Posted by: SWL | September 7, 2011

Government Stimulus Cannot Create Permanent Jobs

There are two specific problems with the federal government spending our tax dollars to “create” jobs:
* The only permanent jobs the government can create are government jobs.
* The government cannot inject money into the economy fast enough to actually “stimulate” the national economy.

About 107,000 federal workers have been added since the American Recovery and Reinvestment Act as passed in early 2009. The private sector jobs “created” from government grants last only until the money runs out. A news story on Tuesday featured a California teacher whose job had been saved by ARRA, also known as the Stimulus Bill, but whose position was cut this school year because the money was gone.

The vast majority of Stimulus funds went to construction projects, which are always temporary. Here in northern Nevada, the Bureau of Land Management (BLM) Winnemucca District built a new field station out on the Black Rock Desert with $3.5 million of Stimulus money. (That area is well-known for the Burning Man festival, but is also well-used for other recreation.) This project brings up a several interesting points: the construction jobs were temporary, the project benefited the federal government, additional tax dollars will be needed for ongoing operations and the office will only be open to the public from March through November each year.

Some of the ARRA funded projects were busy work. Federally subsidized senior housing in my community was renovated last summer. The apartments received new stucco on the exteriors, new windows and new roofs. The problem was that those buildings were less than a decade old and did not need the work. The old stucco was not cracked or falling off. Driving by, I saw one building in the middle of work, with both old and new roofing – both sections looked the same except for color, no curling or missing shingles on the older side. My other complaint on this project was that the firms hired to do the work were from other parts of Nevada, so little financial benefit was realized in my community.

Many of the Stimulus projects were federal highway repairs. All reports say that these are genuinely needed. But why weren’t these repairs done with federal highway funds before the need became desperate – even dangerous? We pay gas taxes every time we fill the gas tank. The tax is a percentage of the price per gallon. Since the price of gasoline has doubled since President Obama’s inauguration (“Meet the Press”, June 12), the government is collecting double the amount of tax.

As to the effect of the Stimulus, consider just a few of the projects I have witnessed. ARRA was passed in early 2009. The “repairs” to local senior housing were not done until the summer of 2010. I witnessed a lot of bridge repairs on Interstate 10 in New Mexico in July 2010. The BLM Black Rock Station was finished this summer and officially opened on August 18. Now, over two years after the legislation passed, work has just begun in town on a platform to make the Amtrak “station” compliant with the Americans With Disabilities Act. (In small northern Nevada communities along the railroad, Amtrak trains stop only long enough to let off passengers and accept new ones. Communities have a small shelter similar to a bus stop, where people are protected from the weather while waiting for the train.) Multiple signs indicate the project is funded by ARRA. Other signs indicate there are two contractors; the one doing the concrete work is based in New Mexico. There are local contractors who do concrete work, making me wonder how ARRA contracts are awarded.

ARRA was meant to continue federal Stimulus spending for a number of years, but when money comes into a state or community a drop or two at a time over 2-3 years, it does little to “stimulate” the local economy. If you are trying to disinfect a gallon of water and put in just a drop of bleach each hour, the effect of each drop dissipates before enough bleach is added to actually kill the pathogens.

Don’t get me wrong, I’m happy for each person who was able to pay his/her bills for a period of time because he/she had a temporary job funded by ARRA. But the slow speed of Stimulus spending has not helped the overall economy. The person with an ARRA project job will spend a bit more at the local store until their job ends. Then another person gets a temporary job on the next ARRA project and spends a bit more at that store until their job ends. For the store owner, there is no increase in income over time, so he cannot (and does not need to) hire more employees and doesn’t have more money to spend. That’s over simplified, but is generally what has happened over the past two and a half years across the US.

The President has claimed the Stimulus did not work as well as planned because not enough money was allocated. But at the rate Stimulus funds have been spent, it would not have mattered if the amount had been double. By its very nature, a government cannot work fast enough to speed up economic growth and create jobs. There are just too many layers of bureaucracy.

Take for example, today’s report from the Department of Energy’s (DOE) Inspector General Gregory Friedman. He says that 33% of money from the department’s Stimulus-funded energy block grant program has not yet been spent. After ARRA legislation passed, states were informed that they were receiving money. States planned how funds would be spent and sought approval of the projects from the DOE. Funds were then allocated to the state projects or funneled down to cities. Some city officials blame federal requirements for delays; others blame the economic problems that forced them to lay off staff so they do not have enough manpower to quickly manage the Stimulus grants. . . .So government funds are unused – no jobs created, no economic stimulation.

President Obama has said we need to create more jobs more quickly. It is fairly likely he is not referring to the problems I just listed, but rather that he wants to spend more. When you listen to Mr. Obama announce his jobs plan Thursday evening, listen carefully. The President is very good at articulating his opinion on the need for action without detailing how it will be done or the actual cost. Listen carefully to determine whether the President’s plan will create private sector or government jobs, permanent or temporary jobs, jobs for a variety of workers or just construction, projects that benefit many Americans or some federal agency.

Information on BLM Black Rock Station – The Humboldt Sun, Aug. 23-25, 2011.
Information on DOE report – The Washington Post, Aug. 14, 2010; The Huffington Post, Aug. 2, 2011; The Houston Chronicle, Sept. 7, 2011.

P.S. One miscellaneous point about the 2009 Stimulus Bill. Most of the projects were construction projects. These jobs require skills and training, so only a segment of the unemployed population is qualified. My sister, who lost her purchasing position at a Las Vegas casino almost two years ago, would not be hired to help build a BLM or Amtrak building. I also have to wonder if construction companies whose bids are accepted for projects actually hire new employees or just pay overtime to current employees as much as possible. The Obama administration was in such a rush to “spread the wealth” that not enough stipulations were written into the Stimulus Bill to distribute the funds equitably to the unemployed and insure the funds stay in the US (see http://investigativereportingworkshop.org/investigations/wind-energy-funds-going-overseas/story/renewable-energy-money-still-going-abroad/).

 

 

 

Advertisements

Categories

%d bloggers like this: