High Taxes, Low Value - Part 2

Yesterday we ran through numerous examples of political class misbehavior and how we as taxpayers always seem to pay high taxes for low performance. Whether it is TSA, recipient of untold billions of dollars since 9-11, being unable to detect on board explosives or government safety organizations who failed to detect cadmium in toys despite having lived through the same experience a few years ago with lead in toys or politicians who are guilty of crimes while in office or lacking any degree of moral standards, we always seem to get shortchanged on our taxes.
Today we will examine another newly exposed and large waste of more taxes.

On January 11, 2010, the Associated Press reported that an analysis of the $20 billion that the Obama administration spent from the original stimulus package on road and bridge construction, the stimulus package that was supposed to increase employment, has had no effect on local unemployment rates. The analysis found that it did not matter if a lot of money was spent on highways and bridges in an area or none at all was spent, local unemployment levels seemed to change independent of stimulus dollars spent. The article's highlights included the following findings:

• The AP report was reviewed and vetted by independent economists at five different universities.


• The projects reviewed and included in the AP analysis were from every state in the union and D.C.


• The stimulus money spent had no impact on unemployment in any any specific geographic area.


• Within the construction industry, there was nearly no relationship between stimulus dollars spent and the number of construction employees working or not working.


• The conclusion of many who reviewed the report is that there was far too little money spent to make much of a difference in the country's $14 trillion economy, with one reviewer saying it was like "trying to move the Empire State Building by pushing on it."


• Marshall County in Tennessee received more stimulus construction money per capita than anywhere else in the country but according to a local contractor: "The stimulus has not benefitted the working class people of Marshall County at all." The unemployment rate in the county is expected to soon top 20%.

Thus, the amount spent may have been too little to make a difference, it may have been spent inefficiently or fraudulently (remember our review of a previous AP report which proved that about 50% of the bridge repair stimulus money was spent on bridges that did not need any repair or work done on them), or it is just an empty (and expensive) PR stunt for the administration to prove it is capable of doing something. Whatever the reason, stimulus money spent so far to increase construction employment has not worked.

So, what does the administration want to do? They want to spent another pile of money on more construction projects. Makes no sense. Having spent a lot of money on a government project that does not work (high cost/taxes to get low value), what do the politician want to do? More of the same high tax /low value shenanigans. Seems we keep coming back to the Einstein quote: "The definition of stupidity is doing the same thing over and over and expecting different results."



Given that the program is not working, the article reports that the administration has decided to change the way it keeps track of jobs created. Rather than measure the incremental number of new jobs created by the stimulus spending,what you would expect from a program whose purpose is to incrementally increase the number of jobs, the government will now "credit jobs to the program even if they were never in jeopardy of being lost, according to new rules outlined by the White House's Office of Management and Budget." Rather than come up with something worthwhile, let's just change the scoring system to make us look like we know what we are doing.


As you can see, this whole waste of time, measurement technique, and money sits on one shaky
and false proposition: government is capable of creating jobs. This fallacy never seems to make sense to the political class. Remember, as outlined in "Love My Country, Loathe My Government," government does not create wealth, it gets wealth by taking it from its citizens in the form of taxes. Thus, the money spent in the stimulus program is money that cannot be spent by citizens in other areas of the economy. All the government did was take money from the economy in the form of taxes and just move it around under the cloud of the stimulus. No new economy growth was created, existing wealth/dollars were just redistributed, and in many cases, misdirected.

The bigger problem is that government can never efficiently spent tax dollars as well as individuals can. Thus, while the total amount of wealth/dollars has not changed, it is being spent in less efficient ways, causing a drag on the economy. If the $700 billion from the stimulus legislation had been returned to its rightful owners, the taxpayers, each U.S. household would have received about $6,100. This is money they could have spent on things they wanted. Retailers and factory owners would have seen demand and sales going up as a result of this more efficient use of money and they would decide at some point to add additional shifts, hire more salespeople, etc. in order to keep up with the demand. That would increase economic activity and start to drop the unemployment rate. Just throwing existing wealth at a bunch of highway projects does not increase economic activity, it just inefficiently moves it around. High cost/low value, the motto of the political class.




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