Tuesday, February 3, 2009

Stimulus: How Porky Is It?

Stimulus: How Porky Is It?

John Maynard Keynes famously suggested that paying people to simply dig ditches and fill them in again would boost the economy because at least wages would be pumped back into the system. There was plenty of ditch digging, road building, and other construction projects in the Obama Administration's stimulus plan that passed the House on a party-line vote Jan. 28. But as debate continues on the $900 billion stimulus package in the Senate, critics are pointing to a raft of projects they say would be wasteful spending and won't help the economy recover.

Republican leaders point to items such as $34 million to remodel the U.S. Commerce Dept. headquarters, and $70 million to "support supercomputing activities" for climate research. "Altogether, only 11% of the so-called American Recovery and Reinvestment Act of 2009 will have anything to do with either recovery or reinvestment," said Senator Jim DeMint (R-S.C.) in a Jan. 29 speech on the Senate floor in preparation for the debate. "This bill is not a stimulus, ladies and gentlemen; it is a mugging. It is a fraud."

Supporters of the plan contend that the vast majority of funds are aimed at worthy projects such as increasing energy efficiency, bolstering education, and rebuilding infrastructure. "The President is pleased with the package that passed the House," said Robert Gibbs, President Obama's press secretary, in a Feb. 2 briefing. "Undoubtedly that package will be strengthened and changed some through the process, but it meets the test that the President laid out originally to, first and foremost, create jobs immediately and to strengthen, for the long term, our economic growth."

Gibbs added: "This meets the President's standard of stimulating the economy, creating jobs, investing in our long-term economic growth through creating jobs in things like a new energy economy that will also make us less dependent on foreign oil; that we do so in a way that's accountable and transparent to taxpayers; and we do it in a way that gets that money quickly into this economy."

Short-Term and Longer-Term Fixes

The grab-bag nature of the House and Senate stimulus bills was sure to present a juicy target for critics. Clearly a big bone of contention is the way that short-term job creation measures were mixed in with projects with a longer time horizon. Alice Rivlin, an economist at the Brookings Institution and head of the Office of Management and Budget under President Bill Clinton, says she thinks the stimulus bill should have been split into two parts: one an immediate emergency package to be "fast-tracked," and a separate long-term one subject to the normal budget process.

Some government watchdog groups argue that even in a time of great economic emergency such huge spending measures shouldn't be rushed through without careful consideration. "Congress is not taking a deep breath and looking at what [policies] would be the most stimulative and the most beneficial," says Steve Ellis, vice-president of Taxpayers for Common Sense, a taxpayer advocacy group. "[The bills include] a lot of money, and it's a great opportunity for Democrats to enact policies they've been wanting to do for years."

For example, the stimulus plan includes about $4 billion to resurrect grants that put tens of thousands of police on the streets during the 1990s but were cut under President George W. Bush.

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