The Wheeling Intelligencer ran an AP story yesterday that was critical of the “stimulus.” Money shot:
Spend a lot or spend nothing at all, it didn’t matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama’s argument that more road money would address an “urgent need to accelerate job growth.”
Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president said are “at the heart of our effort to accelerate job growth.”
The fact that the stimulus has not performed well is no surprise to free market types. Those who think government intervention in the market is necessary think that there should be more spending. However, there is more on the way. Congress should send Preisdent Obama another $150 billion or so. Will it work? Will that finally be enough?
“The problem we’re seeing is, unfortunately, when they put those projects out to bid, there are only a handful of companies able to compete for it,” Zimmerle said.
The Obama administration has argued that it’s unfair to count construction jobs in any one county because workers travel between counties for jobs. So, the AP looked at a much larger universe: The more than 700 counties that got the most stimulus money per capita for road construction, and the more than 700 counties that received no money at all.
For its analysis, the AP reviewed Transportation Department data on more than $21 billion in stimulus projects in every state and Washington, D.C., and the Labor Department’s monthly unemployment data. Working with economists and statisticians, the AP performed statistical tests to gauge the effect of transportation spending on employment activity.
There was no difference in unemployment trends between the group of counties that received the most stimulus money and the group that received none, the analysis found.
So, it will likely not perform as expected as well. Why?
Politically, singling out transportation for another round of spending is an easier sell than many of the other programs in the stimulus. The money can be spent quickly and provides a tangible payoff. Even some Republicans who have criticized the stimulus have said they want more transportation spending.
Spending money on roads also ripples through the economy better than other spending because it improves the nation’s infrastructure, said Bernstein, the White House economist.
But that’s a policy argument, not a stimulus argument, said Daniel Seiver, an economist at San Diego State University who reviewed AP’s analysis.
“Infrastructure spending does have a long-term payoff, but in terms of an immediate impact on construction jobs it doesn’t seem to be showing up,” Seiver said. “A program like this may be justified but it’s not going to have an immediate effect of putting people back to work.”
Of course there’s all sorts of problems with the government’s claims of the government debt and borrowing in the propping up of the economy. Then there’s the expensive programs for the jobs created. Is $2.3 billion for 17,000 jobs really worth the expense? These are tough questions that the voters will need to decide in 2010. When the government picks and chooses markets to invest in, it picks and chooses for the people. It tries to constrain the invisible hand. Will this new round of money work? Larry Kudlow would say unlikely; the Obama administration will say it will. The voters will get the final say.