Governors of hard-hit states split on effectiveness of stimulus package

Two governors whose states have both been hit hard by the recession squared off on the merits of the $787 billion economic stimulus bill, with each towing their party line in defense or criticism of the Obama administration’s efforts to bolster the economy.

Michigan Governor Jennifer Granhlom, a Democrat, whose state’s unemployment is the nation’s highest at 15.2 percent, said the $3.7 billion in stimulus funds Michigan has already used were instrumental in capping the damage of the crumbling auto industry.

“Clearly the stimulus helped although unemployment is at a ridiculously high level,” Granholm said on "Fox News Sunday." “What has been really helpful for us has been the stimulus’ efforts to really help us diversify our economy.”

Noting that Michigan has received about half of the federal grants for investments in new battery technology designed to help the U.S. better compete with Japanese car manufacturers, Granholm said that stimulus funds have been “a great way [for the state] to build on our strengths but also move into new sectors.”

Indiana Governor Mitch Daniels, a Republican, took a far dimmer view of the stimulus, saying Washington’s focus should be on improving conditions for people to invest and “create wealth for each other.”

“I don’t think you can point to much effect so far,” Daniels said of the stimulus. “We’ve used it as aggressively and as quickly as almost any state... Here and there I suppose it’s made a difference. But, you know, government spending doesn’t create jobs, doesn’t create wealth.”

Granholm advocated for an extension of unemployment benefits for certain states that last week passed the House but has not yet been taken up by the Senate.

“It’s so important that Congress passes another extension to the unemployment benefits,” Granholm said. “There aren’t jobs on the backside right now. We know that employers are acting very cautiously. We know that there isn’t a huge uptick in employment.”

What economists are calling a “jobless recovery” has put Democrats who championed the stimulus as the best way to create jobs in a difficult political position, especially as they look for ways to spur additional job growth without making a tacit acknowledgement that their signature response to the recession was a failure.

Economist Mark Zandi, a Democratic adviser who also appeared on "Fox News Sunday," defended the stimulus as having worked despite the lack of jobs.

“10.5 percent is a very reasonable expectation for the peak unemployment,” Zandi said. “But I think it would be measurably higher if not for the stimulus package.”

Zandi backed another round of unemployment benefits, as well as other measures being discussed, including an extension of the $8,000 tax credit for first-time home buyers, which is set to expire at the end of the year.

“I do think the economy’s going to need more help,” Zandi said. “I would advocate extending some of the things in the current stimulus into 2010.”