How much has federal money helped Nevada in this recession? Should it be used to help Nevada
While U.S. Senate Majority Leader Harry Reid, D-Nev., and Republican U.S. Senate challenger Sharron Angle, a former assemblywoman, debate whether the federal government has helped or hurt Nevada, economists say there’s little doubt the state would be in even worse shape without aid from Washington.
Money from the feds — including about $3.2 billion in stimulus funds awarded to the state from the American Recovery and Reinvestment Act stimulus bill — has helped prevent layoffs of state workers and extend unemployment benefits for the jobless, experts say.
The role the federal government should play in boosting Nevada’s economy has been a constant source of friction between Reid and Angle. Reid has touted his efforts to bring more money to his home state, while Angle has denounced the spending as “reckless” and said it has not helped Nevada.
Nevada’s unemployment rate reached 14.2 percent in June, the highest in the nation. The state also suffered the highest home foreclosure rates in the U.S. during the first half of this year.
“Without federal aid, we could be talking Great Depression levels of unemployment in Nevada,” said Elliott Parker, professor and chairman of the economics department at the University of Nevada, Reno. Unemployment rates reached as high as 25 percent at the peak of the Depression.
But economists are quick to add that federal help alone cannot revive the state, which is reeling from sagging tourism, the collapse of its construction industry, and the failure to diversify its economy.
Tourism and construction, which fueled Nevada’s economy before the recession, have been two of the three hardest-hit sectors of the U.S. economy, along with the financial services industry, said Stephen Miller, professor and chairman of the economics department at the University of Nevada, Las Vegas.
“We’ve lost 50 percent of construction jobs in the last three years, so it’s hard to believe that federal money is going to put a dent in that,” Miller said.
Federal aid has softened the blow, economists say, by shoring up state budgets and extending jobless benefits, which provide about $300 a week to people who have lost their jobs.
“Government intervention can slow down the economic fall, but it can’t really turn it around and make it grow unless you just do massive World War II-level spending, and we’re not willing to spend that much,” Parker said.
Short of that, Miller said, the two most important things Congress and the Obama administration can do for Nevada are extending unemployment benefits and giving states more help for their ailing budgets.
Congress recently did both.
After three failed attempts, the U.S. Senate on July 21 approved an extension of unemployment insurance benefits through Nov. 30. The $34 billion bill included retroactive benefits for people whose benefits expired June 2.
That’s very important in Nevada, where about 40,000 of the state’s approximately 193,000 unemployment residents lost $12 million in weekly benefits when funding abruptly expired in June, said Jered McDonald, an economist with the Nevada Department of Employment, Training and Rehabilitation.
“When we lost those benefits, we lost a big chunk of money that had been helping to stimulate our economy,” McDonald said. “This will help us.”
This month, Reid, with crucial support from Maine’s two moderate Republican U.S. senators, pushed through a $26 billion bill aimed at keeping more than 300,000 teachers, police officers and other state and local workers employed nationwide and helping states pay Medicaid costs for the poor. The U.S. House returned from its August recess to approve the same bill Tuesday, and Democratic President Barack Obama signed it into law that afternoon.
Nevada is expected to receive about $83 million from the bill to keep more than 1,400 teachers working and about $79 million to bolster Medicaid, which serves more than 160,000 state residents.
“We are ensuring teachers’ jobs are secure for this school year, that funds are available for Nevadans who rely on Medicaid, and that our state avoids a budget shortfall that could result in more layoffs,” Reid said.
Critics, including Angle; U.S. Sen. John Ensign, R-Nev.; and U.S. Rep. Dean Heller, R-Carson City, said the money is making states such as Nevada too dependent on federal aid and is contributing to the growing federal deficit.
“The majority party will tout this as a jobs bill, but it will do nothing to help produce private sector jobs or grow the economy,” Heller said after voting against the bill.
Angle said that federal spending is not the answer and dismissed the latest federal aid to the states as responding to a crisis that is “only in Harry Reid’s mind.”
“I am the only candidate with the solutions that will turn around our economy, because I understand that government does not create jobs,” Angle said in a recent press release. “Instead of the reckless spending of the stimulus, we need to help small-business owners create an economic environment that will spur real job creation.”
But Reid said the federal government should send Nevada all the help it can.
“I can assure Sharron Angle that losing 1,400 education jobs would have been a crisis,” Reid said. “Every job matters, and if Sharron doesn’t understand that, then she’s not prepared to represent Nevada in the United States Senate.”
Miller agreed with critics that the latest state aid bill won’t create any new jobs, but he said saving hundreds of existing Nevada jobs is nothing to scoff at.
“It certainly helps,” he said.
To try to prevent more foreclosures, the Obama administration announced Wednesday that it would provide more than $34 million to Nevada that the state can use to provide temporary mortgage assistance to unemployed homeowners while they look for work or receive job training.
In the longer run, the state needs to do more to diversify its economy to include renewable energy and other industries and create a better-educated work force that is more adaptable to change, economists say.
“People could come here and park cars, serve cocktails, or be a dealer at a casino and make good money without a lot of education and training,” Miller said. “But when those jobs disappeared, they didn’t have the skills to do something else.”
Northern Nevada is a little better off than the Las Vegas area because its casino industry had been declining even before the recession hit, and local leaders already had been looking for other ways to create jobs, Parker said.
He pointed to the large warehouse distribution centers in the Reno area for companies such as Wal-Mart, Amazon and Barnes & Noble as examples of how northern Nevada has sought to diversify its economy and take advantage of its proximity to the California market.
As a result, northern Nevada’s unemployment rate is about 1 percentage point less than southern Nevada’s, McDonald said.
“But we’re all still suffering,” said Parker, whose own home has lost $200,000 in value during the last three years. “We need a state government that takes a hard look at what we’re doing. The federal government can only help a state so much.”
Nevada depends on the leisure and hospitality sector for 27 percent of its industrial base, compared to 10 percent nationally. So for the immediate future, what Nevada needs most is for other states’ economies to recover enough so people return to Nevada to spend money again, McDonald said.
“While the federal stimulus funds certainly helped us save jobs, it didn’t bring the tourists back,” he said. “Until the national economy improves, we’re stuck waiting.”