The Stimulus Bill and Jobs

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From the talented calculators at Political Math.  Here is the blog post which accompanies the video.

One factor I haven’t seen much discussed is what proportion of the stimulus money is going directly to the states for road repair and similar projects.  I know here in Illinois I have seen the usual road crews along some of the state highways I travel, doing the usual repair work they are always doing this time of year. The only difference is that there are signs erected indicating that the work is being paid for by the stimulus.  I suspect that some of these projects are the type typically paid for with state funds, and that the stimulus money is being utilized to pay for these projects instead.  The state funds saved can then be used to defray state budget shortfalls.  I think the net gain in jobs for this type of shifting of funds from the federal government to the state governments is almost nil.  Here is an article on the state budget in Texas which I believe is probably typical around the country.

“About half of the stimulus money would substitute for state funds that otherwise would be needed. That raised questions because the proposal leaves untouched a state savings account known as the rainy day fund. That account is expected to grow to $9.1 billion in a couple of years.”

That the states would do this should have been obvious to Obama, a former State Senator from Illinois, but apparently it wasn’t.

When even the LA Times is sceptical that the stimulus boondoggle has had a positive impact on the job situation, Obama has a real problem on his hands.   He is in the process of bankrupting the nation without even short term benefit.

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  1. For a country with the current living standards of the USA the stimulus programme is misguided. During the Depression working men and women were desperate for any kind of work to keep hunger at bay, some of them even left for the Soviet Union in their search for a living wage. (Their fate was a terrible one.) It made sense in those days to finance road building and similar projects. On the one hand the roads and dams would pay for themselves by stimulating demand for cars and electrical products, on the other the expectations of the workers were quite low. This is the reason why countries well within the boundaries of technical posibilities such as India and China can get substantial returns on their infrastructure investments. But such is not the case for the mature economies already operating at the frontiers of production curves. For such economies it is better to cut business taxes and provide a direct subsidy to companies to retain their workers till the business climate improves. Given his luck, I expect Obama to get a boost from a purely secular turn of the business cycle which he’ll claim is due to his spending binge.

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