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Poster child for recession shows signs of recovery

In the January 2, 2020 article "Poster child for recession shows signs of recovery," Associated Press writer Charles Wilson says Elkhart, Indiana, one of the cities hit hardest by the Great Recession, is showing signs of economic recovery:

ELKHART, Ind. – When Ed Neufeldt introduced Barack Obama at a speech in Elkhart County in February, the new president promised the laid off RV worker would find a job.

Since then, Neufeldt has found two, setting up bread displays in grocery stores and working with a company that hopes to hire hundreds of people to make electric motors.

"If I was on unemployment, Id be bringing home more money than I bring home from both jobs," said Neufeldt, 63, of Wakarusa. "But thats OK, I want to work and I feel like Im helping the economy a little not being on the unemployment ranks."

Obama has visited the northern Indiana county four times — twice during the 2008 campaign and twice since — focusing attention on the area as emblematic of the nations double-digit unemployment woes.

Now, hope is rising in the struggling area as people head back to work — though not always at the same jobs they left, and sometimes for less money.

The unemployment rate here, driven by job cuts at factories that made Elkhart County the capital of recreational vehicle manufacturing, spiked in March to 18.9 percent. But it has fallen steadily since, reaching 14.5 percent in November while the national rate climbed to 10 percent.

Part of the drop in unemployment may be due to hiring at a handful of RV makers like Heartland RV in Elkhart, which recently held a job fair after announcing it would add 400 jobs by March. For jobless workers who have spent months scrimping to keep up with mortgages, the job fair was a welcome first step in returning to the life they used to know.

"Unemployment is livable, but its not like how we were living," said Marcia Blanton, who lost her job at RV maker Monaco Coach in September 2008. Blanton, 53, of Elkhart, briefly landed a job at a musical instrument factory before being laid off again a year later. She was still waiting to hear from Heartland about her application weeks later.

Other RV makers also have begun hiring, albeit slowly, as orders from dealers have picked up in the past few months. Dealers dont generally discuss sales figures, but two economists who follow the industry have predicted a slight rebound in production for 2010.

Gulf Stream Coach and Electric Motors Corp. announced in May they plan to spend more than $80 million on building renovations and equipment for factories in Wakarusa and Nappanee. The companies estimate the project could have 1,600 workers by 2012.

"I dont think theres any question that jobs are up," said Morton Marcus, a retired Indiana University economist who recently conducted a study for the Elkhart County Economic Development Corporation that forecast an upswing in the RV industry.

Still, some of those who have gone back to work are making less money.

Doug Hartzell, 59, of Nappanee, was rehired as a temp worker at the new Monaco RV in September after the old companys assets were bought by Navistar International Corp.

"I really did make an effort to find a job in those 12 months I was off and it was kind of discouraging after a while when you go door to door and you dont even get a chance for an interview," he said.

He said hes fine with working 9 1/2- to 10-hour days, even for the smaller paycheck.

"Im just glad to have a job," he said.

More jobs could be on the way in other industries as well.

Band instruments, office furniture, steel tubing, plastics and agricultural testing supplies are also made in Elkhart County.

Dorinda Heiden-Guss, president of the county development corporation, said the county has seen an "onslaught" of business interest since visits from Obama and former Arkansas Gov.-turned-Fox News commentator Mike Huckabee.

"People seem to know about Elkhart County," Heiden-Guss said.

In the past year, about $134 million worth of new projects entailing 3,300 new jobs have been announced, she said.

Upstart Electric Motors Corp. has moved into a former RV showroom in Wakarusa, where CEO Wil Cashen hopes to hire hundreds of workers to produce drive trains for electric-hybrid vehicles. Companies like Gulf Stream would install the engines. Its one of three electric vehicle projects involved in or eyeing the county.

Profitability will take some time — Electric Motors business plan projects million-dollar losses for the first two years before turning a $21 million profit in 2011.

Still, Cashen, a northern Indiana native, is a big believer in Elkhart County and its down-to-earth work force.

He was so taken with Neufeldts speech introducing Obama in Wakarusa that he hired him as a company spokesman. There isnt much speaking to do right now, so Neufeldt does odd jobs around the mostly empty building and the nearby Nicola Tesla School of Technology, where Cashen intends for employees to be retrained to work with electric motors.

"Elkhart is a kind of a sleeping diamond," he said. "Its an absolute diamond in the rough."

Amid the signs of hope, there are still plenty of reality checks.

Thousands remain out of work — nearly 14,000 in the Elkhart-Goshen metropolitan area alone in November. Social services agencies like Church Community Services, a food pantry near downtown Elkhart that serves 2,000 families a month, say theyre still seeing intense need.

"We havent seen the bottom yet," director Dean Preheim-Bartel said.

But despite lingering skepticism among some in Elkhart County, many believe that this poster child for the recession will one day become a symbol of recovery.

"If its going to happen, I think were going to be the first to see it happen," said Heiden-Guss, the president of the economic development corporation.

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Obamas budget deficits to rise from wars recession

Obamas budget deficits to rise from wars, recession

y Steven Thomma, McClatchy Newspapers
Mon Feb 1, 5:05 pm ET

WASHINGTON — Fighting wars and lingering effects from a deep recession, President Barack Obama will run up a record $1.56 trillion budget deficit this year and is proposing a 2011 federal budget that would spend $1.27 trillion more than the government takes in next year.
Even with plans to scale back after that, his budget proposal Monday calls for deficits of more than $700 billion a year for at least a decade and relies on outside help from an as-yet un-appointed commission to bring them down more.
"Its a budget that reflects the serious challenges facing the country," Obama said at the White House . "Were at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt after what can only be described as a decade of profligacy."
While he said that he wanted to bring the deficit down later, he warned that the government needs to keep spending at or near its current pace to help create jobs and guarantee that the economy fully recovers. Aides said the White House feared that any quicker cut in the deficit could risk another recession akin to the one in 1937, as the country was starting to recover from the Great Depression and the government cut spending to balance its budget.
"Its very important to understand," the president said. "We wont be able to bring down this deficit overnight, given that the recovery is still taking hold and families across the country still need help."
Obama also used the budget — as much a political document as a policy plan — to blame former President George W. Bush and the Republican-led Congress in Bushs first six years for much of the fiscal crisis that the country faces.
"Over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy and funded two wars without paying for any of it, all of which was compounded by recession and by rising health care costs," Obama said.
"As a result, when I first walked through the door, the deficit stood at $1.3 trillion , with projected deficits of $8 trillion over the next decade."
He did not, however, mention that Bush also cut taxes for the working and middle classes, which Obama on Monday proposed extending permanently without any offsetting spending cuts or tax increases to pay for them. He also didnt propose ending the prescription drug benefit that the Republicans added to Medicare .
His budget plan would spawn deficits totaling $8.53 trillion over the next 10 years.
Democrats in Congress called the Obama budget the best that can be done given the high costs of war and recession.
"It will be impossible to bring the deficit down unless the economy is up. The budget the president is sending Congress today puts a priority on those objectives. It keeps one eye on the economy and the other on the deficit," said Rep. John Spratt , D- S.C. , the chairman of the House of Representatives Budget Committee .
Budget watchdog groups gave Obama credit for some parts of his proposal, but warned that more is needed to keep spiraling deficits and debts from damaging the economy permanently.
"A small spending freeze, some minor tax reforms to raise revenues and a budget commission are all excellent ideas," said Maya MacGuineas , the president of the Committee for a Responsible Federal Budget, a nonprofit fiscal-policy group.
"But this budget doesnt go nearly far enough, and it will require presidential leadership to develop a responsible fiscal plan."
Republicans, who last week helped shoot down a Senate proposal to create an independent deficit-cutting commission that they once supported, called instead for a plan of spending cuts and caps, including scaling back spending increases on entitlements such as Medicare and Social Security .
"President Obama is submitting another budget that spends too much, taxes too much and borrows too much," said House Minority Leader John Boehner , R- Ohio . "Serious fiscal responsibility requires more than a few cuts here and there at the margins. Republicans have proposed adopting strict budget caps that limit federal spending on an annual basis and are enforceable by the president."
The presidents proposed budget would spend $3.83 trillion in the federal fiscal year beginning Oct. 1 , a 3 percent increase over the current year.
The budget foresees the government taking in $2.57 trillion in taxes and other revenue, an 18.6 percent jump as the deep recession ends and a growing economy boosts income. He proposed making Bush-era tax cuts permanent for those who earn less than $250,000 annually, and ending the tax reductions for those who make more than that.
Two key factors would help drive up spending or increase the deficit: war and government programs to create jobs.
First, Obama is spending more for war than he expected.
A year ago, he estimated that spending on war and intelligence operations in Afghanistan , Iraq and Pakistan would drop from the $145 billion he inherited to $129 billion in the current fiscal year. Instead, hes sending another 30,000 to 35,000 troops to Afghanistan and is asking for another $33 billion for the current year, boosting the total to $162 billion , and for $159 billion next year.
The United States is committed to withdrawing all its combat troops from Iraq by the end of 2011, and Obama has pledged to start drawing down troops from Afghanistan next year as well.
Still, his budget asks to set aside an additional $50 billion for the fiscal year that starts Oct. 1, 2011 , and again every year after that, just in case its needed.
"These estimates do not reflect any policy decisions about specific military or intelligence operations," the presidents budget says, "but are only intended to indicate that some as-yet-unknown costs are anticipated."
Second, Obama continues to propose new spending and tax cuts to help spark the economy and create jobs, atop the $787 billion stimulus package enacted last year.
Among his new proposals: $100 billion in tax cuts and credits for small businesses and spending on infrastructure to create jobs and increase wages.
Even with the added boost, the White House forecasts slow progress from the current unemployment rate of 10 percent. Christina Romer , the chair of the Council of Economic Advisers , forecasts that the jobless rate would drop to 9.8 percent this year, 8.9 percent in 2011 and 7.9 percent in 2012.
The president also proposed other spending increases for the next fiscal year, including:
— $48 billion for veterans medical care, an 8 percent increase.
— $53 billion for homeland security, a nearly 4 percent increase, including money for 1,000 advanced imaging technology machines for airport passengers, new explosives detection equipment for baggage and more federal marshals aboard international flights.
— $310 million to close the prison at Guantanamo Bay, Cuba , including $273 million to buy a state prison at Thomson, Ill. , for those detainees who wont be released or transferred to other countries.
Obama also urged Congress to take steps that he said would shave $1.2 trillion off the deficit over the next 10 years:
— Freezing overall spending for three years for some federal departments and programs outside of national security, Medicare and Social Security .
— Slapping a fee on big banks.
— Ending subsidies for oil, gas and coal production.
— Cutting or eliminating 120 programs.
Obama projected that the deficit, while staggering in dollar terms, would drop as a share of the economy. By 2014, he said, a $706 billion budget deficit would be 3.9 percent of the economy, nearing the 3 percent level that he and his aides said would be manageable.
He proposed that a bipartisan fiscal commission find the rest of the spending cuts or tax increases that are needed.
( David Lightman and Kevin G. Hall contributed to this report.)

ON THE WEB
Extending tax cuts or letting them expire could cost Obama
U.S. economy grew 5.7% in 4th quarter, capping dismal year
Senate approves tough new spending curbs without GOP
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