Busch: Reduced Great Expectations...
With the jobless rate climbing to 9.4% and the number of unemployed reaching 6 million since the start of the recession, the White House is in full damage control this week. They are attempting to explain why the $787 billion stimulus program has doled out less than 11% of the funds. The American Recovery and Reinvestment Act has a cool website explaining how it's going to create/save 3 million jobs. So far, the only thing it has created is doubts over its effectiveness.
As far as getting the money out the door, the goals were modest: 70% by the summer of 2010. As WaPo reported back on April 10th , "With more than 100 funding streams contained in the package, many officials find themselves having to file applications for several programs at a time, helping explain why much of the money is still months away from being spent."
Here's a breakdown of some of the spending: $201 billion in tax cuts, $87 billion in Medicaid funding, $79 billion in education funding, $28 billion for highways, $21 billion for food stamps, $17 billion to computerize health records, $11 billion to modernize the electric grid, $17 billion for rail and public transit, and $20 billion to increase the energy efficiency of homes and public buildings. Does any of that look like it's going to create/save 3 million jobs?
They've even had trouble calculating what has left the barn. On May 5th, issued a report that said that $28.5 billion had been outlaid which included $11.5 billion in payments to the Labor Department for the unemployment trust fund. The NYT reported that the Labor Department has now revised its figure, reporting that it has only actually paid $1.1 billion to the unemployment trust fund. As the Times points out, this means that the government actually only got out $18.1-19.6 billion instead of the $28.5 billion. They only missed by a third.
This week, the White House is going to announce 10 projects aimed at creating/saving 600,000 jobs. Bloomberg states that , "The projects will be a key focus of recovery efforts during the next three months and create or save four times more jobs than during the first 100 days since the rescue bill became law, according to a White House news release." I love this language! But it gets better as the report says the projects are framed as the beginning of a "summer of accelerated Recovery Act activity."
Here's what the program aims to hire: hiring or retaining about 5,000 law enforcement officers, starting 200 new waste and water systems in rural areas, creating 125,000 summer jobs for young people and initiating 2,300 construction and rehabilitation projects at military facilities across the nation. Again, is the engine of growth that will propel the economy forward?
The American Recovery and Reinvestment Act has not only not generated job growth, but it hasn't even got the money out the door. In true DC form, what it did stimulate is growth in the budget deficit and selling by bond vigilantes to push up interest rates. With no exit strategy in sight for spending, government is holding true to historical form: their actions are creating conditions to exacerbate rather than ameliorate the current downturn.