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Tags: Stimulus

Five Years Later, the Federal Government Is Still Spending Stimulus Money



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Also in today’s Morning Jolt:

Five Years Later, the Federal Government Is Still Spending Stimulus Money

The U.S. government is still spending money that it classifies as part of the “American Recovery and Reinvestment Act,” a.k.a. the stimulus, signed into law February 19, 2009.

 

For example, the Department of Veterans Affairs is spending $219,117.11 to remove a dumbwaiter elevator near the Biomedical and Dietetics Area on the second floor in the Miami Veterans Affairs Healthcare System.

 


The expenditures go on, even though Recovery.gov is no longer updating its information: “When Congress passed the Federal Government’s Fiscal Year ‘14 Omnibus Spending Bill in January 2014 it included a clause repealing Section 1512 of the Recovery Act which required recipients of ARRA awards to report quarterly on the status of those awards. The result was the recipients reported for the last time January 1–14, 2014.”

Tags: Stimulus

Washington Suddenly Notices the Economy Still Stinks for Most People



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President Obama pivots to the economy . . . arguably for the second time this month. The RNC collected these “pivots” for a while, until they became as numerous as his statement expiration dates.

Sure, the unemployment rate is down to 7.6 percent, after peaking at 10.1 percent; of course, that’s a slow decline since the beginning of 2012 (8.3 percent). This is still high by historical standards (the unemployment rate was below 7 percent from June 1993 to December 2008) and the unemployment rate’s drop is fueled in part by a steep decline in the labor-force participation rate, from 66 percent of all Americans over age 16 to close to 63 percent.

If you’ve got money in the stock market, you’re enjoying a bullish run. About 30 percent of American households have $10,000 or more in stocks. But for most of the folks who suffered the biggest fall in the Great Recession’s start, back in autumn 2008, economic security is hard to find. Wages are stagnant, and actually slightly less than at the end of 2009.

Asked about the issues that will dominate the 2014 races, the heads of the NRCC and DCCC tell Chuck Todd the economy first, before Obamacare and immigration (admittedly related to the state of the economy), gun control, social issues, etc. The issue of our continuing economic troubles never went away; it’s just that the narrative-setters lost interest. To the political class of both parties, the pain is far away (Washington’s economy is comparatively thriving, even in the Age of Sequester) and their preferred options are blocked by the opposition’s role in government.

White House senior adviser Dan Pfeiffer assures us, “Over the next several weeks, the President will deliver speeches that touch on the cornerstones of what it means to be middle class in America: job security, a good education, a home to call your own, affordable health care when you get sick, and the chance to save for a secure, dignified retirement.”

What holds back the economy?

These problems are not likely to be solved by another big-spending “jobs” bill; some of them are probably beyond the capacity of Washington to solve. But the president needs to say something about it — so he will give more speeches, and assure his followers that “if those mean House Republicans would just pass another version of the stimulus I passed in 2009, everything would be fine.”

Tags: Economy , Barack Obama , Taxes , Jobs , Stimulus , Green Jobs

Spared by the Sequester: $2 Billion in Unspent Stimulus Funds



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According to Recovery.gov, “Of the $804 billion awarded as of June 30, 2012, more than $2 billion appropriated by Congress expired — meaning the appropriations were not awarded or used within specified time frames. Agencies might also have adjusted an award amount with funds being returned to the agency. The expired funds are kept on an agency’s books for five years to cover invoices for the projects; at the end of the five years, the funds are returned to the Treasury.”

Why are they kept on the agency’s books for five years? It has been nearly four. If they haven’t spent that money on “shovel-ready” projects by now, how likely are they to spend it in the coming year? What, are they waiting for an invitation from one of the sequester-spared White House calligraphers?

Any chance we can get at those $2 billion to mitigate some of the sequester cuts that the public finds more irritating?

After all, it takes less than a million to cover the costs of White House tours. Certainly, we could take some of that $2 billion and use it to make sure the White House Easter Egg roll isn’t canceled.

By the way, the worst offender was the Department of Agriculture, with $764 million left unspent as of June 30. The Department of Energy left $241 million in stimulus funds unspent; the Department of Defense left $241 million, and the Department of Transportation spent $220 million.

If the Easter Egg roll is canceled, will the announcement be sent out by the White House calligraphers?

Tags: Barack Obama , Sequester , Stimulus

The Stimulus Failed. It’s Time for a New Approach.



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Jim Hoft updates the chart, comparing the Obama administration’s projections of unemployment with the stimulus and how the rate has actually progressed since then. We were supposed to be below 6 percent right now. We’re at 8.2 percent.

The issue is not whether or not the stimulus created jobs; it’s actually hard to spend $787 billion and not create jobs. The issue was whether the Obama administration actually understood the magnitude of the economic crisis hitting in late 2008 and early 2009 and whether the stimulus used the massive sum effectively. In other words, did we get $787 billion worth of economic growth out of it in exchange for taking on another $787 billion in debt?

Considering how politicians no longer use the word “stimulus,” and focus groups indicate voters react strongly negatively to claims that the stimulus worked, the the public’s verdict is clear.

The excuses from the Obama administration and its defenders will come fast and furious (no pun intended) in the coming days. But as I mentioned earlier this week, the argument is that the stimulus would have worked as advertised if not for “headwinds” means that its creators never prepared for such headwinds. And while the specific headwinds, or impediments to job growth, are hard to predict with precision, the continued existence of them isn’t. Natural disasters, political instability, currency instability, uneven growth around the globe… only a fool would assume they would cease from 2009 to 2012.

Pick your metaphor: the stimulus was a house of cards, a Faberge egg, a Rube Goldberg machine… the argument of the Obama camp is that it could have worked wonders if nothing had gone wrong. But that can be said of a lot of plans.

Since we find ourselves in a situation barely any better than before the stimulus, perhaps it is time to contemplate an alternate approach that cultivates the entrepreneurship of hundreds of thousands of American businesses, large and small, instead of relying on officials in Washington to make the right decision again and again. Larry Summers himself said that the federal government makes a lousy venture capitalist, and the philosophy of extending the taxpayers’ resources to a business like Solyndra is privatizing the gains (it’s not like they would trade us the patent for their products) and socializing the losses.

Tags: Barack Obama , Mitt Romney , Stimulus

Romney Camp: Solyndra’s Not Even Half the Story!



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The Romney campaign wants the American public to know about more than just Solyndra. They insist, “that’s not even half” the story, pointing out similar large loans and grants to First Solar, ECOtality, SunPower . . .

They find  “$16.4 Billion of the $20.5 Billion in Loans Granted as of Sept. 15 Went to Companies Either Run by or Primarily Owned by Obama Financial Backers.”

Remember, Obama argues that Romney is too profit-focused and too obsessed with the bottom line to be an effective president.

Tags: Barack Obama , Solyndra , Stimulus

Our Delicate Stimulus



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Presume for the sake of argument that the Obama administration is correct that the stimulus and their other efforts to decrease unemployment and build a prosperous economy could have worked, but were impeded by factors beyond their control: “This recession turned out to be a lot deeper than any of us realized,” “a string of bad luck,” “the Japanese earthquake” “an Arab Spring” “economic headwinds from Europe” “uncertainty from the debt-ceiling debate” “globalization” “automation” “ATMs,” and so on.

Put aside your inclination to roll your eyes and exclaim, “excuses, excuses” for a moment, and examine what this argument really is: Obama and his congressional allies came up with a plan that could work, but only if the conditions were right, or near-perfect. Any economic instability or unforeseen circumstance, in Japan, Europe, or the Arab world, would impede its effectiveness to the point where our current circumstances — 8.1 percent unemployment, millions under-employed, 2.2 percent quarterly GDP growth, etc. — are the very best anyone could possibly expect.

Then it would be fair to ask, it wasn’t much of a plan, was it?

The specifics of economic instability are hard to predict — if this were easy, we would all be successful investors — but the general phenomenon of economic instability around the globe doesn’t seem that hard to foresee. Europe and Japan have aging populations. China’s boom appears unstable and unsustainable. The Middle East never seems all that far from a conflict, and third-world countries, home to so much of the world’s industrial base, can suddenly find themselves torn apart by political and social instability. And was the success of Obama’s economic plan really contingent upon the raising of the debt ceiling, again and again, without contentious debate, for the entirety of his presidency?

If an economic plan can only be effective if it enjoys stable, growth-promoting conditions at home and abroad . . . how good a plan is it? Because a lot of plans can work in those circumstances.

Are there no other alternate plans or visions that are a bit more resilient? Ones that cultivate the entrepreneurship of hundreds of thousands of American businesses, large and small, instead of relying on officials in Washington to make the right decision again and again? Larry Summers himself said that the federal government makes a lousy venture capitalist, and the philosophy of extending the taxpayers’ resources to a business like Solyndra is privatizing the gains (it’s not like they would trade us the patent for their products) and socializing the losses.

Of course, we can argue, and will, that there were a lot more flaws in the stimulus and Obama’s overall economic philosophy than bad luck and factors beyond his control. But it’s worth noting that even if we accept the Obama interpretation of events and accounting for all of their excuses, he and his administration are asking America to buy into a plan has already proven too risky, too delicate, too easily impeded to be effective.

Tags: Barack Obama , Larry Summers , Solyndra , Stimulus

Another Stimulus-Funded Energy Company Hits the Skids



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Another stimulus success story — well, success for Democratic lawmakers and a company that received millions in federal funds, not for the taxpayer, laid-off workers, or the customers who will probably never purchase the product of the rapidly sinking company.

A Waltham-based electric car battery supplier — now facing financial implosion despite receiving $249 million in federal stimulus cash — was a heavy donor to congressional Democrats before scoring the hefty taxpayer handout, the Herald has learned.

A123 Systems CEO David Vieau has donated $16,900 to Washington, D.C., power brokers and Democratic committees since 2008, including $2,400 to Bay State Rep. Edward J. Markey, the chairman of the climate and energy committees, in 2009 — just three months before A123 received $249 million in federal stimulus funds. Vieau donated another $1,500 to Markey last year as the company pushed for even more federal dollars through government loans.

U.S. Sen. John Kerry, another ardent supporter of the company, received $2,000 in campaign donations from Vieau in 2010, the same year Vieau gave $2,500 to the Democratic Senatorial Campaign Committee. In 2008, Vieau donated $4,800 to campaign funds supporting President Obama and $200 to the Democratic National Committee.

The Boston Herald also reports:

A123 has laid off more than 100 employees and seen a net loss of $172 million through the first three quarters of 2011 despite the heavy infusion of federal cash. A123 has yet to turn a profit, and losses have been mounting. Earlier this month, the company posted a fourth-quarter loss of $85 million despite $40.4 million in revenue. The company’s stock tanked to an all-time low of just more than $1 yesterday on news of a $55 million battery recall. A defective battery caused a luxury electric car, the Fisker Karma, to conk out earlier this month in a Consumer Reports test.

A luxury electric car called the “Karma” fails a test because of a product from a company that received stimulus funds. Hmmm.

The only thing this story lacks is Obama touring the factory. But perhaps Pelosi will do:

Markey squired then-House Speaker Nancy Pelosi through A123’s former Watertown headquarters in June 2010 as a “great example of how Recovery Act funding is helping American companies.” Pelosi called Markey a “true visionary of our time.”

Tags: Ed Markey , Nancy Pelosi , Stimulus

‘Barack did the stimulus, and he thought he checked the box and moved on.’



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Do not forget this anecdote from New York magazine, November 29, 2009:

But the most damaging consequence of all may have been inside the White House, where bullishness about how rapidly the stimulus would kick in led to foolish projections that unemployment would peak at 8 percent—and where the bill’s passage bred a certain cockiness and complacency about the need to drive a sustained economic message in the months thereafter. “I recently talked to a very senior friend of mine in the White House, and I said, ‘How did we not spend a year talking about the economy?’ ” a Democratic think-tank maven recalls. “And he said, ‘Look, I think Barack did the stimulus and he thought he checked the box and he moved on.’ I said, ‘That’s not governing, dude. That’s some other thing.’ ”

“Barack did the stimulus, and he thought he checked the box and moved on.” Of course, unemployment remained high, and the economy continued to struggle through this year. Obama moved on, of course, to Obamacare, phenomenally unpopular legislation that may very well be found unconstitutional by the Supreme Court.

It would be bad enough for a president to presume that economic recovery was “done” and to move on to another agenda item. But to do so for legislation struck down about two years later…

Tags: Barack Obama , Health Care , Stimulus

Happy Three-Year Anniversary, Stimulus.



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The National Republican Senatorial Committee reminds us that the stimulus passed three years ago today, in a web video that represents a beautiful example of using lawmakers’ own boasts and promises against them:

Among the quotes that Obama and Senate Democrats might regret:

Barack Obama: “If I don’t have this done in three years, then this will be a one term proposition.”

Obama boasting he instructed his advisers to “conduct a rigorous analysis of this plan and come up with projections of how many jobs it will create . . .” (while showing the difference between the projections and actual unemployment rate). This will “immediately jump-start job creation as well as long term economic growth . . .”

Sen. Sherrod Brown (D., Ohio): “This stimulus package is just right.”

Sen. Claire McCaskill (D., Mo.): “We did the stimulus, we did what has been, by the way, wildly successful.”

Obama, laughing: “Shovel-ready wasn’t as shovel-ready as we expected.”

Tags: Barack Obama , Claire McCaskill , NRSC , Sherrod Brown , Stimulus

Interpretive Dancers, Cheap Compared to ‘Lock Monoliths’



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Over in the Corner, Kevin Williamson finds a stimulus project for interpretive dance that spent $762,372 and created 1.5 jobs.

That comes out to $508,248 per job.

That’s pretty bad, Kevin, but I think I may have you beat: The award to Thalle Construction Co., for “construction of upstream lock monoliths for the Kentucky Lock Addition project, Grand Rivers, KY, of the Nashville District U.S. Army Corps of Engineers” spent $55,180,420 to create . . . 36 jobs.

That comes out to $1,532,789.44 per job, or three times the cost per job of those interpretive dancers.

Think about it, for what we spent for those “upstream lock monoliths,” taxpayers could have hired 108 interpretive dancers.

And the General Services Administration’s stimulus contract for “renovation of an approximately 565,000 gross square foot existing office building in Washington, DC” with Grunley Construction Co. spent $86,674,319 to create 36.84 jobs. That comes out to $2,352,723.09 per job.

Overall, according to the totals on Recovery.gov, the stimulus has doled out 102,475 contracts, grants, and loans, adding up to $268,286,509,456 in funds awarded and $172,391,273,168 in funds received. (Yes, according to these figures, almost $100 billion — $95,895,236,288 — has been awarded to various entities but has not yet been used or spent.)

Contract, grant, and loan recipients report creating 555,029 jobs.

Based on the total of funds received, that comes out to $3,132,734.97 per job.

Tags: Barack Obama , Stimulus

Here Come More Infrastructure Job Promises



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It takes 42 seconds for David Plouffe to bring up “roads and bridges” when discussing Obama’s jobs plan tonight.

The stimulus spent $105.8 billion on infrastructure — in Obama’s words, “the largest new investment in our nation’s infrastructure since Eisenhower built an interstate highway system in the 1950s” — and was supposed to create 400,000 jobs.

The month the stimulus passed, 6.45 million Americans were employed in the construction sector, according to the Bureau of Labor Statistics. It declined every following month until February 2010, when it hit 5.53 million; the following months saw a very modest improvement to 5.55 million, an increase of about 17,000 jobs. It has ranged between 5.56 million and 5.47 million since then, bottoming out in January 2011.

In other words, in no point since the passage of the stimulus has the number of Americans working in the construction industry increased by any figure even remotely close to 400,000. The range from the bottom in that time (January of this year) to the subsequent peak (May) is 51,000.

Tags: Barack Obama , Stimulus

Obama: Let’s Spend Billions to Fix What the Stimulus Was Supposed to Fix



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There’s something eerily familiar about Obama’s latest round of pledges, promises, and plans for infrastructure spending.

The Wall Street Journal, August 15, 2011:

President Barack Obama is pressing Congress to create a new “infrastructure bank” to finance highway and rail construction, create jobs and jump-start the stalled economy, but the proposal faces hurdles on Capitol Hill. White House officials have described the bank as a new government entity that would make loans to support public-works projects of regional and national significance with private funding. That includes interstate highways, rail lines linking Midwest farmers to West Coast ports, and equipment for planes to link up to a new satellite-based air-traffic-control network.

Sounds great, right? It’s almost as if the president should have done this as soon as he took office, right?

Wait, wasn’t the stimulus supposed to do all this?

Obama, in the ceremony signing the stimulus bill:

Because we know we can’t build our economic future on the transportation and information networks of the past, we are remaking the American landscape with the largest new investment in our nation’s infrastructure since Eisenhower built an interstate highway system in the 1950s. Because of this investment, nearly 400,000 men and women will go to work rebuilding our crumbling roads and bridges, repairing our faulty dams and levees, bringing critical broadband connections to businesses and homes in nearly every community in America, upgrading mass transit, building high-speed rail lines that will improve travel and commerce throughout our nation.

Obama, discussing the stimulus to a group of mayors, February 20, 2009:

We’re remaking our cities with the largest new investment in our nation’s infrastructure since Eisenhower built an Interstate Highway System in the 1950s. Ray LaHood is going to be busy, because we’re putting 400,000 men and women to work rebuilding our crumbling roads and our bridges, repairing our faulty dams and levees, replacing our aging water and sewer pipes, and rolling out broadband lines to nearly every community in America. We’re going to unleash the potential of all our regions by connecting them with world-class transit systems and high-speed rail, making our metropolitan areas more livable and sustainable in the process.

Obama, touting the stimulus during a visit to the Department of Transportation, March 3, 2009:

Transportation projects that were once on hold are now starting up again, as part of the largest new investment in America’s infrastructure since President Eisenhower built the Interstate Highway System. Of the 3.5 million jobs that will be created and saved over the next two years as a result of this recovery plan, 400,000 will be jobs rebuilding our crumbling roads, bridges and schools, repairing our faulty levees and dams, connecting nearly every American to broadband, and upgrading the buses and trains that commuters take every day.

(This is not a blanket denunciation of repairing highways and bridges. I’d start by widening the most highly trafficked roads in the country, a scorecard of which can be found here. Instead, the first project funded under the stimulus was $8.5 million to repair the Osage River Bridge east of Tuscumbia, Mo., with an estimated population of 296 people.)

But judging by Obama’s own rhetoric, we’ve spent billions upon billions and the infrastructure is still crumbling.

Obama in Decorah, Iowa, on August 15:

Now is not the time for us to not invest in infrastructure. We used to have the best roads, the best bridges, the best seaports, and these days China has got better airports than us. Europe has better rail systems . . . There is no better time for us to invest in infrastructure than right now — first of all, because we need it.

During a press conference on July 15:

If the only thing we’re talking about over the next year, two years, five years, is debt and deficits, then it’s very hard to start talking about how do we make investments in community colleges so that our kids are trained, how do we actually rebuild $2 trillion worth of crumbling infrastructure.

From his weekly address earlier in the summer:

We need to do what’s necessary to grow our economy; create good, middle-class jobs; and make it possible for all Americans to pursue their dreams. That means giving our kids the best education in the world so they have the knowledge and skills to succeed in this economy. It means rebuilding our crumbling roads, railways, and runways.

Somehow Obama made “the largest new investment in America’s infrastructure since the Interstate Highway System” and yet nearly three years later, the roads and bridges of his rhetoric are still falling to pieces. No matter how much we spend, we’ll be told that our infrastructure is crumbling like a stale doughnut and we absolutely must spend more. It’s easy to suspect that this spending isn’t really driven by physical demands but by a desire to keep the money flowing.

I suppose I should give the president credit for being green; now he’s recycling his promises.

Tags: Barack Obama , Infrastructure , Stimulus

Lack of Energy Policy Kills Two Plant Proposals



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Jobs saved, or created, or canceled.

News out of Wyoming:

Work on the High Plains Gasification-Advanced Technology Center, a much-anticipated $100 million research facility planned for Cheyenne, will be halted for at least a year and a half, University of Wyoming officials said Friday.

GE Energy, which has been working jointly with UW on the coal-gasification research center, delayed the project because of uncertainty about the future of U.S. energy policy, according to a UW media release.

GE has already delayed the project since the fall of 2010 because of a lack of a clear U.S. policy on climate and energy.

The facility, which would study advanced coal gasification technology for the Powder River Basin — a key economic driver to Wyoming’s economy — was scheduled to be completed by the end of 2012

Wyoming’s Republican Gov. Matt Mead puts the blame square on Washington: “Capital from the private sector only flows to large and ambitious projects when there is reasonable regulatory, legal and financial certainty. This is a real world example of the local impact of the federal government’s failure to provide a policy path forward for energy use in America. An energy policy must include the responsible use of our coal resources. Without a clear policy, investors and developers do not have certainty and cannot plan for risk, which is critical in making decisions to build modern, efficient plants… “America and Wyoming have the leadership capacity, the technology prowess and the private capital availability to wisely put our energy resources to productive use but we are strangled by uncertainty created by the energy policy vacuum in Washington.”

This comes after American Electric Power “shelved plans for a commercial-scale carbon capture and sequestration (CCS) project that was a centerpiece of the federal government’s so-called Clean Coal Initiative” in West Virginia.

The company says Congress’ inability to act on climate policy and a weak economy were left little incentive to go forward with the $668 million project.

AEP and French partner Alstom are already operating a pilot-scale CSS project at the Mountaineer coal plant in West Virginia. With $334 million in federal funding, they planned to expand the project in four phases to eventually capture the emissions from about 220 MW of the plant’s 1,300 MW capacity and store it deep underground…

So far, no commercial-scale CCS plants are in operation in the US, and the technology is beginning to look more and more economically unfeasible (like nuclear power).

The Department of Energy still has $612 million in Recovery Act funding designated for CCS projects in Louisiana, Texas and Illinois. And Southern Company is reportedly building CCS at a 582 MW gasified coal plant in Mississippi that will capture 65% of the emissions.

The American Electric Power plan got scrapped in mid-July and the Wyoming proposal’s delay was announced at the end of July. What possibly could have made these coal plant companies so nervous about what’s coming out of Washington?

Oh, that.

Power plant operators are nervously awaiting a new Environmental Protection Agency regulation, finalized last week, which requires more than 1,000 facilities, including more than 500 coal-fired plants, to meet stricter emissions standards so as not to pollute neighboring states. 

The regulation, called the Cross-State Air Pollution Rule, calls for plants to install scrubbers to lower particulate emissions in states that are downwind…

The rule, one of a slew of EPA regulations directed at smokestack industries in the coming months, will impose huge costs on power plant operators, say industry representatives. 

“There are five or six other regulations coming down the pike that will have a huge impact on industry and on consumers and businesses, especially in parts of the country where we still have industrial manufacturing jobs,” said Jeffrey Holmstead , an expert in environmental strategies at the law firm of Bracewell and Giuliani.

The stimulus giveth the taxpayer money to create jobs; the regulations taketh away the financial feasibility.

Tags: Barack Obama , EPA , Stimulus

White House: Nuh-Uh! Stimulus Jobs Only Cost $185K Each!



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The White House’s pushback on the stimulus cost-per-job-created figure is, er, not as persuasive as they would like:

House Speaker John Boehner, R-Ohio, is just the latest Republican to be publicizing a Weekly Standard report claiming that President Obama’s own economists claim the stimulus bill cost $278,000 per job…

The White House has long disputed the math of dividing the cost of the stimulus by the number of jobs created – we asked a similar question back in October 2009, when that computation resulted in the comparable bargain of $72,408 per stimulus job, as you can read at this blog post.

Then, as now, White House officials note that the spending didn’t just fund salaries, it also went to the actual costs of building things — construction materials, new factories, and such. So the math is flawed, White House officials say, since reporters are not including the permanent infrastructure in the computation, thus producing an inflated figure. White House officials also questioned why the Weekly Standard would use the lower figure from the projection of the number of jobs created, and noted that the temporary nature of the stimulus bill meant that its impact would diminish over time, when the private sector began hiring again. In other words, the number of jobs created at its peak – as many as 3.6 million, according to the Congressional Budget Office’s May 2011 report – would be more appropriate, White House officials say.

Okay, fine. Let’s use the high-end 3.6 million jobs-created figure. That still comes out to $185,000 per job.

As for the notion that because the stimulus was temporary, we shouldn’t be surprised that its impact diminishes over time, that’s refuting a point no one made. More troubling for stimulus defenders is the idea that the CBO report puts the majority of the stimulus’ impact in 2010, when the unemployment rate began the year at 9.7 percent, peaked at 9.9 percent in April, and ended the year at 9.4 percent. In other words, even when the stimulus was at peak efficacy, it had minimal impact on the national unemployment rate.

Also note that the White House does some convenient rounding of their own. In their defense, they state, “The nonpartisan CBO has confirmed that the Recovery Act delivered as promised, lowering the unemployment rate by as much as 2 percent, boosting GDP by as much as 4 percent and creating and saving as many as 3.6 million jobs.” 

Actually, that stretches what the CBO actually said. Their report puts the maximum impact on the unemployment rate at 1.8 percent and as low as .6 percent, and that it boosted “(inflation-adjusted) gross domestic product (GDP) by between 1.1 percent and 3.1 percent.”

Tags: Stimulus , White House

Bernie Madoff, Keynes, St. Augustine, and Cassanova



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A stinging observation from John Cochrane:

If you really believe Keynesian Stimulus, you think Bernie Medoff is a hero. Seriously. He took money from people who were saving it, and gave it to people who were going to consume it. In return he gave the savers worthless promises that look a lot like government debt.

Brutal. And this:

The current policy attempt, consisting of  stimulus now, but strong promises to address the deficit in the future, can have no effect whatsoever. If you think stimulus works by fooling people to ignore future tax hikes or spending cuts, then loudly announcing such tax hikes and spending cuts must undermine stimulus!  Augustinian policy, “give me chastity, but not yet,” will not work. Casanova is needed.

Cochrane’s essay, “Fiscal Stimulus, R.I.P.,” is well worth a read.

Tags: Bonds , Debt , Deficit , Despair , Fiscal Armageddon , General Shenanigans , Stimulus

Why the Stimulus Stimulated Nothing



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Hey, Chairman Ben



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In case your staff hasn’t alerted you, you’re destroying the dollar. Thought I’d pass that along, just in case it matters to anybody.

Tags: Ben Bernanke , Debt , Deficits , Fiscal Armageddon , Stimulus

Put that Helicopter in Reverse, Mr. Chairman



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I suspect that, given a fighting chance and full political immunity, the Obama-Reid-Pelosi (ORP) machine would like to try some more fiscal stimulus. ORP rarely encounters a spending measure it does not like (except for a few military ones, from time to time). But the Elected Powers that Be are terrified, at the moment, of touching anything that smells like Stimulus VI. So they are making a hand-off to the Unelected Powers that Be, who are more than willing to run with that ball. Helicopter Ben laid it out this morning:

Treasurys are mixed after Federal Reserve Chairman Ben Bernanke said the central bank was ready to buy bonds to boost the economy.

In a speech Friday morning, Bernanke said the Fed has yet to figure out how the bond purchases would be paced. The effort would be aimed at lowering interest rates to stimulate spending and prevent prices from falling.

Exactly how much more of this does Chairman Ben intend to try? We’ve already had a 13-figure spending campaign for stimulus, and umpteen  rounds of “quantitative easing,” i.e. slowly debasing our money in the hopes that people will want to be quickly rid of their devalued dollars, thereby stimulating economic activity. (When you put it like that . . . ) To what end? Growth and jobs are a joke, and low interest rates have only encouraged government to borrow and spend even more recklessly than it usually does, sinking money into projects of negligible real economic value. We just basically set a $1 trillion pile of money on fire and roasted marshmallows over the flames. That is why Nancy Pelosi is about to become the first female ex-speaker of the House.

Bernanke is a scholar of the Great Depression, and he sees that inflation is currently at about  0.8 percent, which is basically nothing in the Fed’s view, and he fears the deflationary spiral above all things. That fear may be overblown, or at least in need of qualification. Deflation is a real risk, to be sure, but so is unexpected inflation. In fact, we’ve already had inflation, properly understood: Inflation is not a general rise in prices; inflation is an increase in the money supply (an inflation of the money supply) which often makes itself felt through higher general prices — but not always. Asset bubbles (dot-bomb, housing, etc.) are a particularly noxious expression of inflation. Since we are teetering on the precipice of Mortgage Meltdown 2.0, as $1 trillion or so in mortgage-backed securities are at risk of unraveling or experiencing radical revaluations, lots of money is looking for snug harbor. Meaning Treasuries.

The flight to U.S. government debt has enabled Washington to borrow tons of money (literally, tons: Put the Obama deficits in hundred-dollar bills stacked on pallets, and you’re talking tons and tons and tons of money) on easy terms at low, low interest rates. Big debt, easy terms, low rates, for now –  sound familiar? Welcome to subprime government. And just as the housing market came crashing down when interest rates inched up and all those variable-rate mortgages began to reset, the fact is that the world is not going to be in a financial crisis forever, and U.S. government debt is not always going to enjoy the implicit subsidy that comes from being the world’s safe haven in troubled financial times. When your balance sheet starts to look more Greek than Japanese, the market is going to start demanding Greek rates (about 10 percent, at the moment) to finance your fiscal shenanigans. And that is what Fiscal Armageddon means: The bills are due, the cupboard is bare, and all the money in the world won’t save you, even if you could borrow it, which you can’t.

So here’s a contrarian take: The Fed should stop trying to drive down interest rates. It should instead work to raise them. Why? Our economy needs savings and investment — but why save when interest rates are effectively zero? And where can funds for investment be had if not from savings? Answer: from borrowing — and more debt the last thing American businesses, American households, or American government needs right now. Interest rates are going to go up eventually, anyway, so we may as well get started now in order to avoid an especially disruptive transition when the time comes. Higher interest rates would encourage savings, encourage investment, discourage wanton borrowing, and help rebuild  the value of the dollar. Sure, we’d lose the value of the allegedly stimulative effects of zero interest rates — and a lot of good they’ve been doing us so far: 10 percent unemployment, growth that is as dynamic as molasses in February.

The United States should start acting like a dollar is worth something if it expects a dollar to be worth something. Otherwise, to borrow from a wise man, we are left with Barack Obama as the devalued head of a devalued government.

Tags: Debt , Deficits , Deflation , Despair , Fiscal Armageddon , General Shenanigans , Inflation , Stimulus

Bobs-for-Jobs Schilling: Another Republican for Keynesian Stimulus



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I like the Young Guns, and I love a tax cut, but what’s missing from the agenda? Let us ask a grown man called Bobby.

Bobby Schilling, Republican candidate for Congress in the Illinois 17th District, discussed his positions on tax policy. Schilling signed a pledge with Americans for Tax Reform promising not to raise taxes on anyone in a recession. Schilling said he believes JFK, a Democrat, had it right when it comes to tax cuts.

“President Kennedy embraced tax cuts during a tough economy in the early 1960s because they work,” Schilling said. “The truth is that tax cuts stimulate the economy while high taxes discourage further growth. Putting money in people’s pockets will allow them to buy more goods and services. As businesses see more revenue, they’ll be more likely to expand and create new jobs. If we increase taxes in the manner my opponent wants to, we won’t see any new jobs and many businesses will actually be forced to cut back the amount of workers they employ. Some businesses may even give up on our business climate entirely and move their operations abroad. If we want to create jobs and stop outsourcing, we have to start by creating a positive business climate.” Schilling said we can’t afford tax increases while our economy experiences double digit unemployment.

“We have to extend the 2001 and 2003 tax cuts for every income bracket, and we need to repeal the 22 new taxes from the healthcare bill,” Schilling said. “Our economy can only recover if we keep taxes low, stop the out of control deficit spending in Washington, and work to foster a positive business environment so small business can expand and hire more workers. Anything else will make a bad economic situation much worse.”

Bobby Schilling, a native of Rock Island, graduated from Alleman High School and attended Black Hawk College. Schilling, a local business owner, is the Republican candidate for the 17th Congressional District in Illinois. Bobby is running on a platform of bringing jobs and real representation back to the 17th District. Earlier this year, Schilling conducted a 34-city “Bob’s for Jobs” tour, where he met with voters and employers all across the 17th District. Schilling was recently named an official ‘Young Gun’ by the National Republican Congressional Committee in their Young Guns program of top tiered races. 

The Republicans’ recent argument, which goes, roughly, “JFK Was One of Us When It Comes to Taxes, Yee-Haw!” is mostly right — and that is a bad thing. Tax cuts as economic stimulus for the most part amounts to short-term, naïve Keynesian claptrap — especially when the proposal is for temporary or one-time tax cuts. Bobs-for-Jobs says ‘putting money in people’s pockets will allow them to buy more goods and services,” and he even calls it stimulus. Well, Bobs-for-Jobs, your running mate is Brett-for-Debt. What’s the difference between a tax-cut stimulus and a spending stimulus? Some efficiency, sure, less rent-seeking and pork-barreling, no doubt. But if we cut taxes without cutting spending, we are not cutting taxes. We are deferring taxes. Taxes are not the problem; spending is the problem. Taxes are a symptom.

So, what we want is permanent, long-term, significant reductions in tax rates, along with a more sane and simple tax system, right? Which requires us to — sing along with me, Bobs-for-Jobs Schilling of Rock Island — cut spending. A lot. New Exchequer rule: Any Republican who sends me a press release talking up tax cuts without a word about spending cuts gets to be jackass of the day. (Democrats obviously are ineligible; you can’t be jackass of the day when you’re a registered jackass for life.)

Oh, and there’s a junk-bond bubble blowing up because we’re using ultra-low interest rates to combat the recession that was caused by the housing bubble enabled by ultra-low interest rates, which were used to combat the dot-com recession that was enabled in part by . . . .

Bobs-for-Jobs and the junk-bond bubble are not unrelated subjects: Both are the product of magical thinking, the quest for a get-out-of-jail card for economic troubles. Both are going to cost us in the end.

Here’s the problem: Real growth and real productivity cannot be magicked into existence or politicked into existence. Real growth and real productivity come from real investment, which comes from real savings. You want to discourage savings? You want a real good way to discourage savings? Try ultra-low interest rates and tax cuts that are specifically designed to encourage consumption rather than savings, brought to you by Bobby Schilling & Co. There is no substitute for consuming less than you produce, either at the individual level, the household level, or the national level. JFK never really understood that, very probably because he had servants to lift his fingers. Those days are gone. The sooner we start living in the real world, the better.

Now, Bobs-for-Jobs, it would be thrilling if you decided to go by a grown-up name: Mr. Schilling for Deficit-Killing. You’ve told us about your tax cuts. Let’s hear about the spending cuts. Because, I’ve been reading your web site, and I do not see one serious proposal for cutting a dime of federal spending, and do see lots of special pleading on behalf of favored constituents. How about we start with your precious farm subsidies?

– Kevin D. Williamson is deputy managing editor of National Review.

Tags: Debt , Deficits , Despair , General Shenanigans , Stimulus , Useless Republicans

Another Stimulus, Another Bailout



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Pres. Barack Obama’s plan for yet another round (!) of stimulus spending, this time focused on highway infrastructure work, is, like so many products of this administration, something other than what it seems. What Obama is proposing is another backdoor bailout for spendthrift states, such as his political home state of Illinois, giving them large injections of federal money so that they can redirect spending that would be dedicated to highway projects to other areas—e.g., to the government-employees’ unions that are Obama’s most loyal constituency. Call it “No Blue-State Appropriator or Union Goon Left Behind, Part Whatever.”

The highway system in particular (and the transportation racket more generally) is a source of endless financial shenanigans and a rich seam of political patronage to be mined by Obama’s allies at the state and local levels. The federal highway system is maintained by a combination of federal and state spending (in a few cases, local spending as well) with the bulk of the states’ money coming from gasoline taxes and fees levied on car owners. Illinois, for example, levies a 39-cents-a-gallon tax on gas (the sixth highest in the nation, according to the Tax Foundation), and it also applies its general sales tax (another 6.25 percent) to gas. Once you figure in the total tax burden, government levies are probably a bigger contributor to the price of a gallon of gas in Illinois than is the crude oil from which it is distilled. So, what does Illinois get for its money?

Part of what it gets is the Illinois Department of Transportation (IDOT), one of those wonderfully, comically inept state agencies that does things that make political analysts laugh and taxpayers weep: things like deciding to suddenly stop doing roadwork because they are out of gas money (irony!) or threaten to start leaving roadkill on the highways unless the state gives them another $20 million.

Highway maintenance is important, of course. But that’s not all that IDOT does with its money. For instance, IDOT helps to maintain a vast network of full-employment programs for petty bureaucrats, called “regional planning agencies.” Every region in the state has one, and they are not small: The Chicago version lists 94 staffers on its website. Its budget of $16.7 million comes mostly from IDOT ($3.8 million) and the Federal Highway Administration ($11.5 million), with money reshuffled from other government agencies, local levies, and our friends over at the Environmental Protection Agency (no, really!) kicking in another $1 million or so. Nearly a hundred bureaucrats spending state transportation money, FHA money, and EPA schmundo, doing . . . what? Overseeing roadwork? Not exactly.

Because our entire government is turning into a bank, IDOT is in the business of making low-interest loans and grants for business-related projects that it likes under its Economic Development Program (EDP). These are supposed to be transportation-oriented projects, but “economic development” is a famously elastic definition under which to operate.

May I give you a little flavor for how carefully this economic-development business is managed? Here’s an excerpt from the minutes of a recent meeting of the Chicago Metropolitan Agency for Planning, or CMAP. Mr. Blankenhorn is CMAP’s executive director, Ms. Powell its chairman:

Mr. Blankenhorn said IDOT’s FY2010-11 budget includes $5 million to fund Metropolitan Planning Organizations statewide, with CMAP due to receive $3.5 million of that. He said the drawback is that all the money is supposed to be used for transportation planning, and while some of CMAP’s programs, such as community and economic development, can be tied in, most cannot. He said IDOT has promised to be flexible in what spending it will allow, but it’s really up to the General Assembly to provide funding for an agency it created to do more than transportation planning. He urged CAC members to mention the need for funding other areas if they meet with their legislators or people in leadership roles at other state agencies. Mr. Mellis asked if this means CMAP is fully funded for next year. Mr. Blankenhorn said the funding is buried in IDOT’s budget, but it’s in there. Ms. Powell said CMAP is technically not fully funded if it has programs it can’t pay for. Mr. Blankenhorn agreed and said he will no longer use the term‚ fully funded.

Buried in its budget, but they’ll be flexible! Sweet.

So, what does CMAP spend money on? Personnel, mostly — more than half of its budget goes to salaries and compensation: Just over $9.3 million is budgeted for FY2011, or about $100,000 for each of the 94 staffers listed. (I’m looking to see how lavishly compensated the top staffers are and will update you when I get the information.) If you start pumping billions of dollars into bridges and highway resurfacing, you free up a lot of money for the CMAPs and such of the world. But given the sorry record of previous “shovel ready” stimulus programs, don’t be surprised if the bridge-and-blacktop stuff is skipped altogether and the money goes straight into “community development” projects.

This is the sort of horsepucky upon which President Obama proposes to lavish another $50 billion. Stop him.

Kevin D. Williamson is deputy managing editor of National Review.

Tags: Bailouts , Debt , Deficits , Democrats , Despair , Doom , Fiscal Armageddon , Illinois , Obama , Stimulus

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