Page last updated at 21:26 GMT, Tuesday, 15 September 2009 22:26 UK

Stimulus creating jobs in Tennessee

By Katty Kay
BBC News, Washington

Workers at the Armstrong Pie Company, which has expanded its workforce after receiving government backing
Armstrong has expanded its workforce using government funds

The Armstrong Pie Company has been pumping out sweet, fried pies for half a century.

A year ago it relaunched in Linden, Tennessee. But as the world's economy has tanked, Armstrong has thrived.

Judy Kelley, who works on the line in the one-room factory, says production has already tripled to 3,500 pies a day.

Soon, staff will be working around the clock.

"We hope to be making 7,500 a day in the next year or six months," she says. "We'll have to have a second shift to make as many as we need."

American story?

The story is an familiar one - a small business does well, expands and creates jobs. It is as American as, well, apple pie.

But the magic ingredient in this private business is state intervention. Two-thirds of Armstrong's staff are paid for directly by the government.

What we tried to do here in Tennessee was just cut through a bunch of red tape
Phil Bredesen
Tennesee Governor

This town in rural Perry County, about 90 minutes from Nashville, is part of a unique experiment where the state is using stimulus money to pay for almost 300 people to work in private businesses.

Dozens of businesses are benefitting. On just one block in Linden, we saw how businesses are reaping the benefits.

Armstrong Pies is employing eight stimulus workers. Around the corner, Dimples cafe has two. Next door, a tailoring firm employs one, while Linden's only hotel, the Commodore, has 12 government-paid staff to help it run its restaurant.

The scheme has brought local unemployment down from a staggering 27% to 19% - but these jobs are only guaranteed for one year.

The funds come from stimulus money set aside for welfare and only residents below a certain income level can apply.

President Obama speaking in New York on 14 September
Mr Obama needs to convince people that massive spending is working

There is definitely something un-American about having the government prop up an entire county's economy.

But the people of Linden are not complaining - they say desperate times call for desperate measures. What they cannot say is whether this is a long-term solution.

In the depressing emptiness of a shuttered car-parts factory, I met John Carrol, the local mayor.

The Fisher & Co plant once employed 750 people - one-tenth of the county's entire population. It relocated to Mexico last year and the effects were catastrophic.

"If this programme hadn't been implemented you might not have been 27%, may have been into the 30s," Mr Carrol told me.

"Everyone realises that this is not a permanent fix. For lack of a better word, it's a band-aid. It's letting us live to fight another battle, trying to recruit an industry into our county."

New New Deal?

There are echoes of President Roosevelt's New Deal here, particularly the Works Project Administration which employed millions of Americans during the Great Depression.

Today, facing the worst economic downturn since the 1930s, President Obama promises that his stimulus programme will create or save 3.5 million jobs.

I don't think the stimulus was worth the amount of money that we've had to go out and borrow and saddle future generations with
Lee Beaman
Nashville car dealer

The state's Democratic Governor Phil Bredesen designed the rescue package for Perry County. He says the stimulus bill is expensive but essential. And his priority is to find jobs for people as fast as possible.

"What we tried to do here in Tennessee was just cut through a bunch of red tape, tell people in these departments that their careers were on the line, get this money out, get these projects done, we want to get people employed."

Just outside Nashville on the I-40 interchange, stimulus money has done just that. This project was left unfinished five years ago when money ran out. Now it provides employment for 350 people.

But government money is not flowing in every state. While Tennessee has allocated 92% of its stimulus budget for roads and bridges, Florida has only awarded a third.

Mike Smith drives a tractor as part of his government-backed job clearing land for a private property developer
Mike Smith's land-clearing job is backed by federal stimulus dollars

And in California, just a quarter of infrastructure funds have been allocated.

Failure to get the money into the economy has plagued the controversial $787bn American Recovery and Reinvestment Act, (the official name given to the stimulus).

One independent study suggests that - nationwide - only 14% of the stimulus money has been spent so far.

And if all the pieces are not in place yet, critics argue, how can the stimulus possibly be credited with any recovery?

Even Gov Bredesen questions the immediate impact.

"There's other stuff in the stimulus which is longer-term investment which I wouldn't call stimulus, but would call the price of getting the stimulus passed. Those you can't really show the benefits for some time to come," he says.

And he told us it is almost impossible to measure accurately how many jobs the stimulus has really created or saved.

Spending again

But while the governor wants to avoid that jobs-per-dollar equation - President Obama really cannot.

He has to convince voters that the massive spending process was worth the huge hike in the deficit - and that without it, unemployment would have risen even higher.

Conservatives do not buy that argument.

We talked to Lee Beaman, a Nashville car dealer and prominent local Republican backer outside his showroom.

He says companies like his would have received a more direct boost if taxes and regulations had been slashed instead.

"I don't think the stimulus was worth the amount of money that we've had to go out and borrow and saddle future generations with that payment.

"I think the market, people, see that debt and it worries them and they quit spending as much and try to hoard their money".

Social boost

But back in Perry County, choosing to hoard was not even an option for those out of work.

Mike Smith does not care about the politics - or where his salary comes from. He lost his job when the Fisher car plant shut a year ago.

Now, the government is paying him to clear land for a private property developer.

During a break from work on his tractor, Mr Smith grinned while explaining how his social life - and in turn Linden's economy - has been given a boost.

"I've started spending money, yes ma'am. Not a whole lot, bacause if the economy doesn't pick up... I'm going to be back in the same boat. But yes, my wife and I went out Saturday night".

Mr Smith's own mini-stimulus spending may help save someone else's job here. But this salary is only temporary.

In the longer term, his future is tied to President Obama's. If the economy picks up, they both have a better chance of keeping their jobs.

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