What are they thinking? – Part 1
By John D. Turner
8 Feb 2009

Stimulus: n., pl. From Latin – to goad

  1. Something causing or regarded as causing a response
  2. An agent, action, or condition that elicits or accelerates a physiological or psychological activity or response
  3. Something that indicates or rouses to action; an incentive

The economy is tanking. People are out of work. Banks are failing. The sky is falling. We need to do something and we need to do it now! But wait, didn’t we do this last fall? What about that $700 Billion that we spent back then? Remember, the legislation that couldn’t wait? The three pages that Fed Chairman Bernanke and then-Secretary of the Treasury Paulson brought to the Congress that morphed into 451 pages after the Congress got a hold of it after all was said and done.

Actually, we haven’t even spent all of that yet, only half. And we aren’t exactly sure where all of that went – but…we really need to pass another $800 Billion stimulus package immediately or else, well, it’ll be pretty bad, that’s what.

So our heroes in the House of Representatives rushed through a bill; $819 Billion worth of stimulus. If that doesn’t fix the problem nothing will! How could that much money be anything less than stimulating? I’m sure the lawmakers who voted for it were stimulated. And I am just as sure that those who will benefit from the money will be stimulated as well. But will the economy be stimulated – that is the question.

Unfortunately, there doesn’t seem to be consensus on that question. We are told something needs to be done quickly. And the term “stimulus” would seem to imply that the action being taken is to cause a response – in this case, to make the economy better. We are taking the action of passing the bill quickly, but will the “stimulus” applied cause the economy to respond quickly? Most of us out here assume that to be the intent of the bill.

It appears that most of us out here are doomed to be disappointed. According to the Government Accountability Office, less than 21% of the money now under consideration will actually be spent by the end of 2009! That’s about $172 Billion – still quite a chunk of change, but a far cry from the $819 we are proposing to spend. I don’t know about you, but I don’t think money being spent in 2010 (and 2011, and 2012) is going to be very stimulating for someone out of work today.

The purpose is supposed to be to create jobs and increase productivity, isn’t it?

Apparently not. Apparently the purpose is to spend money on pretty much anything under the assumption that spending money has to stimulate something. And even if it doesn’t, at least that pent-up laundry list of pet projects will get whittled down a bit.

What’s in the bill? Here is the full text. It makes good reading if you are an insomniac. But if you have high blood pressure already, you may want to get your doctor’s advice first.

According to the bill itself, its purpose is to

  1. To preserve and create jobs and promote economic recovery
  2. To assist those most impacted by the recession
  3. To provide investments needed to increase economic efficiency by spurring technological advances in science and health
  4. To invest in transportation , environmental protection, and other infrastructure that will provide long-term economic benefits
  5. To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases

Now, assuming that it is the job of the Federal Government to spend money to get the economy moving again during an economic downturn (an assumption not found in the U.S. Constitution), I can go along with item 1 and 2. This is supposed to be an economic stimulus bill, at least that is what it is being billed as, and these two statements seem to agree with the overall purpose of the bill. After that however, things start to come off the rails.

Spurring technological advances in science and health (item 3)? Invest in transportation, environmental protection and other infrastructure to provide long-term economic benefits (item 4)? Stabilize State and local government budgets (item 5)? While these may or may not be worthy and worthwhile projects, they are not “economic stimuli.”

This is supposed to be an economic stimulus bill, not an infrastructure investment bill, or a technology investment bill, and it certainly should not be a vehicle to bail out states. The idea that we should spend money at the Federal level in order to avoid tax increases at the state and local level (and this bill in no way guarantees that such taxes won’t be raised anyway) is ludicrous. I should raise my Federal Taxes (someone has to pay for this after all), so that state and local taxes in the other 49 states don’t have to be raised? Why?

It is good to know that the money cannot be spent for some things. According to Sec 1109, “none of the funds appropriated or otherwise made available in this Act may be used for any casino or other gamboling establishment, aquarium, zoo, golf course or swimming pool.” Apparently there are some things that taxpayer money should not be used to stimulate. I wonder if they consider Wall Street a “gamboling establishment?”

It is also good to know that our legislators have taken the plight of the American Steel industry into consideration as well. Sec 1110 subsection a stipulates that “none of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron and steel used in the project is produced in the United States.” Of course, there are exceptions. Subsection a does not apply in any case in which the head of the Federal department or agency involved finds that:

Whew! At least there is a loophole! Interestingly, while they did define what constitutes a “public building” or a “public work”, they did not define what the “public interest” means. The lawyers should make quite a bit of money figuring that one out on an individual basis. Apparently, lawyers are to be stimulated as well.

Even more fascinating, sec 1112 had the apparent effect of cutting off Illinois from any funds entirely unless “Rod R. Blagojevich no longer holds the office of Governor of the State of Illinois.” Aside from the novelty of having someone mentioned by name in a government appropriation bill, the statement itself is semantically null, since other qualifiers in the section render that passage moot. In any event, the government of Illinois unanimously made the provision itself moot by removing Blagojevich from office. I would assume this clause will be removed in the committee that reconciles the House version of a bill with the Senate version.

It takes awhile to wade through the boilerplate and administrivia. It is nice to see as well that the bill specifies a website, called recover.com, be established in order to “foster greater accountability and transparency in the use of funds made available in this Act.” This is covered in detail in sec 1226.

So what sorts of stimulating things are in the bill? Let’s look at the overhead costs first

It’s good to see that the Federal Government pays itself first. Here in DoD, when we get additional tasking, additional money (or manpower) seldom comes with it (at least where I work). It’s called “doing more with less.” And apparently, as usual, DoD will be doing more with less in the future. More on that in Part 2.

Beginning on page 35, we start to see individual appropriations for the “stimulus”:

Hmmm. Looks less to me like a stimulus package thus far and more like a standard maintenance appropriations and spending bill. Well, I’m spending money so I must be stimulating something I guess.

Lest you think I am “cherry picking”, I have only advanced to page 37 at this time. The whole document is the same; $50 million here, $200 million there, a few billion hither and yon. There is $2.8 billion set aside in grants and loans to ensure that people living out in the hinterlands get high-speed Internet access. Wouldn’t you think that with the health of the nation hanging in the balance, that the most important measures would be mentioned first? Have you seen anything so far that commands such importance? Anything at all that is even remotely related to what you were probably thinking of when you thought about the topic of “emergency economic stimulus?”

I’m sure it’s in there somewhere, but as I am starting to nod off, I think I will close for now and pick up again in part 2 of this article.