Spend or cut taxes: Parties duel over job plans

Feeling growing pressure to create more jobs, Republican and Democratic leaders from the State Capitol to Washington are battling over new steps to stimulate the economy.

Both sides are gravitating to measures aimed at helping Main Street, not Wall Street -- still the focus of voter wrath over last year's bailouts. The consensus mostly ends there.

In Washington this week, Senate Democratic Leader Harry Reid of Nevada hopes to push through a $15 billion package focused on tax credits and subsidies for local transportation and infrastructure projects.

It falls far short of a broader, $85 billion bill that was once thought to have GOP support.

Meanwhile, the DFL-controlled Minnesota Legislature is readying a $1.1 billion borrowing bill that could come to a vote as early as Monday. The money would be used for construction and repair projects and is projected to create roughly 21,000 jobs.

Minnesota Republicans are lining up behind Gov. Tim Pawlenty's pitch for lower corporate taxes and investor credits that he says could save businesses $20 million over 17 months, and more in coming years.

While the politicians battle, small-business owners such as Scott Mendrum say they are running out of time and patience.

15 million, and counting

Government gets pressure to help battered workers and businesses in every recession.

But the stakes are particularly high now. Not only is this downturn the worst in more than 25 years, and maybe the worst since the Great Depression, its effects could be especially long-lasting.

Already, 6.3 million Americans have been out of work for more than six months, the most since the government began counting in 1948. The overall number of jobless has topped 15 million, and economists know that the actual number is higher since only those still actively looking for work are counted.

Sectors of the economy that have typically been among the first to pull out of recession -- autos, home construction and banking -- have been among the hardest hit this time around. With the economy needing to add 100,000 jobs a month just to keep the number of jobless from growing, even a vigorous recovery could take years to bring enough jobs to make up for those lost since 2007.

Some experts say the idea of states trying to spend their way to economic recovery carries more political than economic weight.

"It benefits industry and construction, which are always the first to bounce back in a recession anyway," said Bill Frenzel, a former Republican U.S. congressman from Minnesota and a guest scholar of economic policy at the Brookings Institution.

Minnesota's modest plan

Other than spending bills, Democrats in the Legislature have offered little else to goose the economy. And they scoff at Pawlenty's pitch for tax cuts.

They cite studies that show there's no guarantee that tax breaks translate into new jobs or fresh investments in Minnesota companies.

Pawlenty hasn't offered any idea how many jobs would be created by the proposal, which he dubbed the "Job Creation Bill."

"We're not out here trying to do a jobs created or saved based on this or that," said Brian McClung, the governor's deputy chief of staff. McClung said economists or economic historians could figure out whether tax cuts or state spending best create jobs.

The proposals by both sides in Minnesota pale in comparison to those in other states. Illinois has launched a six-year, $31 billion spending program expected to create or support more than 439,000 jobs. Mississippi, led by Republican Gov. Haley Barbour, may spend up to $43 million in direct wage reimbursements to employers who make new hires. Other states such as Florida and Tennessee are also testing plans to slice off a share of their federal welfare money for wage subsidies of new jobs.

Lesson from Washington

As Minnesota lawmakers remain divided, those on Capitol Hill seem to have found one patch of common ground at a sprawling industrial low-rise in Faribault, Minn.

Republicans like the tax breaks; Democrats like the green energy.

By retooling its Faribault plant, the Minneapolis-based conglomerate is being included among 183 new manufacturing projects in 43 states that qualify for $2.3 billion in clean technology tax credits that were part of the stimulus package.

Designed to spur investment in renewable energy and conservation, the so-called Advanced Energy Manufacturing Tax Credits are touted as one of the undisputed successes of the stimulus package -- and one that serves to bridge the partisan divide in Washington.

For McQuay, the tax credits mean ramping up for a better business climate, and the jobs that might come with it-- if not now, then in the future.

Now, with the Obama administration still searching for ways to tamp down unemployment rates hovering near 10 percent, private sector tax breaks similar to those extended to McQuay and other employers are emerging as a narrow sliver of bipartisan harmony.

U.S. Rep. Erik Paulsen, a Minnesota Republican, agreed that "there are areas of common ground."

Paulsen made a personal appeal for small-business tax breaks when he met Obama at a recent GOP retreat. "I just said, 'You've been emphasizing small business lately, and I've got some ideas I think would be a real economic stimulus.'

"He said, 'Great, send them over.' "