Friday, July 10, 2009

Stimulus Update: It's Not Working

The wheels must be completely falling off if all of these outlets are reporting the truth that the stimulus isn't working. What's really unique and different is that the key selling points of the 'stimulus' at the beginning of this year are being completely rolled back now:

Let’s recall what David Axelrod said we should expect when Obama signed the bill:

Look, what we’re–first of all, a large part of the package is helping people who are caught in this recession; extending unemployment benefits, health care and so on. That’s going to have a stimulative effect, everybody agrees on that. There’s aid to the states in there to prevent layoffs, and that is going to have a stimulative effect. There are tax cuts in there that we feel are going to have a stimulative effect. And obviously, putting people to work rebuilding this country on energy projects, infrastructure projects, rebuilding classrooms all over this country to bring them up to 21st century standards and so on, all of these things are going to have an impact. And those things are going to happen quickly.

It's pretty clear that the primary purpose of the 'stimulus' was to create jobs and jump-start the economy immediately, especially by targeting 'shovel-ready' infrastructure projects, right? Now that the plan has been shown to be an utter failure, the purpose is suddenly...changing:

Pennsylvania Gov. Ed Rendell (D) on Wednesday urged House members to consider another stimulus package just for infrastructure projects in order to produce more jobs…

“I would like to see a second stimulus devoted solely to infrastructure,” he said. “It’s what produces jobs, and produces orders for factories, American factories…”

“Look, I think the stimulus bill was misnamed,” he said. “Part of it was stimulus, part of it was job creation, but a lot of it was relief,” such as increased unemployment insurance and food stamps.

Rendell suggested that a second stimulus creating more infrastructure projects can lead more directly to jobs.

And how about some people in the marketplace?

"Investors are grasping the fact that the recovery, when it does come, may not be as robust as what many hope for."
-- Robert Siewert, portfolio manager at Glenmede

"It's an overall reality check. People are starting to worry there may have been a disconnect between the market and reality. I kept thinking we were way due for a correction a month ago or more, and it wasn't coming."
-- Doreen Mogavero, president of Mogavero, Lee & Company

"We are maybe past the very worst of it, but that doesn't mean we are ready to zoom up. I think the recovery is likely to be shallow and uneven."
-- Janna Sampson, co-chief investment officer of OakBrook Investments

But it's not just high-profile Democrats or industry players, it's also coming from the Obama administration itself (emphasis mine):

When Vice President Joe Biden announced a new $3.3 billion grant program to upgrade the nation’s electricity network, the rationale was simple: “This is jobs — jobs,” he said in April.

But the Obama administration is now saying it will not take the potential for job creation into account in “rating” proposed projects for possible funding — after initially saying that would be a primary consideration.

In April, when the Energy Department first announced regulations for companies that wish to apply for “Smart Grid Investment Grants,” “job creation and retention” was among the explicit criteria. …

But late last month, the department quietly modified the criteria to take the job piece out. As the department explained in a June 26 set of Frequently Asked Questions:

“These criteria differ significantly from those presented within the [Notice of Intent]. First, DOE removed the criterion on the extent of jobs creation and now will require applicants, as stipulated within the Recovery Act, to report quarterly on the number of jobs created and retained.”

The drastically underwhelming results of the stimulus certainly explain the reason for this backward sprint. The GOP is finally starting to get their act together and attack this blindingly obvious point with a statement from Minority Leader Boehner and a terrific ad:

Congressman John Boehner (R-West Chester) issued the following statement today on Vice President Biden’s trip to Ohio tomorrow:

“Our state has been hit hard by the recession, and, like many other Ohioans, I’ll be curious to see what the Vice President has to say, especially on the trillion-dollar ‘stimulus’ that clearly isn’t working. How will he defend a bill that the White House promised would create jobs ‘immediately’ in a state that still has over 10 percent unemployment? How will he explain the Administration’s promises that if we passed that bill, the nationwide unemployment rate would stay below eight percent, when it’s now at 9.5 percent and rising? How will he explain supporting policies that will destroy even more American jobs, like Speaker Pelosi’s national energy tax or a government takeover of health care financed by a new tax on small business? The people of Ohio – like people all over America – have a right to know, where are the jobs?”

Here's another great ad, this time from the House Republican Conference:

Both of these are excellent attacks, and precisely the kind of thing that needs to be spread far and wide. But, more needs to be done. For example, these ads
lead to the question of what is all this 'stimulus' doing (other than burying generations of Americans under mountains of debt)?

First off, it's a bailout of irresponsible government:

James Pethokoukis links to a GAO report that surveyed 16 states and the District of Columbia to see how stimulus funds are being spent. The study found that 90 percent of the stimulus funds spent so far have gone toward bailouts for fiscally irresponsible state governments. These states made commitments on health care and education spending commensurate to what they could afford during the boom years. When the economy crashed and tax revenues dried up, they had no way to pay for these commitments short of raising taxes, which none of them wanted to do. (Most states' constitutions restrict their ability to run deficits.)

This is what the stimulus was really all about — not creating or "saving" jobs, but preventing states from suffering the consequences of their profligacy.
But, it gets even worse. On top of completely failing to create jobs and bailing out irresponsible state governments, the 'stimulus' is being used for political paybacks and favored political constituencies in Obama-friendly regions:
Billions of dollars in federal aid has gone to those counties that supported Dear Leader Obama in the last election.
Obama Supporting Counties-- $69 per person
McCain Supporting Counties-- $34 per person

2008 Election By County (Washington Post)
USA Today reported:
Billions of dollars in federal aid delivered directly to the local level to help revive the economy have gone overwhelmingly to places that supported President Obama in last year's presidential election.

That aid — about $17 billion — is the first piece of the administration's massive stimulus package that can be tracked locally. Much of it has followed a well-worn path to places that regularly collect a bigger share of federal grants and contracts, guided by formulas that have been in place for decades and leave little room for manipulation.

"There's no politics at work when it comes to spending for the recovery," White House spokesman Robert Gibbs says.

Counties that supported Obama last year have reaped twice as much money per person from the administration's $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain, a USA TODAY analysis of government disclosure and accounting records shows. That money includes aid to repair military bases, improve public housing and help students pay for college.

The reports show the 872 counties that supported Obama received about $69 per person, on average. The 2,234 that supported McCain received about $34.

This is the real stimulus story. I hope the GOP puts out some good ads that hammer this home, too.

There's my two cents.

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