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Thursday, June 11, 2009

Before It's Spent, Stimulus Falls Short of Its Billing

By Jim Scarantino
For the Journal
      The White House has announced it is launching a new Web page that “will allow the public to follow America's recovery story and hear from people across the country whose lives are being influenced by the Recovery Act.”
       This is the Empathy Economy. Even if unprecedented federal spending and borrowing are not improving your bottom line, you can feel warm and fuzzy that someone else has caught a buzz off the stimulus.
       When pushing the $787 billion stimulus bill through Congress, President Obama predicted that by now unemployment would be decreasing. Instead of ebbing off a targeted 8 percent high water mark, unemployment has swelled above 9.4 percent. Jared Bernstein, Vice President Joe Biden's top economic advisor, admits that White House forecasts were “clearly too optimistic.”
       Many economists made that point before the bill was passed. They further observed that the so-called “emergency” spending would be dribbled out over a period of years instead of poured onto the fire in a furious effort to douse the flames. The president acknowledges his administration has spent only 5 percent of the stimulus package he once needed in such a hurry Congress could be allowed no time to read the bill before voting.
       Critics also contended the massive spending would not address fundamental economic problems, but primarily go toward satisfying pent-up demand for Democrats' favored social welfare projects. Too little, critics argued, would be invested in infrastructure that could produce wealth and drive prolonged economic growth. Too much would be spent on projects that merely grew government and returned little to the general economy.
       Plans for New Mexico's $3 billion share of stimulus funds shows the critics called this third strike correctly. As Journal reporter Dan Boyd found (“N.M. Stimulus Projects: Not So 'Shovel-Ready,' 6/9/09), the largest allocation of New Mexico's share has nothing whatsoever to do with fundamental economic problems. Nearly 38 percent, more than a billion, will be spent on Medicaid and welfare . Education gets 22 percent. Environmental projects receive 14 percent, and 2.5 percent goes to an assortment of governmental operations.
       The financial meltdown didn't occur because we were spending too little on those programs, noble as some may be. No one has argued that a surge in spending on Medicaid and welfare will have the slightest impact on fixing the banking system or helping our manufacturing sector compete with Asian exporters. Unsatisfied desires for more spending on special education, trail maintenance, leaking underground storage tanks, Head Start, extended care facilities and habitat restoration didn't crash the Dow, gut the housing market, or panic investors and savers alike.
       A category called “infrastructure” gets $370 million. Some of the anticipated water projects listed in this category might facilitate economic growth. But more than $136 million for low-income housing, rental assistance, homelessness prevention, extended-care facilities and Community Development Block Grants have been disguised as “infrastructure.”
       Finally, down the list, comes “transportation.” All those wonderful job-creating, growth-revving road projects we hear so much about will get less than 10 percent of the pie.
       So when the stimulus money has been completely spent here and across the nation, what will we have to show? Let's not forget that nearly half of every stimulus dollar is being borrowed. We'd better have built what we need to pay back, with interest, all our loans from China, Japan, OPEC countries and Caribbean banking centers
       Wealth-creating engines may emerge. They will certainly be less potent than if the stimulus had met original billing. New Mexico's plans demonstrate we will spend significant portions of the stimulus on programs that cannot sustain themselves and will need additional hundreds of millions of dollars down the road. But there won't be another payday like this. Washington, President Obama admits, is out of money.
       A once-in-lifetime feast has been laid before us. We had a chance to feed muscle, sinew and bone. Instead, we've settled for a lot of empty calories.
       Jim Scarantino spent 25 years practicing law, including time as a prosecutor in Philadelphia and New Mexico. He concluded his legal career as the ACLU-New Mexico's lawyer of the year in 2006. Scarantino also served as executive director of the New Mexico Wilderness Alliance and Republicans for Environmental Protection. He currently writes a monthly report for the Rio Grande Foundation. E-mail: jimscarantino@gmail.com.
       

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