The New York Times had some, what was to me, shocking news today.  The article said that there was now consensus that the Obama stimulus plan was working.  Is this the same kind of consensus that man-made global warming was settled science, despite the glaring evidence that carbon dioxide emissions continue to grow while the globe stopped warming ten years ago?  This is also close on the heels of breaking stories of extraordinary misinformation if not outright deceit on how the $787 billion is being spent.

Smoke and Mirrors

Early on in the article we have this gem:

“The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama’s promise to “save or create” about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.”

There is no mechanism that exists to measure a job saved. None.  So how do they do it?  It goes something like this:

“Here, Mr. Stimulus Funds applicant, I have this check for you for $642,000.  No can you tell me, if I give this to you, how many jobs would you create or save?”

“Create? Er, none.”

“Hmmm,” the bureaucrat mutters, staring down at the check in his hand, “what about jobs you would save?  You know, if I don’t give you this nice, rather large check, how many of your people would you be forced to lay off?”

“Oh, I get it,” the potential recipient says with a wink and a smile, “probably all of them!”

The bureaucrat scribbles down a number, and hands over the check, walking away shaking his head.

That’s about how it’s done.  The government surveys the people getting the money and asks them what would have happened if they didn’t get the stimulus.  And what would you expect them to say?  Keep the check?

Revenue Starved States

What a concept, “Revenue Starved States.”  The article complains that not enough money was provided to “Revenue Starved States.” Does he mean states like California and New York?  I believe the correct term is states where spending is out of control.  It means states where taxes are so high that people are moving out in droves, and among them the “wealthy” people they love to tax to the eyeballs, meaning a dramatically shrinking revenue base.  After all, if one of the wealthiest people in the state, who is part of the group that pays 70% of the taxes, moves out of the state or (out of the country when it gets bad enough), that means a lot of people are going to see their taxes raised to make up for it.  So the statists seem to think a stimulus package that keeps these bloated bureaucracies fat, dumb and happy is the way to go, until when exactly?

The Multiplier Fallacy

The other great fraud being foisted on us is the multiplier effect, where for each dollar of stimulus money spent more than a dollar of economic activity results:

That sort of impact is what makes federal aid to state governments rank high in economists’ reckoning of the stimulus value of various proposals. Every dollar of additional infrastructure spending means $1.57 in economic activity, according to Moody’s, and general aid to states carries a $1.41 “bang” for each federal buck.

Even more effective are increases for food stamps ($1.74) and unemployment checks ($1.61), because recipients quickly spend their benefits on goods and services.

Okay, then how is this for a solution.  Let’s spend $10 trillion on infrastructure, food stamps and unemployment checks, since they will result in $15 trillion or so in economic activity, because of the multiplier, right?  For that matter, let’s have the government spend $100 trillion and we’ll really be rocking.

Where’s the So Called Consensus

From what I read in the article, there was only one economist that could be called a conservative, Martin Feldstein, that they were willing or able to quote, and this was his take on the stimulus.

While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.

“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”

That’s it?  That’s the consensus?  It seems to me that he is pointing out what was wrong with the package rather than what was right.  He was in the Reagan administration and he knows what works: permanent cuts in marginal tax rates. Those dreaded tax cuts for the “rich.”  The thing is that when the people above the subsistence level get to keep more of what they earn, yes it does belong to them and not to the government, they tend to invest it, which means the provide capital to businesses that grow and create jobs.  Yes, capitalism.  What the stimulus does is take money away from these people, or borrows it and steals it from future generations, and gives that money, as in the example above, to highway projects, food stamps and unemployment checks.  The first of these may create jobs until the road project is completed, but the latter two only increase the dependency of those recipients on the government.  So how exactly does the stimulus plan that puts money into a highway project and unemployment benefits, help a banker who got laid off?  How does it help the unemployed executive from United Technologies?  It doesn’t.  It’s like a drug fix.  You may feel good for a while, but then it wears off and you need another fix.

The Genius of Government

You would think that with all the examples of government planning lying on the waste heap of history, the statists will finally catch on that they can’t successfully pick the winners and losers in an economy.  Government has to get out of the way and let the market work.

Government must be drastically cut down to size.  Think of the popular TV show “The Biggest Loser.” Picture the governments of the United States, California, New York, New Jersey, Rhode Island, Michigan, Nevada, for starters, as contestants.  Let’s see who can lose the most weight.  Ready? Go.

Baby's Not Happy About the Stimulus Bill She's Stuck With

The colorful brochure arrived in the mail today titled, “Fighting For Long Island.”  In it Congressman Tim Bishop extols the virtues of the American Recovery and Reinvestment Act, and how much bacon he brought home for the district.  Inside the folder is a map of the 1st Congressional District with callout balloons showing all the locations where stimulus money will land.  On first blush one is tempted to think, good job Congressman!  But then I reached for the calculator.

By the Numbers

If you take the $787 billion and divide it by the 535 members of Congress (425 Congressman and 100 Senators) the stimulus bill works out to $1.47 billion per member.  That’s a lot of dough.  I then took out my calculator and tallied up all the monies on the map that “CONGRESSMAN TIM BISHOP Delivers Economic Recovery Funds To Long Island.”  Just to be sure, I checked my numbers three times and the projects added up to $274 million. That’s not good.  That means that our Congressman brought home less than 19% of his share, which means that a lot more backslapping members of Congress got more than their share.  Throw into the mix that every Republican voted against the bill and probably were not considered too kindly on the receiving end, then we really got short changed.

Money In vs. Money Out

Although there are many people who like to believe that Uncle Sam is really some independently wealthy tycoon who showers his nieces and nephews with his largess, the sad reality is that the money all comes from us.  So I wondered how much do we send to the Treasury?

The federal government does a pretty good job of concealing how taxes are broken down by congressional district, which is understandable as accountability at election time can be problematic.  In 2004 the First Congressional District in New York ranked 60th in the nation in average income tax liability per tax return, at $8,310 per return.  What percentile is that?  Let’s see 60 out of 435 comes out to be about the 14th percentile, well above the midpoint.  How much stimulus did our esteemed representative bring home?  Somewhere around the 81st percentile well below the midpoint.  So the bottom line is that our Congressman voted to have his constituents pay a very large share of stimulus money that will go to every other part of the country, while we spend years working off the debt.  Brilliant!

Historically, New York gets about $0.79 from the federal government for every $1 that New Yorkers pay in taxes.  So why do New Yorkers keep overwhelmingly electing Democrats to Congress who love to increase taxes that ultimately end up being sent to other states?  Who are they working for (perhaps themselves)?

The Stimulus Was Really About Jobs

So let’s not get bogged down in costs when it’s jobs we’re really talking about.  After all, passing the stimulus would keep the unemployment rate at 8% instead of 9% without it.  Oops, it’s already at 9.5% and climbing.

Of all the projects identified on the map of the district, one had an actual figure, in bold, stating that it would create 1,000 jobs.  That’s a nice figure, but let’s put it in perspective.  There are about 233,000 people employed in the district. At a 9.5% unemployment rate that would mean about 22,135 jobs have been lost in this recession.  So creating 1,000 jobs equates to about 0.4% employment.  The particular project that was identifed with creating these 1,000 jobs was getting $184.3 million in stimulus money or two-thirds of all the stimulus in the district.  That works out to us spending $187,300 per job created.  Call me a conservative, but somehow I think that if we cut taxes by $184.3 million we would create a lot more than 1,000 jobs.  But what we will have to do is raise taxes to cover the $184.3 million that we are spending to create these jobs which will probably turn right around and kill them or an equivalent number.

What Federalism Means to Me

Here is a “top ten” list of stimulus projects compiled by Senator Tom Coburn [R-OK]:

1. “Free” Stimulus Money Results in Higher Utility Costs for Residents of Perkins, Oklahoma
2. FutureGen: The Stimulus Earmark that Wasn’t, Becomes the Costliest Pork Project in History
3. Little-Used “Shovel-Ready” Bridges in Rural Wisconsin Given Priority Over Widely Used Structurally Deficient Bridges
4. $800,000 for little-used Johnstown, Pennsylvania airport to repave a back-up runway; the “Airport for Nobody” Has Already Received Tens of Millions in Taxpayer dollars
5. $3.4 Million for Wildlife “Eco-Passage” in Florida; Project Still May Take Years to Finish
6. Nevada Non-Profit Gets Weatherization Contract After Being Fired For Same Work
7. Non-Existent Oklahoma Lake in Line for Over $1 Million To Construct a New Guardrail
8. Taxpayers Taken for a Ride: Nearly $10 Million to be Spent to Renovate a Century Old Train Station that Hasn’t Been Used in 30 Years
9. Ten Thousand Dead People Get Stimulus Checks, Social Security Administration Blames a Tough Deadline
10. Town of Union, New York, Encouraged to Spend Money It Did Not Request For a Homelessness Problem It Does Not Have

Now if someone in Florida (No. 5) want to spend $3.4 million for a wildlife “eco-passage” (i.e., roadway tunnel for turtles)  project, fine.  The good people of Florida can pay for it.  If the people of John Murtha’s district  want to spend $800,000 (No. 4)  to repave a backup runway in Johnstown, fine.  Let those folks pay for it.

If it doesn’t cross a state line, or have a benefit for ALL Americans, it’s not the federal government’s business.  That is my litmus test for federalism.  There is nothing more idiotic than having me pay for your project while you pay for mine.  Because it comes down to a perpetual power grab where those who stay in the government the longest get everyone to pay for their projects (so their constituents will re-elect them) and everyone else gets the bill.  Just ask yourself how many federal functions have been moved to West Virginia (Robert Byrd 50+ years in the Senate).  How much pork goes in to John Murtha’s district (38 years in Congress).

Spinning it for All it’s Worth

So look for the brightly colored brochure from your Congressman crowing about how many stimulus dollars they brought home, but just remember, if your Congressman hasn’t been serving for 20 years, he or she probably got fleeced and you got screwed.  Enjoy holding the bag.