When Is 20% Good Enough?

There have been some good questions regarding the stimulus bill, which was signed into law by President Obama yesterday.

A lot of the programs being supported are fine programs, and in most cases, programs that non-governmental investors would not support. As I have said before, I believe providing these kind of services/programs that benefit the common good is one of the basic precepts of government. However, the stimulus was pitched as a creator of 3.5-4.0 million jobs, then changed to a saver or creator of 3.5 million jobs. I am left questioning both the messaging and eventual effectiveness of the package. I think one of the first things you learn when you get to Washington is to stay on message, and the stimulus message looks a bit lost.

I went through each allocation of the stimulus, in a fairly lenient manner, and came up with 21.5% of the $790 million spending package that would fund a project likely to create a new, albeit short-lived, position and/or build something that would continue to add value. For example, it is hard to argue that the Tennessee Valley Authority did not create lasting value and at least a partial foundation for future growth. Of course there are probably some that I missed, but also some that I should not have counted, so net net I feel good about my figure. The majority of the personal tax cuts I did not count. The reason being that I just do not see tax refunds being spent on new goods and services (i.e. the money moving through the economy). The savings rate is up and in this environment I think it will only increase.

It is not the stimulus per se that I oppose. I advocate the least amount of intevention as possible and believe that just as things were exaggerated to the upside (with everyone on the road in a Beamer), they are being exaggerated to the downside as well (everyone in your neighborhood is going to be foreclosed on). In the current situation we would be better off in the long-term if we take some lumps now and reset expectations on a more normal rate of growth, rather than the cheap money induced rate of the last seven years. Recession is a good excuse to spend, and I get that, but I do not like to hear job creation in one ear and hear straight welfare and special interest pandering in the other.

As it is now law, I hope the stimulus works to spur real growth and job creation, but I have my doubts. I would like to prattle on about being smart with the money, as the President promised he would be with his oversight committees, but in a sense there is no point. It is now up to Americans to earn our way out of this hole, and at a reasonable time start on the path to fiscal prudence with targets and progress reports toward balanced budgets.

-2outof4