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The Obama Watch
Recession Reinforcing Job Creation
OXFORD, Miss. -- President-elect Obama has announced plans for a
new stimulus package containing $500 billion to $700 billion
worth of public works projects. The package would be "the single
largest new investment in our national infrastructure since the
federal highway system," he said.
America's governors already are scrambling to compose lists of "shovel-ready" projects so no bridge or highway is left behind. But while a "new" New Deal will produce certain visible results -- more construction materials will be sold, more construction workers will be employed and some of the nation's infrastructure may indeed be improved -- it is unlikely to give the economy much of a boost.
Most projects qualifying for funding will be selected not because they are urgent national or regional priorities, or because they are likely to produce the greatest benefit at the most reasonable cost, but because they please important political constituencies: organized labor, for example.
Let's be honest: Anybody who has seen a "work" crew on an Interstate knows full well that the federal highway program is a poster child for pork barrel spending. Owing to lax oversight, public works projects have always been plagued by delays, corruption, shoddy workmanship and cost overruns. Remember Boston's "Big Dig?"
Because Congress likely will require contractors to pay union scale -- the euphemism is "prevailing wages" -- the costs of the projects will be bloated, even if the stimulus package doesn't lead to sensational scandals. While unionized workers may benefit, union wages will price less-skilled workers out of construction jobs, meaning that many of the "new" hires will replace other workers, producing something significantly less than an employment boom.
In addition, Obama's proposed massive transfer of resources to the construction industry will shift funding away from other potentially more-valuable uses. America's future is still the knowledge industries, not road building.
The truth is government cannot "create" jobs or wealth in one sector of the economy without destroying them in others. Look no further than the old New Deal for proof.
Despite all the credit given to Franklin D. Roosevelt's bold experimentation in confronting the economic freefall of the Great Depression, prosperity didn't return to the United States until after World War II.
Nearly a decade of then-unprecedented increases in federal spending on public relief and public works projects never managed during the Depression to lower the unemployment rate into single digits or restore our gross domestic product (GDP) to the level it had achieved in 1929.
Attentive students of the New Deal now understand that FDR's willingness to try something and, if that didn't work, try something else, created a climate of uncertainty that discouraged private investment in the factories and equipment that could have put America back to work. It should not be forgotten that it is Roosevelt's Works Progress Administration, the WPA, to which we owe the word "boondoggle."
With this year's federal budget deficit now being forecast to be north of $1 trillion, perhaps even a spendthrift Congress will hesitate to add a minimum of $500 billion to the burden that will fall on the shoulders of our children and grandchildren.
But don't bet on it. Another election is just two years away and politicians will be eager to claim credit for bringing Obama's infrastructure largesse to their states. Taxpayer money could be better spent elsewhere than on Obama's infrastructure plan.
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Deborah| 1.8.09 @ 7:36AM
Thanks for your straightforward article. I'm sure you'll be flamed in short order by the liberals who like to shoot down "outrageous statements" such as:
"Attentive students of the New Deal now understand that FDR's willingness to try something and, if that didn't work, try something else, created a climate of uncertainty that discouraged private investment in the factories and equipment that could have put America back to work. It should not be forgotten that it is Roosevelt's Works Progress Administration, the WPA, to which we owe the word 'boondoggle.'"
Common sense, which most Americans have, does not reign supreme in Washington, D.C. where all the smart guys live. Most Americans know in their gut that more spending, going further into debt is not the answer to improving their own lives.
Melvin| 1.8.09 @ 7:49AM
People.. Does anyone remember the Big Dig in Boston.
All this grand FDR scheme will do is, allow government bureaucrats, politicians, unions, construction companies owned by organized crime to skim unfathomable amounts of tax payer money that can never be traced to whom it goes to.
White collar Chicago crime at it's finest.
Robert Rosencrans| 1.8.09 @ 8:10AM
Obama and the Democrats are seizing this opportunity to grow government, not the economy. The tax credits are meaningless, and according the an article I reviewed just today, even the Republicans are attacking the concept of letting the business community write off their losses. This is just another ill conceived attempt at a bailout that will reward non producers for producing nothing and will not create one dime of wealth.
Ironically, in the final result, it will do what Obama claimed he wanted to do. Simply spread the wealth around.
saleboter| 1.8.09 @ 8:17AM
It's going to be an interesting next few years.
Thunderbottom| 1.8.09 @ 10:02AM
I remember the "Millenium Park" project in Chicago - at least a billion dollars over budget and not completed until five years after the deadline. Then there's the ongoing O'Hare airport expansion projects and the perpetual Tri-State Tollway reconstruction project. There was a recent study done by two UCLA economists, Harold Cole and Lee Ohanian that shows that government intervention (first by the Hoover then by the Roosevelt administrations) extended the "Great Depression" by at least seven years (according to the UCLA article, the Depression didn't officially end until 1943 - well into the Second World War).
Deborah| 1.8.09 @ 10:16AM
Former U.S. Comptroller David Walker is in favor of sane fiscal policy. "We need to realize that the same factors that led to the subprime crisis — too much debt, too little attention to cash flow, ineffective risk management, and waiting to do something until the crisis hits the door — those same factors exist for the federal government’s fiscal situation, with one big difference: No one is going to bail out America."
You can read all of what he has to say here: http://corner.nationalreview.com/post/?q=MjZjM2YyMTkxOTZiMDIyMzM4NWFiYTcxZjk2YTk5NzA
Len| 1.8.09 @ 11:22AM
The article is fine analysis, but it only shows how duped most Americans are. We debate soundness of fiscal policy, but miss the real issue. It's like debating who would win in a fightbetween comic book characters, it's nice what ifs. The real issue is WHAT DOES THE CONSTITUTION SAY? Has anyone bothered to look at Article 1, Section 8 and see just how limited the authority of Congress is in spending? They are allowed to pass laws as they see fit for revenue, not spending. Their spending must be done under the constrains, of paying debts, general welfare, and common defence, BUT THESE ARE ALREADY ENUMERATED. It does not say Congress may pass laws for general welfare. It is not a general welfare power given, but a tax, duty, excise and impost power. Let Thomas Jefferson say it better than me in this link.
http://avalon.law.yale.edu/18th_century/bank-tj.asp
Len| 1.8.09 @ 11:52AM
To add to my comment above; we don't need politicians who understand economics(I know we really do), but who can read plain English.
Jim H.| 1.8.09 @ 11:58AM
Some say government’s can’t CREATE productive jobs, only private sector can give people a product or service that people will pay for. Granted, the First Stimulus Package checks failed to do much good as most people paid down debts or stashed the government check in the bank. But there is a way government CAN create jobs….double mail deliveries to twice a day to give patrons speedier delivery … like the old days! First Class and Junk mail would be delivered sooner. Since the Constitution gives the federal government monopoly on First Class mail delivery. Since competition is un-constitutional, no one, like FedEx or UPS, can compete!
This stimulus can be implemented immediately. “Shovel Ready” projects still have to wait years until Environmental Impact Reports (EIR’s) are done, competitive -bid contracts are complete and capital equipment is purchased. Twice as many letter carriers, clerks, and their overhead bureaucrats would be hired. Lots of unemployed white collar workers could be hired immediately since no special talents are needed. No big capital investments (Except new uniforms and mail pouches are needed. Granted this might triple the cost of First Class postage from 42 cents to $1.42, but I’m sure that most taxpayers would be thrilled to get all their junk mail a few hours sooner.
Todd| 1.8.09 @ 4:44PM
Nice one Jim. The absurdity of this stimulus is just beginning, notice how Obama now says he will create or "save" 3 million jobs. Now just how exactly are "saved" jobs measured? I am sure the ingenious Paul Krugman will be able to determine that and claiming on the MSM shows all these saved jobs as the economy goes further down the tubes and we hit double digit unemployment. I am sure there will be lots of good jobs for people holding signs at $30 an hour at taxpayer expense as we are stuck in traffic for all these "shovel ready" projects.
Michele San Pietro| 1.8.09 @ 5:49PM
Recession? What recession? America is in very good condition and you shouldn't believe the Liberal lies. Let's hope Obama will not make matters really worse for America and Americans.
Roy| 1.8.09 @ 6:37PM
Every time somebody says "create jobs" the comeback needs to be "The hard part is creating salaries."
When a business creates a job, it also creates a salary. When the government creates the job, your wallet creates the salary. This should be obvious but apparently is not.
Alan Brooks| 1.8.09 @ 9:56PM
Obama said it will be a long time to dig ourselves out of the hole we're in.
say about eight years.
Adam | 1.9.09 @ 1:45AM
The real culprit here is the Federal Reserve. Just follow the money trail. All monetary policy decisions are up to the judgement of the board of governors.
This institution is private and answers to absolutely no one. They manipulate interests rates and have the capability to print money out of thin air. They are a monopoly. Together, with the big Wall street banks they create a cartel. For this reason, we haven't had a truly free market since 1913, the year the Federal Reserve Act was passed. It was Christmas Eve by the way.
The founding fathers warned us about central banks and spoke out adamently about them. They knew how powerfull money was. If the government had a central bank in their back pocket they could do as they please.
With the monopoly over the money supply, the government can get away with not raising taxes to the extent necessary to fund its ever expanding operations. This is false, the tax that we pay is inflation. They hide this from us. In simple economic terms, if you can produce something with less and less effort the supply expands and the price comes down. When the government prints money out of thin air it expands the existing money supply, consequently devaluing its purchasing power. Prices go up. You get less for your money.
Taking a moral , one should be outraged by this. It is basically legalized counterfeiting. Our dollars are backed by nothing. They are fiat. They are only worth our faith in government. Up until 1971
we were on a gold standard. Which meant dollars had to be backed by gold. This is beneficial because it keeps government in check. They cannot freely expand the money supply. Therefore, no unneccessary spending.
The best solution would be to end the monopoly and allow for free competing currencies. Let the private sector decide what currency suits their needs best. I guarantee you the soundest currenies would be chosen. Who would want paper anyway?
Ricardo| 1.9.09 @ 5:03AM
When business is down people should focus even harder on promotion. Advertising online is one option if other advertisining means are too costly. Improving speed of production is also something people can do to make it through tough times and the business software can help with this.
People shouldn't "give up hope" when things are down. There is always something that can be done to improve one's lot.
Michele San Pietro| 1.11.09 @ 5:49PM
America finds iself in no hole. It may not be its best time, but it isn't its worst one, either. Regardless of what Liberal scoundrels say.
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