Why The Economic Stimulus Plan Was A Taxpayer Failure But A Political Class Success

Yesterday we made the case that the TARP program to save the world's financial system was basically an expense failure for taxpayers but provided a successful new source of campaign slush funds to keep incumbent politicians in office. Today we will look at some aspects of Obama's economic stimulus program and see if the American taxpayer got their money's worth in this government program:

• The easiest analysis of the stimulus program is to just look at what the administration claimed would happen if we did not pass the program. Their claim was that, without the economic stimulus, unemployment could rise as high as 8%. Well, Congress did pass the stimulus program and unemployment has been stuck between 9.5% and 10% for who knows how long, with no immediate prospects for it getting anywhere close to the upper limit the administration says it would hit WITHOUT the stimulus spending. No matter how you cut it or how many times Pelosi blames the Bush administration, the stimulus program has been a bust when measured against the parameters that the Obama administration put forth. Oh, and by the way, while I am certainly no fan of Bush, the Democrats have controlled the purse strings and economic policy for the past three and a half years in Congress so Pelosi's recent blaming of the Bush administration for the economic doldrums in the country ring hollow, given she and the Democrats have been running Congress since 2006 and the White House since early 2009.
• In late October, 2009, about a year after the stimulus program took effect, the Associated Press ran an article by Matt Arizzo and Brett Blackledge that reported the Obama's administration claim that the stimulus program had created or saved about 640,000 jobs. At the same time, propublica.com's analysis estimated that at that same time, about $183 billion of stimulus money had been spent. [Note: Reason magazine estimated that by the end of 2009, the administration would have spent almost $200 billion of the stimulus money, indicating that the propublica.com estimate was probably a good estimate for late October, 2009]. If we do the simple calculation of dividing the Obama administration's number of jobs created/saved (640,000) into the amount of taxpayer money spent up to that point, we see that each job created or saved cost about $286,000, or more than four times what the typical American household earns in one year. Thus, we could have created four typical earning American household jobs if we could have theoretically just written four checks out of the $286,000. Instead, we as taxpayers only got one job for each $286,000 spent. inefficient, wasteful, and a failure, from a taxpayer perspective.
• Also in late 2009, the Associated Press ran another article concerning the stimulus, this one covering bridge construction and repair. One of the selling points of the stimulus program is that it would have a twofold effect relative to infrastructure jobs: it would create construction jobs and those jobs would fix our nation's crumbling infrastructure which would better serve the nation and the economy once things got back to normal. Unfortunately, the Associated Press investigation found that of the 2,200 or so bridges fixed under the stimulus program, about half of them were perfectly fine and needed no repair or construction work. It is pretty obvious what happened. Politicians in power were able to direct stimulus construction funds to their home districts or states even if the money could be better spent elsewhere on bridges that really were dilapidated and falling apart. Thus, rather than get an efficiently fixed infrastructure, we created phony work to fix things that were not broke, basically paying twice as much in taxpayer money to get the benefit.
• Two Republican Senators have issued a report that highlights, in their minds, the 100 worse uses of stimulus money. I will just go through the first five today, it gets pretty depressing after reading about five:

1. Almost $550,000 of stimulus funds were spent to replace windows in a Forest Service visitor's center at Mt. Saint Helen's. One might think this is a good thing except for the fact that the center has been closed down since 2007 and there are no immediate plans to reopen it since the Forest Service believes it has enough facilities for visitors already in place. As we have said many times in this blog, government does not create jobs, it creates work when it comes to stimulus spending. Once those windows were needlessly replaced, the jobs disappeared. Short term work was created, a long term job was not.
2. About $762,000 of stimulus funds were spent at the University of North Carolina to develop a computerized choreography program that the recipients of the funds hope will lead to a Dance version of YouTube. How this creates a long term, sustaining job is a mystery. If the market needed a computer program to develop a Dance version of YouTube, someone would have stepped forward with the venture capital funding.
3. About $62 million of stimulus funds were earmarked for the city of Pittsburgh to extend its light rail system under the Allegheny River and connect to a river casino and two professional sports complexes. This money was allocated despite the fact that the Pennsylvania governor called the rail connection a waste of money, the local Pittsburgh paper called it the tunnel to nowhere, and earlier attempts to build the tunnel were met with severe cost overruns. Talk about throwing good taxpayer money after a bad idea.
4. About $1.2 million of stimulus funds were earmarked to convert an abandoned train station, on a dead train line, into a museum in Glassboro, New Jersey. The train station closed almost forty years ago and is currently boarded up and covered in graffiti. it has no windows, they have been replaced with plywood, it has not immediate parking or landscaping, and if you see the picture, it cannot be more than 20 by 30 feet big. As with Pittsburgh, if Glassboro wants to create a museum, or Pittsburgh wants to build a light rail tunnel, then let that town fund it, not the Federal taxpayer. Creating a museum in dinghy, small, obsolete rundown building has nothing to do with creating an economy that can self generate long lasting jobs.
5. About $1.9 million of stimulus money was sent to the California Academy of Sciences to research ants in the southwest Indian Ocean and east Africa. The money would be used to capture, photograph, and analyze exotic ants. This one is so ridiculous from a job creation perspective, I cannot even come up with anything witty to say.

So where are we? A stimulus program that does not even come close to the parameters that its creators laid out, inefficient and redundant use of money to fix things that were not broken, job creation costs that are astronomical and inefficient, and money wasted on projects for dance computer programs, cataloging of ants, and building a tunnel to nowhere. Thus, it is obvious that the taxpayer loses again, just like we did under TARP.

And who wins under the stimulus program? Of course, it is our political class. Politicians were able to divide up the stimulus money and send it to places that did not need it or spent it on things that are totally inane, all in the pursuit of getting re-elected, i.e. showing how they brought back tax dollars to the home state or district and they need to be kept in office. In the meantime, 14 million Americans are still out of work but we know a whole lot more about ants in the Indian Ocean.

Let's assume that the American taxpayer put out about $1.5 TRILLION for both TARP and the stimulus program (remember, government pays for nothing, at some point in time the American citizenry pays for government expenses). If that money had been spread out to every American household, each household would have had about $13,000 in their pocket. $13,000 they could have used to pay their mortgage and stay out of foreclosure, $13,000 they could have used to help buy a new car, stimulating the auto industry, $13,000 they could have spent at restaurants, amusement parks, on cell phones, etc. which would have more efficiently stimulated the economy from the ground up. This would have been a much better use of our money, we could live without a Dance version of YouTube or windows in a closed visitor's center, if we had our own stimulus money to spend.

We lose, they win again. That is why two steps from "Love My Country, Loathe My Government" are so critical to this country going forward. Obviously, Step 39 is important since it would impose term limits on our Federal politicians and eliminate the need for them to constantly steal from the public treasury to enhance their re-election chances. Second, we need to implement Step 44 which would prohibit the expenditure of Federal funds on any project or program unless it significantly affected the residents of at least five states. Anything short of that threshold would be funded by the affected states or not done at all. The Federal government has no business in creating a museum in a dump in Glassboro, and certainly cannot claim that such a waste is helping to create jobs.


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http://www.cato.org/
http://www.reason.com/
http://www.robertringer.com/
http://www.realpolichick.blogspot.com/
http://www.flipcongress2010.com/