When Franklin D. Roosevelt wanted to stimulate the economy in 1933, the first thing he did was create the Civilian Conservation Corps.
Within 37 days of FDR’s inauguration, he had proposed and Congress had enacted the CCC. On the 38th day, the corps began handing out shovels to hundreds of thousands of young men who worked for $30 a month planting trees, building fire roads and fire towers, digging irrigation ditches, restoring what the Dust Bowl had torn asunder.
In today’s world, we might get hearings in 37 days, but we wouldn’t get a bill. The American shovel industry would have to be satisfied; foreign-made shovels might be allowed, but only if a reciprocal trade agreement were hammered out.
The bulldozer industry would demand equity, and the biofuels industry would demand that a certain percentage of bulldozers run on biodiesel, which would require significant re-engineering contracts and trade protection against Japanese bulldozers.
Cities would say “Where’s ours?” States would demand control over a certain percentage of the money so that legislators could reforest their own districts. Labor unions would scream bloody murder about scab labor.
All of these interests would have invested heavily in key committee chairmen and appropriators. Democrats would attach unrelated pork projects to the bill, as would Republicans, who would then vote “no” anyway, preferring merely to give tax breaks to the lumber industry.
If you want to know why the $787 billion economic stimulus bill hasn’t created much stimulus — and right now, with unemployment headed for 10 percent, a lot of people are asking that question — it helps to remember the process that created it.
President Barack Obama’s name is attached to it — as in “Obama’s $787 billion stimulus plan” — and it’s true that he championed it. As president and leader of the party that controls both houses of Congress, he bears ultimate political responsibility for it.
But the bill largely was written by House Appropriations Committee Chairman David Obey of Wisconsin. He and his aides began working on it in November, shortly after Mr. Obama’s election. It is the ultimate camel designed by the ultimate committee.
When you’re about to spend more than three-quarters of a trillion dollars of borrowed money, you hear from a lot of people, many of whom you owe favors. The jobs that most interest members of Congress are their own.
Thirty-four percent of it, about $267 million, was tax relief. About $212 billion went to states to offset Medicaid costs and avoid cuts in education, nutrition and unemployment programs. Some $308 billion was set aside for “discretionary spending.”
Some of the tax relief already has kicked in; much of the rest will kick in next April when taxes are due. Its effect on employment is indirect, as money flows through the economy. Similarly the Medicaid, education and unemployment spending create economic activity, but the direct effect on jobs is hard to measure. Administration officials estimate that the stimulus bill might have saved 150,000 jobs from being eliminated.
Discretionary spending is what’s supposed to create jobs; it might eventually, but not so far. Mr. Obama had estimated the stimulus bill would save or create 600,000 new jobs by August. But 2 million jobs have been lost since he took office, so he’s deeply in the hole.
Vice President Joe Biden said last week that the administration had “misread how bad the economy was” when it took office. Lawrence Summers, the administration’s chief economic adviser, said last week that the stimulus is “on track,” and its full effect will kick in later this year and early next year.
Perhaps so, but it’s a growing political and economic problem now, and the fault can be laid at the way the stimulus plan was designed. Too little was directed at “right now” jobs, and too much at special-interest projects that — admirable though they might be — take a long time to get off the ground.
Consider the $3.4 billion devoted to the Fossil Energy Research and Development Program. Reducing the amount of carbon emitted by burning coal is a critical goal, but it’s not going to create jobs any time soon.
Another big problem: the $26.6 billion to be doled out to states by the Department of Transportation for “shovel-ready” highway and transit projects. States get to make their own decisions on where to spend it, which involves a whole new layer of political considerations, involving very loose definitions of “shovel ready.”
The New York Times reported Thursday that of the $16 billion approved so far for 5,274 transportation projects, more than half is going to projects outside the nation’s 100 largest metropolitan areas. These areas create three-fourths of the nation’s economic activity and nearly all of its traffic congestion.
And here we thought that Missouri was the only state that had a rural-dominated legislature and highway department. Still, we rated a special mention:
“Missouri,” The Times reported, “has directed nearly half its money to 89 small counties which, together, make up only a quarter of the state’s population.”
Now, despite a $1.7 trillion federal deficit, there is talk of yet another stimulus package. Administration officials and congressional leaders are wary, but they haven’t ruled it out. Congress being Congress, the same process would be followed: Lobbyists lining up outside the doors of their favorite appropriator to argue that their pet project would be a job-creating juggernaut.
Explosive detectors for airports! Green neighborhood vehicles (i.e., golf carts)! Head Start programs! A new icebreaker for the Coast Guard! Another billion for Amtrak! A tax refund for General Motors!
No, wait. Those projects are in the current stimulus bill. We can only imagine what might be Stimulus II. Actually it would be Stimulus III, since President George W. Bush signed a $168 billion stimulus package 12 months before Mr. Obama signed the $787 billion package.
If, on top of that $955 billion, there must be a third round — and we’re not convinced it’s a good idea — Republicans say it must come in the form of tax cuts (of course), not more spending. But tax cuts take a long time to work their way through the economy.
To make any immediate dent in unemployment, stimulus must be pork-free and only for projects that will help immediately. We doubt Congress is up to that task. More’s the pity.
