How Stimulus Fails

[Valin]

Reason:

A case study of federal waste in Silver Spring, Maryland

Jim Epstein

April 2012

 

It’s not hard to make the case that President Barack Obama’s $840 billion stimulus was a failure. The economy, which was supposed to recover as a result of the massive spending, has largely remained in the doldrums. The administration’s prediction in the event that the stimulus didn’t pass—an unemployment rate of 8.8 percent—was exceeded within two months of February 2009, when the bill was signed into law. (At the time, the total cost was said to be $787 billion; that figure was later adjusted upward by more than $50 billion to align with the president’s budget.) Democratic dead-enders claim this laughably inaccurate employment projection was based on a lack of knowledge about how lousy the economy really was. They tend to overlook another broken stimulus promise: that 90 percent of the jobs “created or saved” would be in the private sector. In fact, the biggest beneficiaries of stimulus funds have been public school teachers.

 

These big-picture truths paint a picture damning enough. But to better understand the fallacies of stimulus economics, it helps to take a close-up look at how the money was spent. To capture such a cross-section of stimulus reality, reason.tv went to Silver Spring, Maryland, a suburb of Washington, D.C., that is home to many government contractors and other recipients of money earmarked for the “shovel-ready” projects that were supposed to bring the economy back to life.

 

The ground rules for stimulus dollars, as laid out by Obama’s top economic adviser at the time, Larry Summers, were based on the insights of legendary 20th-century economist John Maynard Keynes. The funds were to be “targeted” at resources idled by the recession, and the interventions were to be “temporary” and “timely,” injected quickly into the economy.

 

(Snip)

 

[raygun]

HOLD IT!

 

You guys don't have to lift a finger; I've got this one TOTALLY covered (none of you need to come to my aide)

 

 

I gots this one.

 

Stimulus: A History of Folly

James K. Glassman — March 2009

 

Before he was sworn in as President, Barack Obama began to lay out his plans for reviving an American economy that, it would later be discovered, had declined 3.8 percent in the fourth quarter of 2008, its worst performance in 26 years. About the first part of his project, “stimulating” businesses to invest and consumers to consume through government spending and tax remittances, he was forthcoming and enthusiastic. About the second, stabilizing the financial system, he wished to reserve judgment.

 

He anointed the stimulus proposal with a convenient and vivid metaphor. “We’re going to have to jump start this economy with my economic recovery plan,” he said on January 3. According to the image, one can jolt a dormant economy into action just as one can hook up polarized cables to a car battery, clamp a defibrillator to the chest, or breathe into the ear of a reluctant lover. Suddenly, the object of our attention will be back in action, aroused.

 

Alas, the questions raised by a proposed stimulus—whether to apply it, what sort it should be, how much it should cost, and when it should begin and end—are far trickier to answer than problems involving dead batteries. And, remarkably enough, history and economic research offer no conclusive answers. The recession that began in 2008 could turn out to be the worst slowdown since the Great Depression of the 1930’s. For three-quarters of a century, economists have been studying it diligently. And even now they cannot come to a definitive conclusion about the cause of that depression, the reasons for its severity and duration, or what cured it. In an introduction to a book of essays on the Great Depression he compiled in 2000, Ben S. Bernanke, then a Princeton professor and now chairman of the Federal Reserve Board, wrote, “Finding an explanation for the worldwide economic collapse of the 1930’s remains a fascinating intellectual challenge.”

 

Today, of course, the challenge is more than intellectual.

 

[Excerpt: read entire article at above link]