On Tuesday, I spoke to the annual meeting of the Central Fabricators Associationor CFA in Chicago which is a trade association serving structural steel fabricators across 13 states. This is smart, tough group that is the backbone of construction in the United States from buildings to bridges. They generally lag the downturns in the economy due to large backorders, but they are critical indicators of returning growth when they see their orders rise.
I asked for a show of hands on who has received one order from the "Shovel Ready"projects that the stimulus plan was to support. No one raised their hand. Granted, $75 billion is just 0.5% of the $14 trillion economy, but clearly this level of spending was more marketing than substance for helping the economy.
The $787 billion stimulus planapproximately breaks down to $75 billion for "shovel ready" projects, $288 billion in tax cuts, and $424 billion in aid to states. The goal of Congress and the White House was to get this money into the economy quickly to help stabilize the massive slide in activity. Not surprisingly, they failed. The NYT today reports that only 6% of this spending has actually gone out the door.
"The stimulus bill has directly injected around $45.6 billion into the economy, mostly to help states cover the costs of Medicaid and unemployment benefits, one-time $250 checks that were mailed to Social Security recipients last week, and income tax cuts that began to take effect this spring......the Department of Transportation had spent only about $11 million on highway projects through the first week of May. "
Now, we know from past tax cuts that retail sales will see an increase from the money. This should show up in the May data, but it's pretty clear that in April no one was anticipating spending their $250.
Later this week, we should see a report from the Vice President's office on the pace of the stimulus spending. In the NYT article Biden says this, "We’re 85 days into a two-year program here — we’re trying to get the money out as quickly as we can, but not too quickly, so we don’t end up really screwing up here. Because we’re talking about big dollars here, these are big numbers, this is unprecedented. And in 85 days we’ve gotten tens of billions of dollars out the door, and so far — knock on wood — no real big problems, no real big glitches.”
Biden's got some very good people working on this report and I expect it to be an accurate description of what is happening. However, this is another case of over-promising and under delivering by the Obama administration. For now, the markets have run fast and hard with green shoots theory and some of that stemmed from the stimulus hope. However, this program runs the risk of being a major disappointment by mid-summer if we fail to see any meaningful growth to the economy occur.