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Today Congress passed a new jobs package that may have a larger impact on the 2010 elections than any political ad or gaffe between now and November. The $26.1 billion dollar bill is designed to help state and local governments currently experiencing serious budgetary crunches. Without the aid, states would have had to layoff hundreds of thousands of workers or raise taxes in some form. Instead, today the House of Representatives passed the federal aid package, which is financed mostly by closing a tax loophole for corporations. The bill passed by a 247-161 margin and will be signed by President Obama tonight.
Following the vote, both Republicans and Democrats immediately started their spin campaigns. Republicans accused Democrats of spending more taxpayer dollars, and passing the bill to benefit “special interests.” Democrats argued that the tax loophole in question rewarded corporations for sending jobs overseas. Democrats also accused Republicans of purposefully trying to sabotage the economy to help their political prospects in November.
Americans unlikely are to be greatly influenced by any of the spins, but the jobs reports over the next three months are likely to have an effect. Last month the overall economy lost jobs, despite adding 71,000 jobs in the private sector. The cause of the job loss was the public sector, as state and local governments started shedding workers to avoid running a debt. That situation likely would have continued without the state-aid package. Most state and local governments, unlike the federal government, can not run deficits. As a result, most would have faced the prospect of either raising taxes or laying off workers. Given the unpopularity of tax cuts in bad economic times, or any time for that matter, the likely result was massive layoffs.
With the passage of the state-aid package, Democrats believe they have avoided the layoff of 161,000 teachers and 158,000 public works employees. Many of those jobs saved (an infamous phrase among many conservatives) will positively impact the jobs reports in September and October. Job creation is the number one issue in nearly every poll, and Democrats had to have known that when they voted overwhelmingly to pass the bill.