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6/23/2010
Jeremy Shown: Stimulus record doesn’t engender confidence
President Obama was in Columbus, Ohio last week to announce the start of the 10,000th road project funded by the stimulus bill. Meanwhile, left-leaning economic commentators like Nobel winner Paul Krugman, continue to bemoan the fact that a large percentage of the country, as well as its leadership in Washington, have exhibited no interest in further stimulus spending. With unemployment high and output low compared to recent history, Krugman and others think that the case for boosting demand through further spending by the federal government is an open and shut case. They tend to categorize opposition to spending either as economic ignorance or a willful disregard for the obvious positive effects of additional stimulus.
There is another possibility: Perhaps folks simply aren't convinced the government is capable of carrying out efficient and effective spending programs.
Funds from President' Obama's stimulus bill have been used for a $54 million loan to an Indian tribe which runs a casino that garnered over $1 billion in revenues in 2009 according to ABC News. The stimulus also funded a $25 million contract with a PR firm to promote electronic medical records. Unfortunately, as ProPublica reports, the same firm has been in the news in the past for producing what was essentially "covert propaganda" and for paying columnists to promote No Child Left Behind.
Stories like these have a corrosive effect on support for fiscal policy as an effective tool for managing the economy. Supporters of further stimulus downplay such stories or when possible, avoid them all together. It's not a coincidence that the President chose to highlight a road project in promoting the stimulus. When it comes to government spending, road construction is about as non-controversial as it gets. But even in this area, government's record leaves much to be desired.
The Journal Sentinel recently reported how governments across Wisconsin have recently increased restrictions on the travel of heavy trucks due to the associated road maintenance costs. The state transportation fund would seem like just the thing to help local governments pay for road maintenance during tough economic times. Unfortunately, the Journal Sentinel article reports that, "[s]ince 2003, $1.2 billion has been transferred from the transportation fund."
While it's true that the plural of anecdote is not data, when considering the merits of additional stimulus, ignoring the government's track record on spending is a mistake.
We welcome Jeremy Shown (Rhymes with ‘Clown’) to FoxPolitics.net as a guest blogger. Jeremy is a cool guy, a father of six with a B.S. in Economics and currently works in the construction industry. His blog, Rhymes with Clown hits on politics and economics in Wisconsin and the U.S.
COMMENTS
"There is another possibility: Perhaps folks simply aren't convinced the government is capable of carrying out efficient and effective spending programs."
And as Krugman has pointed out, the private sector cannot or will not spend now in this time of uncertainty. Government spending is all that is left to stimulate the economy and stave off the next Great Depression.
Dean Weichmann (Wed Jun 23 07:45:34 2010)
Obama is focused on creating jobs rather than bringing back the jobs we lost because of NAFTA, CAFTA and the subsidies we gave to corporations who outsourced jobs to India. Stimulating temporary jobs is not the answer.
I did not vote for Obama, but when he was elected I at least had hope. I've lost even that as he has proven to be in the pockets of the same corporate America as the rest.
Jack Lohman (Wed Jun 23 08:06:58 2010)
Dean, you are so closely aligned to Paul Krugman that you refuse even to read what's being said here. Please address Jeremy's assertion that government stimulus monies aren't being spent efficiently, constructively, wisely. You still say just throw money at the economy? In the context of the article, it seems to me your comment misses the mark.
Jo (Wed Jun 23 08:41:45 2010)
And yes, Jeremy, I'm one of those who "aren't convinced the government is capable of carrying out efficient and effective spending programs."
That's because politicians are paid big campaign contributions, cash bribes, to do exactly the opposite, and the money works as intended!
Until conservatives step up to protest our corrupt political system, it is what it is. Live with it.
Jack Lohman (Wed Jun 23 09:11:04 2010)
Jo I read it. Jeremy's assertion is just that, an assertion. He has given anecdotal evidence but has no data to back it up, only the "common knowledge" that government programs are inefficient. Government pays private contractors to build roads in most cases, does that make the contractors inefficient by association?
Let's assume, just for the sake of arguement, that goverment is more inefficient than big corporations. Does it matter when the object is to get more money out there in circulation?
Dean Weichmann (Wed Jun 23 09:12:01 2010)
Yes by gum, it matters! YES.
Jo (Wed Jun 23 09:17:20 2010)
Jo prefers not to talk about this, but conservatives prefer an "unfettered market" over a "free market," and so do corporate CEOs because it gives them free reign with shareholder cash. And the politicians on the corporate payroll deliver the deregulations without fail.
If our political system were clean, I'd prefer privatization. But it isn't, and the politicians share in the booty, which often drives private costs higher than public costs.
As an example, look at the privatized Medicare Advantage plans that cost the taxpayers 17% more than traditional Medicare. So much for private being more efficient than public.
Jack Lohman (Wed Jun 23 09:45:16 2010)
The point seems to be missed here.
The private sector cannot or will not spend right now. For example, I have a hard time convinceing my lender to give me more cash despite having an excellent credit rating.
Government stimulus is the only game in town to kick the ecomomy into gear. I does not matter if it is efficient or not. Credit has tighted up. Because of that THERE IS LESS MONEY OUT THERE. Deflation is worse than inflation.
Dean Weichmann (Wed Jun 23 10:02:20 2010)
If you want to talk about Krugman perhaps you should read him. Here is his an excerpt from his blog and a link;
"The case for expansionary policies in the face of a slump is intellectually difficult; Keynes described the writing of the General Theory as a painful process of discovery, and so it is. The natural instinct of almost everyone is to think that tough times require tough measures, and that if the economy is suffering, the government should tighten its own belt. It would take a clear consensus from economists to overcome that natural bias."
http://krugman.blogs.nytimes.com/
Dean Weichmann (Wed Jun 23 18:45:35 2010)
Dean -
You're right that what I presented was anecdotal, and I said so explicitly.
When it comes to figuring out why a bank won't give a loan to a worthy borrower, there may be a government angle as well.
For example even as the Fed undertook unusual monetary policy in the fall of 2008, they also started paying interest on reserves. In essence paying banks to hold deposits at the Fed.
That's the view of economist Scott Sumner. If you read Krugman regularly, you may know Sumner as well since they have crossed paths.
Jeremy (Wed Jun 23 19:47:37 2010)
Please Dean - please. It's one thing to accuse me of being ignorant of Dr. Krugman, but please, not our guest blogger! Because mortals disagree with you it doesn't mean they don't read your guru Krugman. I read Krugman and you can be sure Jeremy reads and understands Krugman.
Jo (Wed Jun 23 20:24:25 2010)
Thanks for the link Jeremy. It appears very interesting with a quick look. I will spend some time with it.
Dean Weichmann (Wed Jun 23 22:01:27 2010)
Jeremy, reserves are required are they not? Does paying interest on those reserves tend to increase reserves? Do banks have the the option to park more money in reserves?
Dean Weichmann (Thu Jun 24 07:31:20 2010)
I encourage folks to look at real data about how local transportation spending benefits economies here: Even Milton Friedman (the conservative economist godfather) admitted that Keynes was right about the benefits of stimulus spending. But I agree that the stimulus should have been more focused on infrastructure.
JPK (Fri Jun 25 11:30:37 2010)
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