Taxpayers of America rejoice! Tired of the nearly endless stream of reports showing the mind-nubbingly dumb ways in which their stimulus project was spending taxpayer money, the Obama administration decided to fight back. Their report, entitled, 100 Recovery Act Projects That Are Changing America , was intended as a direct response to several reports issues by Sens. John McCain and Tom Coburn highlighting the 100 Most Wasteful Stimulus Projects.
So does the Obama report allow taxpayers to rest easy knowing that their tax money was spent on worthwhile projects? No.
Just take a look at some of the projects that the report, supposedly the best-of-the best, highlights:
- A $299 million grant to build a battery manufacturing facility in Michigan for a company that was considering Asian locations. The project created or saved at least 100 jobs.
- $8.3 million in grants to Toledo to allow them to re-hire 31 police officers.
- $114 million for ECOtality, a manufacturer of electric vehicles, to help them produce 8,500 electric drive vehicles. The company reported the stimulus helped support 50 jobs.
- $3 million for the Malden Redevelopment Authority to help remove lead paint and other safety hazards. They company reports it was able to retain 5 employees that would otherwise be laid off.
There are two distinct problems with even these cream-of-the-crop proposals. First, none of these projects deliver a respectable cost-to-jobs ratio. Second, they artificially diverts capital away from other worthwhile projects.
The government is notoriously inefficient. Or to take Reagan’s preferred metaphor, “Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other.” In this case the taxpayers were forced to feed the giant baby a whopping $862 billion to fund the economic stimulus plan. Coming out the other end it looks a lot like what you would expect.
Even after having passed the largest stimulus in our nation’s history the unemployment rate continues to tick upwards. Moreover, things are not on track to improve anytime soon. Recently economists predicted that over the next year the unemployment rate will rise above 10 percent before finally starting to fall. Why didn’t the stimulus stimulate? One big reason is that the money was not used efficiently. It went towards things like seeing how monkeys react under the influence of cocaine, improving the freezing process of rat sperm, and improving African genital hygiene.
You may argue that these projects are cherry-picked and not indicative of the whole. But even when you look at the administration picked as its best projects you see a whole lot of money spent and very few jobs created. For instance, their #1 project used $100 million stimulus dollars and has created 230 jobs so far. That’s approximately $430,000 per job. The second and third projects don’t get much better – $153 million to save 150 research positions and $49 million to create 100 jobs. Each of these projects arguably does worthwhile things, providing housing for wounded soldiers or cancer research, but we weren’t sold on the plan because it was worthwhile. We were sold on the plan because it was supposed to create jobs. And judging by that metric, the only one that matters, the stimulus is a miserable failure.
Second, the stimulus projects are being championed by the administration using a myopic train of thought. Nobel Prize winning economist Henry Hazlitt wrote in his seminal book, Economics in One Lesson, that,
The bad economist sees only what immediately strikes the eye; the good economist also look beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks at the longer and indirect consequences. The bad economists sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.
Using this definition we can tell that the White House is chock full of bad economists. The short-term, long-term dichotomy has become thoroughly engrained in today’s politics. Democrats cried that we needed an enormous injection of funds to get the economy going, Republicans countered that the national debt that would be created would be a long term drag on the economy that it would actually hinder growth.
But the argument, or as Hazlitt would say “fallacy,” that I want to discuss is that Democrat’s are too focused on the good of one particular group without looking at the broader picture. We know that every dollar of government spending must eventually be pad for through future taxes. So when a government creates a stimulus project with the idea of increasing employment it is not a free bridge, future taxpayers must pay for it. But, you may say, it created jobs. Yes, it created jobs for the construction workers necessary to build the bridge. But it is also true that the cost of the bridge, say $5,000,000, is directly taken from money that would have been spread around to other jobs. That $5 million would have been spread around the economy purchasing things like televisions, computers, and cars, each of which take people to build. So the stimulus project didn’t so much create jobs as it did divert jobs.
The problem is that we can see the construction worker get hired. We can mark him on our tally of “jobs saved or created.” On the contrary the “other” jobs are spread throughout the economy and thus imminently less visible, and thus, less politically valuable. And political value is the name of the game in Washington where creating jobs is only a means to an end, namely, reelection.
President Obama is hyping the success of the stimulus in his new report 100 Stimulus Projects That are Changing America. But is this clear waste and redistribution really the kind of change they should be touting?
by Brandon Greife, Political Director of the College Republican National Committee