NYC Letter: Trust Team Barry, Part IV

Day 115 of CHOPE

Without Mr. Obama or a single person in Congress having read the 1,079-page bill in its entirety, the $787B American Recovery and Reinvestment Plan (ARRP) was rushed into law. It was rushed because we were told by Mr. Obama and the Democratic leadership that it must be rushed, that any delay would have a worsening effect on the worsening economy generally and on unemployment specifically. Any delay and unemployment might shoot past 8%.

We were also told by Mr. Obama and the Democratic leadership that this was a "stimulus" intervention by government, quickly forcing a huge amount of money into mostly local government economies to create or "save"* jobs. This we were told would kick-start the larger economy into positive growth.

AARP has neither prevented nor delivered as advertised.

GDP collasped -6.1% in the first quarter. Unemployment shot up to 8.9% in April, above the 8% doomsday ceiling, with the adminstration gloomily predicting a rise to 9.5% into 2010. The cash stimulus is choked at the till with only 6% actually distributed to date and that mostly to shore up non-job creating social services.

Ed Morrisey picks up the lament at the American Issues Project.

WAS THE STIMULUS IRRELEVANT?

May 14, 2009 (AIP) - In early January, a joint paper by Dr. Christine Romer, then the nominee to chair the Presidential Council of Economic Advisers, and Jared Bernstein from Joe Biden's advisory team painted a bleak view of a world without the off-budget stimulus plan. This paper drove the administration's agenda on the stimulus bill and helped formulate the calculus that gave a much higher priority to public-works projects as opposed to tax cuts and business incentives.

BETTER OFF UNSTIMULATED
High Unemployment And Crippling Debt

Return, though, to the graph created by Romer and Bernstein. They clearly predicted that the main explosion of unemployment would come this year, tapering off into 2010 and going lower in 2011 whether or not the stimulus bill passed. The issue has been how high would unemployment initially get before a recovery would start creating jobs, and how fast would jobs get created. The graph shows that their primary purpose in pushing the stimulus was to keep unemployment from peaking above eight percent.

We spent almost $800 billion to keep that bubble low, and the stimulus failed completely at its task.

Note that in the graph, the two lines meet in 2014, meaning that the American economy would have recovered with or without the stimulus plan and that unemployment would return to five percent. Unfortunately, having spent the $787 billion, we have massive debt to repay when those lines meet, debt that we incurred in a failed policy of irresponsible spending when we should have been encouraging capital investment in private enterprise, the real engine of job creation. Even if we do return to 95 percent employment, each worker will carry the burden of debt from Romer, Bernstein, and Obama – a burden that paid no dividends but will encumber us for generations.

We only wish that the stimulus bill was as irrelevant as it was useless.

Worth the full read.

Why has ARRP failed? We can think of several reasons.

1. ARRP has no governing plan. It is the usual Democratic fix, big money to spend, without any uniform discipline or effectual calculus.

   The money is the plan.

2. Distributing massive amounts of money quickly requires an in-place system. For example, a cut in the payroll tax could immediately be realized by an adjustment to the collection tables of the IRS. Instead, Team Barry must review and approve and exercise oversight over thousands of disparate state and local projects at the federal level. Team Barry cannot keep pace within its cobbled up system.
3. Needy governments lose out to affluent governments. Money is dispensed first come first served. This favors local governments with "shovel-ready" projects originally budgeted at the state and local level. Local governments without the means never spent money to develop plans for projects they couldn't possibly fund.
4. No funding for oversight. An important part of funding compliance is oversight and accountability reporting. Incredibly Team Barry forgot to build in oversight funds to its funding parcels.

5. Transfer payments do not stimulate. They do not create jobs and make no meaningfully contribution to productivity.
6. Mr. Obama put Joe "Hi-Q" Biden in charge. A one-man disaster (and this and this).

With only 6% of ARRP spent, the prudent thing to do is repeal it. We are too far along be spared the worst of today's recession but we can still be spared the future calamity of improvident debt.

CHOPE.

Hurry up. Wait. Tank.

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* There is no metric for "saved" jobs.