Resurrecting the New Deal in Perry County, Tennessee

While many cities and municipalities are still seeking approval on projects that propose to use federal stimulus money, a Tennessee county has used a different model to attempt to employ as many of its citizens as quickly as possible. The New York Times details the county’s efforts to put stimulus money to work in an area where unemployment levels recently exceeded 25 percent.

Rather than waiting for big projects to be planned and awarded to construction companies, or for tax cuts to trickle through the economy, state officials hit upon a New Deal model of trying to put people directly to work as quickly as possible.

They are using welfare money from the stimulus package to subsidize 300 new jobs across Perry County, with employers ranging from the state Transportation Department to the milkshake place near the high school.

Given the constraints of the American Recovery and Reinvestment Act, Perry County may be maximizing the potential of these federal dollars to lower current unemployment rates.  The Tennessean reports that the immediate effects of this program have been successful:

The centerpiece of an innovative job-creation program has put 300 residents to work temporarily, including 200… who are employed in the private sector, working at the local country club, insurance offices, hardware stores, trucking firms and the Subway sandwich shop.

What sets this program apart from other stimulus-related ones around the nation is that workers’ wages and benefits are paid directly by federal funds. It is the only stimulus initiative in the country like this, at least on this scale, according to federal Health and Human Services officials.

Aside from the local benefits of rapidly spending its ARRA allotment, the Perry County model is likely a better attempt at effective discretionary fiscal policy than has been witnessed in places that have yet to begin spending their stimulus money. A standard critique of discretionary fiscal policy is that is has long lags before taking effect, meaning that changes in taxing or spending in response to changes in the business cycle are likely to exacerbate, rather than smooth peaks and troughs in the business cycle. If it is possible to create spending programs that minimize these lags, Perry County has likely done just that.

As with other programs using stimulus funding, however, seeing success in Perry County’s unemployment reduction relies on a short-term view of economic heath.  The jobs funded by ARRA will likely disappear once these funds run out and public support for job creation wanes.  A local television news station explains:

The jobs are only temporary and will end a year from September. County Mayor John Carroll says the jobs are just a bandage: stopping the bleeding, but not a permanent fix.

Federal spending in places like Perry County has the potential to help people weather the current recession, but it may do more long run harm than good. Many manufacturing jobs that were once located in America are now outsourced to places where they can be executed more cost-effectively, but this trend does not require federal support to artificially create jobs for low-skilled domestic workers.

Instead, for long-term economic health, former manufacturing centers need to allow the private investment to direct their labor pools toward their new comparative advantages.

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