WASHINGTON (Reuters) - The Obama administration, facing criticism its economic stimulus plans are failing to halt layoffs, on Tuesday said hiring prompted by the spending would accelerate next year.
About half of the $787 billion in stimulus spending has been disbursed or committed, but has so far created or saved only about 1 million of a targeted 3.5 million jobs, said Jared Bernstein, economic adviser to Vice President Joe Biden.
Bernstein told a news briefing at the U.S. Treasury many infrastructure projects are just “slightly underway or half done. So a lot more of that employment will be coming over the next three quarters.”
“Basically you’re in the million (jobs) saved or created thus far, and we were on track to save or create 3.5 million by the time the act winds down at the end of next year, so that leaves about 2.5 million left,” Bernstein said.
Republican lawmakers have heavily criticized the Obama plan, pushed through Congress in February, for doing little to stop the loss of 3 million jobs since February or prevent unemployment reaching 10.2 percent.
At a Joint Economic Committee hearing last week, Rep. Kevin Brady, a Texas Republican, declared the stimulus a failure and asked U.S. Treasury Secretary Timothy Geithner to step down.
Bernstein said there was “no relationship between the timing” of last week’s criticism and an effort to highlight some of the stimulus act’s more successful programs.
Among these are the $47 billion in Build America Bonds sold by state and local municipal issuers through October. The bonds, which provide a direct subsidy of 35 percent of the issuer’s interest costs, have helped revive a municipal bond market that was completely frozen earlier this year as the financial crisis peaked.
The bonds now make up 21.1 percent of the muni market and have been credited with reducing borrowing costs by an average 112 basis points on a 30-year bond compared to normal tax exempt munis. They also have lowered yields on regular tax exempt bonds as reduced issuance shrinks supply.
However, U.S. Treasury assistant secretary Alan Krueger said that the administration has not made an independent estimate of the ultimate subsidy costs associated with the bonds, which have no issuance cap through the end of 2010.
He said the Treasury has been relying on estimates made by the congressional Joint Committee on Taxation, which has estimated the subsidy cost at about $4.35 billion over the next 10 years.
However, the committee’s estimate did not indicate a basis for total issuance, which Treasury officials say has widely exceeded expectations. Krueger said the program’s subsidy cost ultimately depended on many factors, including prevailing bond yields and the tax status of investors buying the bonds.
Reporting by David Lawder; Editing by Andrew Hay