployment benefits, the money would be spent immediately by those who, without these benefits, struggle to stay afloat. For example, the House proposal to decrease the amount of earnings needed to receive the Child Tax Credit would put much-needed (and quickly spent) income into the hands of the poorest Americans. Every dollar spent by the federal government on tax credits of this type expands the economy by $1.22, according to Zandi.

With the harsh impact of the recession causing a growing unemployment rate, social services in Butler County and Ohio are seeing a drastic increase in clientele that have never before sought assistance from any such agencies. The growing number of people in need in Butler County is real. Their plight is painful and without an easy fix. The struggling American family must not be forgotten.

Recent polls show that the vast majority of Americans support increased federal spending to generate jobs and stimulate the economy – even if it means increasing the federal deficit. As Congress considers the details of an economic recovery plan, it should remember that helping those in need is the quickest and most reliable way to help us all.

Jeffrey Diver is executive director of SELF (Supports to Encourage Low-income Families), Butler County's community action organization.