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UTT: New stimulus the same as old, failed stimulus
Question of the Day
Brand-new title, same old story.
Last month, President Obama announced yet another stimulus plan. Granted, he never uttered the word “stimulus” in his speech at the Brookings Institution. Instead, he called it a “jobs plan.”
Notwithstanding the shift in terminology, the president’s new plan is nothing more than another serving of his old, failed stimulus plan. It calls for another massive dose of “infrastructure spending” — up to $50 billion more for roads, trolleys, trains and sewer systems. Such spending has proved one of the most impotent components of last year’s American Recovery and Reinvestment Act.
It’s hard to imagine Congress agreeing to double down on another losing hand of infrastructure spending. As the Congressional Research Service noted in an earlier review, to the extent that such spending is achieved through deficit finance, “the net impact on the economy of highway construction in terms of both [economic] output and employment could be nullified or even negative.”
Yet many on Capitol Hill seem eager to embrace a stimulus proposal that:
• Implements policy proved by several decades of independent studies to be highly ineffective.
• Repeats the approach most recently shown incapable of meeting expectations or stemming unemployment.
• Wastes billions of dollars and adds to the federal deficit.
• Is subject to exasperatingly long delays in implementation.
• Panders to politically powerful constituencies.
Big-government devotees, it seems, still relish throwing good money after bad. But they at least have learned some new semantic tricks.
In addition to jettisoning “stimulus” in favor of “jobs,” spending advocates also eschew describing the next round of costly infrastructure projects as “shovel-ready.” Instead, they refer to such jobs as “ready-to-go” — a relabeling that tacitly acknowledges the extended delays in getting the “shovel-ready” projects of the earlier stimulus under way.
Call them what you will, these types of projects are almost always slow off the mark because they require cumbersome, multilayered federal and state bureaucracies to stir into action.
Six months after the last stimulus was enacted, more than half of the approved projects had yet to put a single shovel to work. That’s no way to jump-start the economy. And that’s the good news about the plan.
Some of the areas the president wants to prime again have nothing to show from last year. Take high-speed rail projects. The last stimulus bill provided $8 billion for them, yet the first of those dollars won’t be spent until this year, more than 12 months after passage.
In his speech at the Brookings Institution, Mr. Obama acknowledged that infrastructure stimulus was off to a slow start, but he said that was a feature, not a bug. The delays were intentional, he said. “It was planned that way for two reasons: so the impact would be felt over a two-year period and, more importantly, because we wanted to do it right.”
Perhaps, but if the president actually believes that these projects will boost economic growth and job creation, this “planned” delay seems surprisingly callous toward the millions of workers who lost their jobs and the tens of thousands of families whose homes went into foreclosure during that period.
As for the desire to “do it right,” it appears that the planned snail’s pace was still too brisk. Journalists and whistleblowers have uncovered hundreds of instances of laugh-out-loud wasteful projects given a green light under the stimulus. Sens. Tom Coburn, Oklahoma Republican, and John McCain, Arizona Republican, released a long list of dubious stimulus spending, including $350 million for a broadband map that duplicates existing maps, a $5 million thermal energy award to a largely vacant shopping mall, $1.57 million for fossil research in Argentina and $50,000 to underwrite an anti-capitalist puppet show.
It’s enough to make a taxpayer wonder if Congress and the president really care whether stimulus spending works, or if their major interest is in greasing the palms of powerful construction and transportation lobbies and their associated unions.
Whatever the motivation, one thing is clear: Last year’s stimulus represented a giant expansion of federal stakeholding in the economy. Congress’ willingness to run a trillion-dollar-plus deficit gives the feds a greater presence in the economy than at any time since World War II. How long before they try to use fear of that ever-growing deficit as an excuse to ram through massive tax increases?
• Ronald D. Utt is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.
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