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.


Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Also visit the following sites for freedom:

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

The Political Class And Job Creation - Always A Day Late and A Dollar Short

As most of you know, unemployment has been a very depressing fact of life during the economic crisis and the tepid recovery. The official, low ball unemployment estimate has lingered around 10% for the longest time and every week there are hundreds of thousands of first time claims for unemployment insurance. Despite their supposed attention on this problem, the Obama administration and the rest of the political class has failed to generate any significant job growth at all.

Of course they tried, but in just about every instant they have failed miserably:

• Last year we computed what it cost to create a "job" as a result of the Obama stimulus legislation. As you may recall, using the administration's own numbers regarding jobs created/saved and the amount of stimulus money that had been spent, the average cost per job created by the government was almost a quarter million dollars. This figure was calculated by taking Obama's jobs created/saved estimate and dividing it by the stimulus amount that the Obama administration said it had spent. The numbers were not from Fox News, the Republicans, the Tea Partiers, or George Bush, they were Obama's numbers. You cannot create jobs effectively or long term when it initially costs you over $200,000 to create one via government spending.
• The reality is government stimulus spending does not create jobs, it creates work. It sets aside money so that people can do some temporary work (temporary in the sense that the job lasts as long as the government money lasts) and when the government funding is used up, the "job" goes away. Work was created, an incremental job was not.
• Some would say that in some branches of economic theory, it is good that the government created work, if it not real/long lasting jobs, it helps jump start the economy and the hiring process. I think we can say after fifteen months of this type of economic gibberish, that theory is seriously flawed. Remember our post from about a week ago regarding the end of the second world war. Rather than "create" jobs for the millions of returning servicemen and women, the Truman administration, a Democrat by the way, slashed government spending by over 50% almost overnight but the economy, i.e. the private sector, easily expanded to create enough jobs to keep the post war unemployment figure at about 4.5%. What do think Obama would do today to get unemployment down to that figure, a figure accomplished in a very short time with no government stimulus money. Remember, most of the economists supporting stimulus spending were the same economists that did not see the biggest economic catastrophe coming since the Great Depression until it hit them in the face, why would we give them so much credence going forward?
• The other argument for the stimulus package is that it would repair our crumbling infrastructure so that when the economy did recover, the repaired infrastructure would facilitate an even greater recovery. Unfortunately, as reported by the Associated Press late last year as an example of wasteful spending, about half of the nation's bridges repaired with stimulus money did not not any repair work done at all, i.e. we spent money to repair stuff that was not broken, therefore torpedoing this argument for the stimulus in the first place. What happened? It is pretty obvious that each member of the political class lined up at the stimulus trough to fight for bridge stimulus funding for their states and districts even though half of it was completely wasted.
• And my favorite job creation argument/fallacy from the Obama administration, they were going to create a whole new industry of people going around to caulk and insulate buildings around the country. How's that idea coming along? Given that unemployment is still around 10%, I would say not too well. Whatever gave them the idea that they could create jobs in an industry that basically does not exist? These people have obviously never worked in the real world or the private sector. Customer demand creates demand which creates jobs and functions to fulfill that demand. You cannot top down dictate what a new source of jobs will be. Pathetic.

Thus, the political class has gotten very little right when it comes to job creation. But while they were wasting hundreds of billions of dollars and failing to create permanent jobs, something interesting is happening right under their noses that they never anticipated. Consider some facts from a May 24, 2010 in Fortune magazine, written by Sheridan Prasso and titled, "American Made, Chinese Owned":

• Chinese companies have already invested $280 million and created more than 1,200 jobs in South Carolina.
• Since last year, Chinese firms have announced or acquired more than 50 U.S. companies.
• In 2009, Chinese companies invested close to $5 billion in the United States.
• Corpus Christi, Texas is about to become the home of a $1 billion factory owned by Tianjin Pipe Group which will eventually hire 600 Texans.
• Chinese companies will build a wind turbine plant and wind farm in Nevada which will create about 1,000 jobs.
• A Chinese company bought a tool manufacturer in Georgia which will result in a $13 million upgrade investment which will result in an additional 120 jobs.
• The article estimates that the Chinese have made over 1,200 investments in this country in the past few years but believes that number may be low for a number of reporting reasons.
• A lot of the products made in America are actually exported back to China.

Why do the Chinese want to create manufacturing jobs and products in the U.S.:

• Land is cheaper here relative to China in many cases.
• Electricity is usually much cheaper, and reliable, than in China.
• Much of the market for Chinese goods is in the United States and thus, by manufacturing those goods domestically, transportation costs are slashed.
• The Chinese products made domestically can avoid any import tariffs.
• Chinese products made domestically can honestly say that the products were "Made In The USA," an excellent marketing strategy.

Nowhere in the national political class discussion of jobs have I heard about this Chinese contribution to fixing our unemployment problem. While the Obama administration was trying old and failed economic stimulus projects to create jobs, that have failed miserably, the global market place has chugged along with smart private sector managers looking for costs and competitive edges, edges that have led many of them to production in the United States. In the process, they are creating a multitude of real, long time jobs, without wasting hundreds of billions of taxpayer dollars in the process. The world has passed this political class by, they are a day late (the Chinese are already creating real jobs vs. the politicians' failed economic policies) and are definitely a dollar short since they already wasted untold billions of dollars in stimulus ideas that flopped.

The difference between the two approaches is that the Chinese understand markets and how markets create bottom up economic demand and this need to fulfill market demand requires workers. The political class erroneously still thinks that a government policy can create demand and that will result in jobs. Nowhere in the article did I see anything about the Chinese wanting to get into the caulking and insulation market in a big way like Obama wants to. The reason: the Chinese understand that there is no overriding demand for such services and products, the government does not understand. And that is why you do not see long lasting government funded jobs in the caulking/insulation industry or anywhere else.

I applaud the foresight of the Chinese to find the best operating conditions for their companies which fortunately is resulting in many more permanent U.S. jobs being created vs. the feeble Obama efforts. My only concern is that the political class will get involved and screw up a good thing. The article interviews local citizens, workers, and politicians about the Chinese influx of jobs and they are all quite happy with the results. The Chinese have been good corporate citizens and employers.

The best things the political class can do is:

• get our national financial house in order, i.e. get the deficits under control
• keep inflation under control.
• keep a lid on corporate taxes.
• allow for the free flow of materials, both finished and unfinished, to and from China, keeping tariffs and trade barriers under control and reasonable.

The last thing we need them to do is get to this job creation party late and waste more taxpayer dollars in ways that ruin a good thing for American workers. In other words, think like a freedom loving American for once and let Americans, in cooperation with their Chinese partners, continue to do the good work that is employing a great many more Americans in real jobs than the Obama administration could ever dream of.

Step 36 of "Love My Country, Loathe My Government" would be a good thing to have in place in this matter since it would require all members of Congress and the administration to take and pass a basic course on economic theory. Not the failed voodoo economics of the present administration and their fatally flawed stimulus approach, but basic economic theory on supply and demand, learning that demand is created first in the market place and jobs then follow. Demand is not dictated by some bureaucrats.


Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Also visit the following sites for freedom:

www.cato.org
www.reason.com
www.robertringer.com
www.realpolichick.blogspot.com

Political Class Actions and The Many Unintended Consequences

One thing that most Americans never think is what happens after the political class takes action or passes a law? I think most of us just assume that once the law is passed, everything will be okay and work as planned. Unfortunately, that is almost never the case. For one, most of the laws pass never solve, or even address, the issue that they are purported to be addressing. Anti-drug laws do not work, Bush's public education initiative, No Child Left Behind, does not work (and the Obama version will not work either), the Federal government funded and started building a fence along our southern border to keep illegal Mexicans out of the country but the fence has been breached over 3,000 times, allowing who knows how many illegals to get into the country, we are told that we need an economic stimulus package that will be used to fix our crumbling infrastructure but the Associated Press reported that about half of the stimulus money for bridges was spent on bridges that were in excellent condition, etc. The list goes on and on.

Consider some more recent occurrences of unintended consequences:

• The main reason that BP has not gotten its runaway well under control is that the accident occurred about a mile under the Gulf Of Mexico. Why are they so far out in the Gulf and drilling in such deep water? Because Congress decided to force drilling further and further from the coastline, falsely assuming that our beaches would not get fouled by an oil disaster if the oil rigs were further away. The unintended consequence of their logic is that once the disaster did occur in deep water, it could not be readily fixed compared to if the drilling had been closer to shore. Yes, there may have been some localized ecological damage but it would have been contained and easily and more cheaply cleaned up. Now, this unintended consequence will spread disaster all along the Gulf and into the Atlantic Ocean, unintended consequences from a political class that did not think through the problem.
• In the past year or so, there have been horror stories of airline passengers spending hours and hours in airplanes waiting to take off resulting malfunctioning toilets, shortages of food and water, high degrees of stress, and other behaviors that one would expect being cooped up in a plane for long hours but not going anywhere. To remedy the situation, the political class passed a law that puts a cap on how long passengers can sit in a waiting plane before the airline starts being fined. Their logic was that if the airlines were facing stiff fines for delaying flights on the ground for more than a few hours, they would act more efficiently and promptly to get the passengers airborne. However, the unintended consequence of this law was that airlines can avoid fines if they cancel the flight before the time limit is reached. Consider this unintended consequence example: if a plane is scheduled to actually leave the ground fifteen minutes after the time limit elapses, rather than going through with the flight, the airline will cancel it to avoid the heavy fines and inconvenience all of the passengers even though they were very close to taking off. Thus, an airline will probably never get fined under this law but untold number of passengers will be inconvenienced by canceled flights, an unintended consequence.
• Back when the economy first started to implode, the political class told us that we had to bail out the banks because they "were too big to fail." If they failed, then the entire financial system might collapse. Two years after the political class sold us this bill of goods, it appears that the four biggest banks, Wells Fargo, Bank Of America, Citi, and JP Morgan, are now bigger than ever with a bigger percentage of deposits and assets than before the economic meltdown. Thus, in an attempt to save banks "that were too big to fail", the unintended consequence was that the political class made a handful of the surviving banks bigger than ever. This must mean that we are no closer to getting out from under the "too big to fail" dilemma despite wasting billions and billions of taxpayer dollars on bailouts.
• In almost every past recession, it was small businesses that led the country out of the economic downturns with their hiring of new workers. However, in this recession, unemployment has stayed very high and small businesses are not hiring people, they are just getting more productivity out of their current workers. What happened? According to many sources, small businesses are having a very difficult time getting loans to expand. No loans, no new hiring. Thus, the unintended consequence is that the political class has been so tied up with the big banks, all of their actions in the banking industry over the past two years has resulted in an environment where banks do not want to loan money except to the biggest companies.
• Last year, it was discovered that many children's products coming from China factories had high levels of lead in them. The serious concern was that kids might put the toys and other products in their mouths, ingest some of the lead, and suffer serious health issues. The political class and government agencies got involved after the fact and made sure that those products were removed from the shelves and not longer imported. The unintended consequence of their late actions were highlighted in a May 20, 2010 Associated Press report that found high levels of the toxic metal cadmium in some imported children's products. Thus, through incompetence, the removal of lead from products was not enough to protect our kids since the overseas factories just replaced one toxic metal with another. So, just when you thought it was safe to have your child suck on a toy because of what the government did to remove the lead, you run smack into the unintended consequence of a different dangerous metal to be ingested.
• The recent health care reform legislation that was passed was opposed by every Republican in both the House and the Senate and had to be carried by all Democrat votes. The Democrats have traditionally been strong advocates of abortion rights for women. However, according to an Associated Press May 17, 20120 article, the way the final legislation was written had the unintended consequence of making it easier for a state government to restrict abortion coverage by private insurance plans serving the 30 million uninsured Americans in the so-called insurance exchanges that will take place in 2014. In other words, if you buy your health insurance through these new exchanges, the state where you live can make it much more difficult to get funding for an abortion. Arizona and Tennessee have already passed laws to this effect and dozens of other states are considering doing the same. Not quite the result the Democrats wanted in the area of abortion rights, certainly an unintended consequence.

There are probably a number of reasons why political class and government programs do not go as planned and result in unintended consequences. First, some of these issues are very complex (the banking/financial industry, the 2,400 page health care reform bill) and the politicians are not smart enough to understand how things work. As a result, their intentions result in unintended consequences that they were not intelligent enough to foresee.

Second, there is no accountability for correctly implementing many of these programs. Why was taxpayer money wasted fixing bridges that did not need to be fixed, especially when we were told by the politicians that one benefit of spending obscene amounts of borrowed money is that our crumbling infrastructure would be improved? The fence on the border costs billions of dollars to build, why is no one being held accountable for its poor performance and numerous breaches?

Third, as we have said many times in this blog, politicians do not solve problems, they only get re-elected. They are either not smart enough to find root causes and solutions for problems, they are too lazy to find the the root causes and solutions, or they do not want to find the root causes and solutions since it may harm their election chances. In any case, we suffer the unintended consequences of bad legislation, legislation that is not properly executed, or politicians that are not held accountable for laws and policies that go astray.

Thus, in the future, whenever Congress passes a law, do not think what good the law will do. Focus on all the ways things that could go wrong, you are far more likely to be right tracking the latter possibility than the former. At the same time check out Step 39 and Step 34 in "Love My Country, Loathe My Government" to see what could be done to help minimize unintended consequences. If we do not do it, our political class will certianly not do it.




Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Current Day America - The Good News and the Bad News

While I still believe we live in the greatest country in the world, there are always some days where the news is not so good. Whether it is the economy, a do nothing political class, or other irritant, something always seems to be going astray lately in this country. Most of the time, the things going astray are caused by somebody or some organization associated with government. Thus, today's theme: what is going wrong and why and what is actually going well according to the political class:

Bad News # 1 - According to a USA Today article that was summarized in the May 7, 2010 issue of The Week magazine, today's teens and 30-somethings are likely to be the first generation in U.S. history to be less well off financially than their parents. Also:

• 49% lack health care insurance
• 39% were jobless at some point during the current recession
• 42% do not pay their monthly bills on time

Not a pretty sight, America's potential future leaders will not have the opportunities that their parents had. Could it be that poorly performing, government controlled public schools have not prepared this generation for the world's challenges ahead of the them? Could it be that government interference in the economy has resulted in a shrinking job market and huge national debt levels that these kids and young adults will be paying down for the next several decades rather than building their own version of the American dream? Whatever the case, someone has failed this generation of young people in America and it does not bode well for the nation's future.

Bad News #2 - In the May 3, 2010 issue of Business Week, there was a short article about roads in North Dakota. In Stutsman County, there are 233 miles of paved roads. The county road department, however, says that it can afford to care for just 48 miles of the total miles of roadway. Thus, unless there is an unexpected increase in taxes, the county will start to grind up ten miles of paved roads this summer and turn them into gravel roadways. According to the article, other counties may do the same as they run short of tax money to keep up the roads. How bad is it when the richest country in the history of the world cannot maintain paved roads? These are not new roads that have to be built from scratch, these are existing roads that just need routine maintenance. How poorly is the political class performing when the country now begins to revert back to the unpaved roads of yesteryear?

Bad News #3 - Lets see, we have recently had a fatal coal mine incident in West Virginia. We are in the middle of the worst off shore oil drilling mishap in our history. According to an Energy article in the May 3, 2010 issue of Business Week, Germany already gets 7.5% of its electricity from wind turbines while the United States gets only 1% of its electricity from wind. However, the millionaires and billionaires that live on Martha's Vineyard are very upset that their ocean views are tainted by the new off shore wind farm. What do all of these events have in common? They exist in the vacuum of a missing national energy strategy and policy. The political class has done nothing since the oil embargo shocks during the Carter administration relative to defining and implementing a comprehensive energy strategy that balances costs, environmental concerns, foreign policy, technology and availability. This lack of a coherent strategy has caused the country to look for energy in suboptimal ways that enrich hostile foreign entities, damage the environment, and increased costs to the consumer. What a mess.

Good News #1 - While I have never been a fan of Obama's stimulus program, mostly because it does not work and is fundamentally flawed, I was impressed by a government operation that was summarized by an article in the May 3, 2010 issue of Business Week. The Federal government has set up an anti corruption group in Washington whose job is to make sure that the government is not defrauded by unsavory parties relative to the dispensing of stimulus money. According to the article, "staffers scrub government databases and public records, looking for bankruptcies, past criminal records, tax liens, and other signs of trouble from individual or companies seeking public stimulus funds. The aim is to catch fraud before it happens" How about that? A government entity trying real hard to make sure the taxpayer's money is spent efficiently and effectively? So far, the center has opened 245 fraud investigations relative to the stimulus program.

The bigger question is why is this amount of attention not spent on ALL government programs and expenditures? According to the article, average government programs lose 7% of their funding to corruption, according to the Association Of Certified Fraud Examiners. If that is true, than Obama's current budget in 2010 of about $3.4 TRILLION is wasting about $238 billion a year. Imagine how much better the national deficit or taxpayers would be if that 7% of waste could be eliminated or at least significantly reduced by tracking government spending as diligently as the stimulus funding? Thus, this is some good news. Waste is out there, we just need the political class to put as much focus on saving our money as they do on spending our money.

All of these bad news and good news items are covered in "Love My Country, Loathe My Government." It has the fifty steps necessary to minimize the bad news and start maximizing the good news including fixing public schools, establishing a national energy policy that works, downsizing and making government more efficient, and most importantly, getting smarter and better politicians in office who will actually act courageously to fix the nation's ills. The fix begins in November with the removal of all incumbents from office and starting over.




Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

I Know It Is A Bad Idea But I Voted For It Anyway

Two days ago the U.S. House Of Representatives approved legislation which allocated $35 billion towards so-called job creation. The bill they passed would give hiring companies a temporary payroll tax break in addition to providing funding for construction in the transportation area. Since the country has lost over 8 million jobs since the recession began in late 2007, the political class thought it would be a good idea to create jobs. never mind the fact that government cannot create jobs, they can only temporarily create work.

The main thrust of the bill is a twofold hiring focus. First, it would allow businesses, who hire the unemployed, to not pay Social Security taxes on those new hires through the end of the year. Second, it would grant those businesses a $1,000 credit per worker if those new workers stay on the job for a full year.

What did some of the Congress people think of their new bill? Here a few examples of quotes from the march 4, 2010 Associated Press article describing the legislation:

• "If that's the only thing that I can vote on... I'll vote for it, obviously." Congressman Bill Pascrell
• "It's really not a jobs bill." Congresswoman Barbara Lee
• "Better late than never, and better something than nothing." - Congressman David Obey
• "It simply encourages conduct that would occur anyway." Congressman Lloyd Doggett
• "It's an insipid piece of legislation." Congressman Jim McDermott
• "It's not that good, but it's better than nothing." Congressman Jim McGovern

That sad part about these quotes is that they all come from Democrats, most of whom voted to pass the legislation regardless of how bad and insipid it is. I can imagine what the Republicans think of the bill, almost all of which voted against it. There are so many problems with this bill:

• For all those businesses that were going to hire people anyway, they get free grants of money since it is impossible to determine which of these hires would have happened in the absence of the this bill. Much like the Cash For Clunkers program, inane laws like this just move demand around and rewards the recipients of the cash for doing something they likely would have done anyway. It does not spur growth and is just a free handout of taxpayer money in most cases. That was Congressman Doggett's point listed above.
• Although it is a lame attempt to spur jobs growth, it robs the Social Security Administration of some potential revenue that the article says will be be made whole. How do you do that? Why, at some point in time you get it from those that generate wealth and the resultant taxes, the American taxpayer. Thus, all this bill does is take money out of the Social Security trust fund, spend it in a lame attempt to spur job growth and then takes the same amount of money from taxpayers to repay Social Security.
• You can bet that there will be rampant fraud under this program. How easy would it be for a small business to cook their books and make it look like they are bringing people (sisters, brothers, cousins, friends, etc.) on board when they are just paper hires? How easy will it be to fire everyone on Friday and hire them back on Monday and make it look like you hired a bunch of people when all you did was reset the clock to collect the Social Security dollars exempted under this bill and get the $1,000 grant per employee?
• As Republican Congressman LaTourette said in the article, most business people he has talked to will not use the provisions of the bill because there is simply not enough business available to justify any hiring, regardless of the provisions of this legislation. "This is not going to create one job."
• And finally, how many jobs can something like this generate (remembering that these types of programs create work, not new economy jobs)? Some of our previous posts to this blog calculated that best, best, most optimistic case is that the previous government stimulus funds cost about $224,000 per "job" created. If you assume that this bill will not be anymore efficient than previous ones and we divide the $35 billion by $224,000 cost per job, you end up, best, best case with just over 100,000 jobs created. Most of these jobs disappear once the money is spent since they were not permanently created, they were temporarily funded with borrowed taxpayer money. Anyway, creating 100,000 temporary jobs pales in comparison to the over 8 million jobs lost in the past year or so to the recession.

S0 let's review. Most politician do not like the bill and do not think it will work but many voted for it anyway. Although it is unlikely to work, any temporary "jobs" it creates will likely be very expensive, and it well be subject to an incredibly high probability of fraud that will be next to impossible to detect. Most justified voting for it simply because it was better than nothing, kind of like being queen of the pigs, you may be a queen but you are still ugly. And in this case, an extremely expensive, ugly pig at $35 billion. Better uses of the money:

1. Pay down part (a very small part) of the deficit and national debt to get government spending under control and get the country fiscally sound again.
2. Give each U.S. household a check for $270 or so, it is their money anyway, they should be able to waste it anyway they want and not rely on the political class to pass "insipid" legislation to waste it.
3. Retrofit about 580,000 U.S. homes so that they are completely solar powered, reducing green house gases, reducing dependency on foreign energy sources, and possibly creating some real jobs in a new industry. See a previous post concerning nuclear energy on how we arrived at the 580,000 homes ($35 billion divided by the average cost of retrofitting a typical house = $61,000).

If I can come with these three far better ways to spend $35 billion, I am sure smarter people than me could come up with even better ideas. Unfortunately, those smarter people apparently do not currently sit in the U.S. of Representatives.

Our new book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble.

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.




Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.

2009 Year End Review: The Good, The Bad, And The Ugly - Bonus Post On Inefficiency

The past three days we have reviewed the goings on of the political class in the second half of 2009. We focused on The Good, The Bad, and The Ugly antics and activities that the government and its presiding politicians have done to the America people and to the country. Today's bonus post is the last official review and award winner for 2009. We will look at four government programs that we have previously analyzed and determine which one is the most inefficient in spending America's tax dollars.

A few things to note first. All of the instances of political activity I will and have reviewed have already been discussed and analyzed in previous posts to this blog. Thus, for more detail on anything listed and discussed in the year end review posts, you can review the specific past posts. Second, everything discussed in the 2009 review posts come from credible news sources, these are not facts and stories I made up or are coming from highly partisan sources. Typical sources include CNN, the Associated Press, the New York Times, The Week Magazine, Reason magazine and other news sources. While I will not identify the sources again in these review posts, you can refer to the original posts to get the date and source referenced for the information.

Thus, without further adieu, looks determine what was the most inefficient government program we covered in 2009, i.e. what program spent the most money and got the least bang:

• As the economic stimulus package was rolled out, the AP did a number of tough love stories on how the money was being misspent. The one glaring example of inefficiency was the use of stimulus money to fix the nation's crumbling bridges. According to the AP report, stimulus money had been used to repair 2476 bridges at the time of the article. However, 1123 of those bridges did not need any repair, they had been diagnosed as safe. Thus, about 45% of the bridge repair stimulus money was wasted since those bridges that had been "fixed" were not broken to begin with. Let's give this government effort an efficiency rating of only 55% since almost half of the allocated money was wasted fixing non-broken bridges.
• According to a blurb in a recent Business Week magazine article, only about 30% of recent stimulus money that was directed to households was actually spent in the market. 70% was either put in the bank or other savings vehicles or was used to pay down debt. Since the purpose of the stimulus money was to quickly get Americans spending and buying goods and services again to stimulate the economy, any other use of the money can be viewed as an inefficiency. Thus, the household spending component of recent stimulus programs gets an efficiency rating of only 30%.
• In a post on September 23, 2009, we reviewed another AP report and did some simple calculations relative to a teenager summer job program that the Federal government ran last summer. There are two ways to measure the efficiency of this program, both yielding less than stellar results. First, 25% of those involved in the program never did get a job for any number of bureaucratic (e.g. later than expected roll out of the program) and other reasons. Thus, on this measure the efficiency could be viewed as 75%, not bad compared to the 55% efficiency of the bridge repair program and the 30% of the stimulus program. However, the program cost the American taxpayer $1.2 billion but generated only an estimated $670 million in wages for the participants. Thus, for about every dollar spent on the program, only about $.56 in wages resulted. This is no way to grow an economy and provide long term employment. Thus, this program gets no better than a 56% efficiency rating.
• Late in the year we reviewed a Treasury Department anti-drug money program that was supposed to prevent drug money from leaving the country and going back to Mexico, where it is laundered and used to extend and improve the drug cartels in that country. At that time, we calculated that for every dollar that the Treasury department intercepted, about $8,300 was getting through. Thus, the efficiency rating for this program is 1/8300 = .01%.

And the winner is .... the Treasury Department's anti-drug money stoppage campaign. While all of these samples illustrate how poorly the political class is running the country and inefficiently spending our tax dollars, the Treasury Department program has to be hands down the most inefficient program going right now. Why even use budget dollars and manpower resources to run this program the way it is currently being run if your success rate is so very, very small? Why has not the ruling Congressional committees either fixed the program or shut it down?

Step 34 in "Love My Country, Loathe My Government" would help prevent some of these inefficiencies. That Step would hold Congressional committee and subcommittee members directly accountable for these types of wasteful spending atrocities and would provide the mechanism to remove those politicians on those committees that allow this waste to continue.

A follow up to our post form two days ago which covered "The Bad" antics and actions of the political class. It has been pointed out to me that I missed a major "bad" when I neglected to include the work of a whole Congressional committee that was proposing legislation to force the NCAA to determine the Division One football champion by a holding a playoff. This was a whole subcommittee worrying about a football game rather than some of the real issues facing the country, many of the issues being of a life and death nature. Special demerits should go out to the U.S. Senator who wants the Justice Department to devote resources to look into the whole matter. Forget about crime, and drug lords, and terrorism, let's take law enforcement resources and investigate a football game. I apologize for the oversight of not including this in the post from two days ago, it certainly deserves recognition for its waste of time and resources.



Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.

Turning Wealth Into Waste

Yesterday we discussed a new government report that highlighted the tremendous amount of waste in the Medicare area. Today we will cover waste on a broader base as outlined by a new government report that was summarized in a November 18, 2009 news article that appeared on Earthlink's news page.

According to the government report, the Federal government wastes $98 billion a year due to improper payments. This comes down to about $750 for every family in America every year. The report detailed the improper waste department by department:

• Agriculture wasted $4.3 billion or about 5.9 percent of its total department budget.
• Defense wasted $849 million or .5% of its total department budget (more on this below).
• Education wasted $599 million, 2.1 % of its budget.
• Health and Human Services wasted $55.1 billion or 9.4% of its budget.
• Homeland Security wasted $644.5 million or 3.7% of its budget.
• Housing and Urban Development wasted $1 billion or 3.5% of its budget.
• Labor wasted $12.3 billion or 9.9% of its budget.
• Transportation wasted $1.5 billion or 3% of its budget.
• Veterans Affairs wasted $1.2 billion or 2.7% of its budget.
• Social Security wasted $8.0 billion or 1.2% of its budget.
• And the big winner: Treasury wasted $12.3 billion or a whopping 25.5% of its budget.

A couple of observations:

• If someone or some department in private industry had lost/wasted 25.5% of its total budget on improper payments, like the Treasury Department did, there would sure to be firings, investigations and possible criminal liabilities.
• I am sorry but I simply do not believe the defense number of only .5% of its budget. With troops and facilities all over the world requiring probably thousands upon thousands of contracts with outside vendors (combined with the old stories about $700 hammers, $400 toilet seats, etc.), it is highly probable this number is bogus.
• The report identified the Homeland Security grant program and the Disaster Relief Fund Vendor Payments program in the Homeland Security organization as the main culprits in that department's waste. Has anyone in any position of responsibility been fired for this waste of taxpayer dollars?
• Similarly, in the Transportation department, much of the improper payments were attributed to the Federal Highway Administration planning and construction program. Has anyone been fired in this program?

But lets not stop here, this is probably just one leg of a three legged stool. These numbers appear to be due to improper payments, leg number one of the stool. It does not appear to include waste for programs that have little or no use for the American taxpayer. As mentioned in Appendix A of the book, "Love My Country, Loathe My Government," the following are just a small handful of useless government programs that while they may not include improper payments, they are a complete waste of Federal tax dollars, the second leg of waste in our stool:

• $250,000 of Federal money to research asparagus industry labor costs.
• $70,000 of Federal money for a Paper Industry Hall Of Fame.
• $300,000 of Federal money for a feasibility study for the world's first fully enclosed motor speedway in Ohio.
• $2,500,000 of Federal money for fish waste research in Alaska.

This list could go on forever but you get the idea. The $98 billion waste in improper payments is just the beginning, wasted tax dollars on useless Federal programs adds on to this number. This second set of waste includes not only the smallish programs listed above but the massive Federal programs like TARP that wastes untold billions of dollars. See some of our previous posts on how TARP and the Stimulus Program turned wealth into waste.

And finally, the third leg of the stool, outright fraud from a tax perspective. As outlined in "Love My Country, Loathe My Government," an article in Money magazine in 2006 quoted an IRS source that said the difference in what private citizens owed under the current tax code and what was actually collected differed by almost $200 billion a year to the short side. The article did not estimate how much businesses were also shortchanging the IRS.

If we just take a wild stab and say that the IRS is short $100 billion on business taxes, combine that with the $200 billion they are short on private citizen taxes and add in the $98 billion in waste of improper payments, you get almost $400 billion wasted every year or over $3,000 per U.S. household. This does not include the second leg of the stool, the money spent and wasted on Federal programs that get nothing done for the vast majority of Americans. It is mind boggling. And that does not end the bad news. Tomorrow we will discuss some of the reactions to this waste report as stated by government bureaucrats and members of the political class, now their comments are mind boggling. Also tomorrow, we will show how many of the steps in "Love My Country, Loathe My Government" would effectively address and minimize or eliminate many sources of wasted taxpayer dollars as compared to the lame plans the political class has in mind for fixing the problem.

Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.

Obamanomics and The Stimulus Plan - Part 1

Let's talk a little bit more today about what impact the President's stimulus plan has had on the economy. As you may recall from yesterday, the AP and the White House were in a little bit of a spitting match about what numbers were valid to use with the White House promising to produce newer, more accurate results by yesterday, which they did.

The new numbers claim that Obama's stimulus plan has created or saved almost 650,000 jobs according to a new AP article by Matt Apuzzo and Brett Blackledge. The White House obviously thinks this is great news but, as always. let's do a little math. If the stimulus plan did indeed create/save 650,0o0 jobs and we divide that estimate into the estimated amount of the stimulus plan that has already been spent, $180 billion or so (see yesterday's post for the details), then each job Obama claims to have created or saved was done at a cost of about $277,000 per job! There is no way we can get out of the recession with these kinds of programs if it needs over a quarter of a million dollars to create one job. And remember, the 650,000 estimate is Obama's number, not some sandbagged Republican number.

What is even worse, according to the AP article, the White House still has not gotten all the kinks out of the estimation process:

• Despite earlier identification of a double counting, the jobs saved claim from the Palm Beach County, Florida water department is still was doubled from an actual of 57 jobs to a reported 114 jobs.
• Some programs that got money from the stimulus package continued to use the money for pay raises and not job saving, incorrectly listing those who got only a raise as a job saved.
• According to the article, there are still dozens of instances where contractors posted the same number of jobs created or saved on different projects, which resulted in multiple counting of the same employees who were just working different projects.

Even worse, the greatest number of jobs created or saved were in state governments. These state government employees, while they most probably work very hard, do not contribute to the growth of the economy since their wages are paid for by taxing people in the private sector. So saving their jobs is just a distribution of existing wealth via taxation, not from the market or the economy getting larger.

Now, given that the economy has already shed 3 million jobs this year, the Obama supporters could claim that unemployment would be even worse if the stimulus plan had not been passed. Two problems with this line of reasoning. First, this approach was never going to work it if cost over $270,000 to create one job under Obama's plan. Second, and this the real fundamental problem that no one is addressing, government does not create jobs, the private market does. Free people earning and spending their wealth as they see fit is the most efficient, cost effective way to grow an economy. Politicians either do not recall, do not know, or choose to ignore the fact that government does not pay for anything. It merely takes wealth via taxation from some members of society, individuals and businesses, and redistributes it to other members of society including a cut for itself.

Thus, to say this plan using government money "created" a job is a bogus argument since the money used to create this job will not be used to create another job that was the result of the free market, it was just redirected by the political class. The more Obama uses government money to create these phantom jobs, the less jobs will be created in other sectors of the market where people would have spent the money they earned if it had not been forcibly taken under taxation.

Remember, it was the political class, including both Republicans and Democrats, that got us into this mess in the first place with lax oversight performance of the banking, financial, and housing markets. No member of the political class accurately predicted, along with their respective economists, the largest economic downturn since the Great Depression until it was way too late to do anything. What makes anyone think they can fix the very disaster they caused?

"Love My Country, Loathe My Government" addresses many of these issues, the most important of which calls for a major downsizing of government and the associated taxation so that free individuals can take more control of their financial and economic choices and in the process, create the new jobs and industries that government cannot do by redistributing wealth.

While the above is a common sense description of how the stimulus plan is doomed to failure, tomorrow we will discuss Obamanomics and The Stimulus Plan - Part 2. We will review a Reason Magazine article that asked credible, non-administration economists their opinions of the stimulus plan and hopefully, provide some more detailed explanations of why this and other types of stimulus programs never work, always waste money, inflate the national deficit, and delay the recovery.

Tell Me When You Feel This (Stimulus That Is)

As we come up on the one year anniversary of the government's $787 billion stimulus program, I thought it might be fun to see what good, if any, it has done. The data below comes from two sources. The first is the claim by the Obama administration that the stimulus program has already created 30,000 jobs as outlined in an October 29, 2009 AP article by posted on Earthlink. The second set of data comes from several sources and tries to estimate how much of the stimulus money has already been spent. According to www.propubica.com, a source quoted in numerous other websites and blogs, the government has spent about $183 billion already with $120 billion in spending programs and $63 billion in tax cuts. A June 15, 2009 article on the Reasons magazine website by Jacob Sullom estimates that about one fourth of the entire package will be spent by the end of the year which comes out to about $197 billion dollars. Since the two sources are relatively close if you consider timing, year-to-date (propubica.com) vs. year end (Reason), lets use the $183 billion for our calculation.

Given these sources, let's do some very, very simple math: $183 billion has been spent to generate 30,000 jobs or $6.1 million has been spend to generate each job! If we assume that the tax cuts did not generate any jobs and use the $120 billion spending component, then we get a deal at about $4 million per job created. This is an atrocious waste of taxpayer money no matter how you do the math. Even if you are off a factor of ten in the job creation estimate, you are still looking at hundreds of thousands of dollars spent per job created. This is not job creation, this is just an unadulterated waste of valuable taxpayer resources.

The even sadder part of the whole deal is that the 30,000 estimate might be TOO HIGH. The whole purpose of the October 29 article referenced above is to review the job count data the Obama administration claimed was a legitimate estimate. In its review of government records, the AP found:

• Some groups that received stimulus money used it to pay raises for existing employees but reported saving jobs anyway.
• A Georgia day care center claimed that they saved 129 jobs with the stimulus money. Must be a very, very large day care center.
• A Texas contractor who kept 22 people on the payroll counted each employee four times inflating their jobs created number to 88.
• The water department in Palm Beach County, Florida hired 57 people but reported 114.
• A Colorado business claimed the stimulus created more than 4,200 jobs but the actual count was under 1,000.

Thus, just using just this small sample of reports that the AP reviewed shows that even the 30,000 is overinflated by more than ten percent before looking at any other sources. Pathetic returns no matter how you cut the data.

Two questions need to be asked:

1) If the entire $787 billion and the equally ineffective $700 billion TARP dollars had been given to each US household, each household would have received about $11,400. I contend this would have been a much better economic stimulator of the economy rather than banks that did nothing constructive with their TARP funds (see yesterday's post) and million dollars wasted per each job created. It certainly would have been fairer since these households will have to pay for these billions in future taxes.

2) Although there is no indication that the Obama administration artificially inflated the jobs creation number (if they were going to lie about the numbers, I assume they would have done a much bigger lie), what if they did? It reminds of the Nixon administration attempts to manipulate economic data back in the 60s and 70s to make his administration look better than it actually was. In either case, incompetence in reporting the numbers or lying about the actual numbers, how can we believe anything this administration tells us?

Was This Porgram Necessary? Part 2

This follow up to government waste is based on a September 3, 2009 AP article that appeared on Earthlink news. It was an article on a statement by Vice President Joe Biden on how well the $787 billion stimulus package was working. You remember Joe, he was the candidate that proclaimed during last year's campaign the FDR went on TV when the stock market crashed in 1929 and reassured Americans that everything was going to be alright. Unfortunately, FDR was not President in 1929 and TV existed only in a lab. Thus, Joe has never had a lot of credibility with me which is why I relied on an external source for the facts in this post.

Mr. Biden "proclaimed success beyond expectations" relative to the stimulus results. However, the article had a differing opinion in many instances:

• Although 192 airports were targeted for stimulus money, a federal watchdog launched an investigation as to why 50 of these projects did not meet the grant criteria.
• Four of the airports have a history of mismanaging Federal grants according to the investigation.
• While there were 2,400 military construction projects from the stimulus, millions of dollars were lost because many of these projects were not subjected to competitive bids.
• Of the 2476 bridges that were to receive stimulus money, nearly half of them, 1,123 bridges, passed safety inspections with high marks that normally would not qualify for Federal money, i.e. they were in good shape, were not about to fall down as the Vice President claimed, and in no need for help. Unfortunately, these bridges will waste $1.2 billion according to the AP analysis.

So, according to the Vice President, projects that are wasteful because they were not competitively bid, projects that are unneeded because there is nothing wrong with the bridges, and projects that are wrongfully granted money because they do not meet the criteria are a "success beyond expectations." He sure has a funny definition of success.

As with yesterday, let's do some math:

• The stimulus will spend $787,000,000,000 which means the American taxpayer will have to fork over $787,000,000,000 of their hard earned money at some point in time to pay for it.
• A billion dollars is a lot of money. If you spent a thousand dollars a day from the day Christ was born, you still would not have spent a billion dollars. Thing about it, most of us could live quite comfortably on a thousand dollars a day, particularly hundreds and hundreds of years ago.
• Since there are about 130 million households in the United States, if the $787,000,000,000 had been spread out over each household, every family would have gotten a check for about $6,000 (as opposed to the tax break of only $400-$800 they actually got). Thus, rather than waste money on strong bridges, bad youth job training programs (see yesterday's post), stupid and inefficient rebate programs ("Cash For Clunkers"), wasteful military construction projects, bank bailouts, government agency bailouts (Fannie Mae and Freddie Mac) and other useless expenditures, I contend that giving every family $6,000 would have immediately stimulated the economy. We would likely have seen car sales jump, home foreclosures slow, consumer expenditures increase creating youth job opportunities and whole bunch of good economic stuff happen in a free and efficient way. Hey, we as taxpayers are going to have to pay the bill for the stimulus, we should at least get the benefit.

Would You Like Fries With That Stimulus Package (because that is all it is worth)

Let's take a well deserved break from health care reform and talk about stimulus packages. There is actually talk around DC of having a second stimulus package. Is that a good idea? Me thinks not. In her Reason magazine (www.reason.com) article in the April, 2009 issue, "Stimulating Ourselves To Death", Veronique deRugy does an inventory of stimulus history and analysis:

1) In a published work in 1992, Christina Romer, chair of Obama' s Council of Economic Advisors, and David Romer examined New Deal stimulus spending during the Depression and concluded that stimulus spending did not play any role in ending the Depression.

2) Harvard economist, Robert Barro, in his 2008 book, "Macroeconomics: A Modern Approach" concluded that $1 of government spending in war time produces less than $1.00 ($.80) in GDP growth.

3) Stanford economist Bob Hall and Sand Hill Econometrics chief Susan Woodward found that government spending in wartime did not increase or decrease GDP, i.e. for every $1.00 spent a dollar in GDP resulted.

4) Japan spent over $840 billion in stimulus attempts to restart their economy in the 1990s. This resulted in a massive jump in their debt to GDP ratio, massive corruption scandals and no economic recovery.

5) The Bush administration passed two stimulus packages, one in 2001 and one in 2008. Both failed to stimulate anything.

6) Brian Riedl of the Heritage Foundation analyzed several studies and found that increases in government spending actually reduce the size of the GDP.

Ms. deRugy explains the numerous reasons why stimulus packages and government spending do not increase economic activity but the biggest reason they do not work is also the simplest reason: government cannot inject money into the economy without taking money out of the economy first. They can borrow the money or collect it with more taxes but there is no aggregate growth in market demand. All it is is a redistribution of current or future wealth by the political class who tend to spend these stimulus dollars for pet projects that satisfy their egos and reelection needs.

A final stimulus rebuttal comes from a recent Cato Institute publication (www.cato.org). It cites a January 9, 2009 Obama quote regarding the latest stimulus package, "There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy." Unfortunately, this was not quite a true statement (my gosh, a politician lied?). Cato surveyed many leading economists and found over a hundred that strongly disagreed with that statement, i.e. everybody did not agree. These in disagreement came from leading, major universities including the University of Chicago, Cornell, Northwestern, Columbia, Stanford, NYU, Duke, Carnegie Mellon, USC, UCLA, MIchigan, Ohio State, Auburn, Washington University, Johns Hopkins, University Of Delaware, Rutgers, FSU, University of Texas, and many more.

So, take the fries option because past and future stimulus programs will not get us much more than that.