• U.S.

Business: Lotsa Bucks, but Little Bang?

3 minute read

“The goal right now is to get the biggest employment bang for the buck.” So says one of Jimmy Carter’s advisers, defending what may become the most debated aspect of the President-elect’s multifaceted economic program: his plan to create nearly a million jobs over the next two years by adding $4 billion and possibly as much as $8 billion to federal spending on public works projects and public service jobs.

Although jobs programs are a surefire way to get people on a payroll—any payroll—they can be expensive relative to their effectiveness. Public works projects, by nature, are not heavy employers. The Commerce Department calculates that at best only 35% of the money spent on construction projects winds up as wages in the pockets of workers. Ford Administration officials figure that the $2 billion in public works grants they awarded last month will create no more than 80,000 jobs.

Start-up time is another problem. Though the Government requires thatconstruction begin within 90 days of funding approval, the lag betweenpresidential initiative and groundbreaking is much longer. Before the $2 billion in public works grants could be dished out, the CommerceDepartment’s Economic Development Administration had to sift through24,000 project applications to select 2,000 winners.

Despite these drawbacks, public works can give a boost to financially strapped areas simply by an injection of much needed capital. That is, if Congress can avoid treating—or mistreating —the program as pork-barrel politics. When Congress approved the $2 billion public works appropriation, it required that 30% of the money go to communities with unemployment rates below the national average. Says one of the Senate Public Works Committee staffers who drafted the legislation: “It was a political necessity. You can’t have all the money going to Newark. The Congressman from Scarsdale wants a cut too.” Outgoing Assistant Commerce Secretary John Eden, who is charged with administering the program, calls the 30% requirement “an absolute embarrassment. We gave money to places that didn’t need it.” Greenwich, Conn., for example, a wealthy suburban community where the per capita income is $8,300 (compared with a national average of $5,850), received $4 million to build a new high school.

Public service employment has its limitations. Without controls, the program can create “leaf-raking” employment and end up padding state and local payrolls without producing a net reduction in unemployment. Critics have called it “a revenue sharing program pretending to be a manpower program.” A rule of thumb that has been accepted by economists holds that because of “displacement”—new workers hired while old ones are fired—it takes 1 million public service jobs to reduce unemployment by about 250,000.

Congress tried—and partially succeeded in—overcoming these handicaps last year by designing legislation that creates jobs with a future (such as teaching, police work, surveying) and requires that they go to workers unemployed 15 weeks or longer. That safeguard, contained in the Comprehensive Employment and Training Act, will govern allocation of the additional billions Carter wants in order to increase the number of public service jobs from 310,000 to as many as 700,000 next year. The potential loophole will be enforcement of the 15-week unemployment standard now prevailing.

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