The Des Moines Register in yesterday’s editorial told us what common sense denies – the Stimulus WORKED!!!! Really? For whom? I think the only winner of the stimulus were the public employee unions because it certainly wasn’t the average taxpayer.
In fact, the stimulus package did have a measurable impact on the economy, according to the nonpartisan Congressional Budget Office. The CBO calculates the stimulus raised actual gross domestic product every quarter since 2009. An average of 2.3 million jobs were created or saved during the first three years, when 90 percent of the money was spent. It propped up budgets for families, school districts and police departments and paid billions to workers to build needed infrastructure.
So it was such a glowing success that we’ve had 42 straight months of unemployment being above 8%. I guess we should forget that President Obama promised a 6% unemployment rate with this stimulus plan. Of the 2.3 million jobs that were created or saved (operative word there in order to prop up numbers) how many were private sector jobs? The Register cites the Congressional Budget Office’s latest assessment of President Obama’s stimulus. The problem is that they are using a faulty model, and they seem to be immune to embarrassment.
These models assume that deficit spending is stimulative, so when CBO runs the models they find—you guessed it—that deficit spending is stimulative. All CBO has really shown is that they’ve run their models correctly…
…The assumption at the bottom of the CBO’s mistake is that deficit government spending stimulates demand, which stimulates the economy. To be sure, when government spends money, the money is spent, and when government gives money to others, they spend much or all of it. The recipients then have more to spend and they spend it, and on and on, producing the so-called multiplier.
So far so good. But where did the money come from when not from tax revenues? Thin air? No. It came from borrowing, which means it subtracted from the pool of saving that individuals and businesses would otherwise have tapped to—wait for it—spend. And so government borrowing reduces private borrowing, which reduces private spending, which means less is received, which means less is spent, and on and on—the reverse multiplier.
The flaw in the Keynesian approach at the heart of the CBO model is embodied in this simple equation: 1 – 1 = 0. A dollar of deficit spending (and its multiplier) is offset by the dollar borrowed (and its multiplier), leaving a net of zero effect.
Rural utility projects have been found to be a complete failure in job creation. The Feds have proven to be extremely deft at losing money though. In states like Wisconsin 80% of stimulus funds went to public employee unions. They in turn used that money to try to recall Wisconsin Governor Scott Walker. What a fabulous use of tax payer money!
Mallory Factor, a political science professor at The Citadel, pointed out in his recent book Shadow Bosses that this money created few jobs, but had more to do with lining the pockets of public employee unions:
First by favoring unions only:
As the Wall Street Journal noted, “There’s almost a direct correlation these days between the Obama Administration’s complaints about ‘special interests’ and its own fealty to such interests. Consider the latest decree that federal contractors must be union shops.” The Journal was referencing Executive Order No. 13,502, which President Obama issued during his first weeks as President. The Order encourages federal agencies to enter into Project Labor Agreements or PLAs, with labor unions on projects of more than $25 million. As the Journal noted, “Only 15% of the nation’s construction workers are unionized, so from now on the other 85% will have to forgo federal work for having exercised their right to not join a union.” In contrast the Bush had preserved open competition for work on federal construction projects by expressly prohibiting PLAs.
By favoring unionized workers, PLAs restrict competition and drive up costs of construction projects about 10 to 20 percent – great for unions, but terrible for taxpayers, (pg. 90).
It protected government jobs which protected union jobs and thus protecting union dues.
Of the initial stimulus spending, a whopping $115 billion was earmarked for education spending like the “Edujobs” program. The program is called Edujobs to focus the public on the fact that teachers’ jobs are saved by the program. How did that work? The federal government gave money to the states, supposedly so that states didn’t have to lay off teachers. But money is fungible – all this money didn’t necessarily go to preserve teachers’ jobs. The states basically used this cash to plug holes in their budgets generally and to delay necessary spending cuts – not just to education but to other government services as well. Of course, the discussion is framed in terms of preventing your local teacher from losing her job. The teachers unions are able to pub a face – your local teacher’s face – on the budget cuts to get you personally interested. As a result, stimulus spending for education is much more popular with taxpayers than stimulus spending in general…
From the teachers unions’ perspective, this spending is essential to keeping dues income up. by retaining teachers in forced-dues states, teachers keep paying union dues. If states have to reduce the number of teachers and school workers thanks to the budget crunch, teachers unions get hit.
While the stimulus didn’t create many education jobs, it does preserve existing government jobs – and in most cases, that means union jobs. The U.S. Department of Education claims that the stimulus created – or, more accurately, – retained – 367,524 education-related jobs during 2009 – 10 school year, which if true would have also preserved at least $165 million in teachers union dues annually, (pg. 91-92).
President Obama also through the stimulus monies funded public employee unions directly as well:
Not only did stimulus spending protect dues income, but Obama sent the teachers unions some more goodies. The AFT Educational Foundation received just under $5 million in stimulus via the Investment in Innovation Fund, which gives grants to applicants – that is, other liberal organizations – with a supposed record of improving student achievement. According to the AFT, the goal was to create “evaluation systems” for the teachers. Because, really who could be better at designing and implementing evaluations of teachers than their unions right? (pg. 92).
Let’s see what are some of the other gems in this stimulus package that The Des Moines Register’s editorial board has boldly said “worked.”
– A $50,000 grant for the Frameline film house, which recently screened Thundercrack, “the world’s only underground kinky art porno horror film, complete with four men, three women and a gorilla”
– A $25,000 grant to help fund the weekly production of “Perverts Put Out” at San Francisco’s CounterPULSE, whose “long-running pansexual performance series invites guests to join your fellow pervs for some explicit, twisted fun”
– A $25,000 grant for “The Symmetry Project,” a dance piece by choreographer Jess Curtis which “depicts the sharing of a central axis, [as] spine, mouth, genitals, face, and anus reveal their interconnectedness and centrality in embodied experience, according to a description offered on Curtis’ Web site”
– A $219,000 grant for a psychology professor at Syracuse University to study the “hookups” of 500 freshmen women
– $850,000 for a backup runway, which can handle the largest commercial jets, named after Chairman of the House Defense Appropriations subcommittee, Rep. John Murtha (D-Pa.), at the Murtha Johnstown-Cambria Airport, served by only six commercial flights a week on small planes
– $3.4 million for a wildlife crossing, otherwise known as an “eco-passage”, which will serve as an underground wildlife road-crossing for turtles and other animals that live in Lake Jackson, Fla.
– $9.3 million to renovate an old train station building built in the early 1900s that “has sat vacant for more than 30 years”
– Millions to dead people from the Social Security Administration (SSA), which blames a strict mid-June deadline for mailing out $250 checks to 10,000 deceased persons.
Awesome. Perhaps The Des Moines Register’s editorial board will realize what Portugal soon discovered that Keynesian stimulus spending is a flop. So if the stimulus “worked” it worked only for public employee unions, not for American taxpayers.