If you only read one critique of the stimulus plan today, check out the Journal’s editorial, which concludes that of the $825 billion that’s being spent, only 12%, or $90 billion, could legitimately be considered stimulative. In their opinion, which is presented quite well, the rest is just more spending on inefficient programs that have already seen plenty of money thrown at them.
WSJ: We’ve looked it over, and even we can’t quite believe it. There’s $1 billion for Amtrak, the federal railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There’s even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.
In selling the plan, President Obama has said this bill will make “dramatic investments to revive our flagging economy.” Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.
Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus. And even many of these projects aren’t likely to help the economy immediately. As Peter Orszag, the President’s new budget director, told Congress a year ago, “even those [public works] that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.”
So why has Obama, just one week into his administration, adopted a plan that’s apparently so laden with junk? The problem, as we mentioned yesterday, the ostensibly stimulative stuff can’t be spent that quickly. But the headline number has to be extremely large to get the kind of shock & awe reaction they hope to get. So there you have the dilemma and the pork laden burrito that’s coming.out of Washington.
Meanwhile, there are some doubt that the actual stimulative parts of the bill will, you know, be stimulative. In a separate piece, the Journal notes that some of the private sector firms that would most likely benefit from the bill are pretty sceptical that they’ll see any help anytime soon.
Corning Inc., a New York producer of fibre-optic cable, flat-screen television supplies and other products, said Tuesday that it would lay off 3,500 workers, or 13% of its work force, despite major provisions in the stimulus plan that could help the company.
For Corning, the plan could include $6 billion to $9 billion of new federal spending to wire community colleges, libraries and rural governments with high-speed Internet equipment. In addition to supplying fibre-optic equipment, Corning supplies products that could benefit from efforts to retrofit diesel truck engines.
Corning’s chief executive, Wendell Weeks, will meet with Mr. Obama Wednesday along with a number of other chief executives to offer his support for the stimulus plan. Still, the company has been hit so hard by the downturn that it is moving ahead with layoffs to meet its cash-flow targets.
Daniel Collins, a Corning spokesman, said that while the stimulus is likely to help, it isn’t clear when, or how much. “You can’t bank on hope,” he said.