The Most Money Every Spent With The Least Scrutiny

We will be posting on the stimulus bill for months and years, because it will take that long to figure out what was in it.  Congressman who voted for it may never know what they actually voted for.  Veronique de Rugy takes a first swing at it:

Total spending amounts to $792 billion, with $570 billion in direct spending and $212 billion in tax provisions. These numbers don't include the massive amount of interest that will accrue on the increased debt. If we include that, the total amount comes to $1.14 trillion.

Supporters of the package describe the legislation as transportation and infrastructure investment, the idea being to use new spending to put America back to work while at the same time fixing decrepit infrastructure. However, only 17 percent of the discretionary spending in this package is for infrastructure items. More worrisome still, the final version lacks any mechanism to ensure that spending will be targeted toward infrastructure projects with high economic returns

De Rugy actually overestimates the infrastructure spending, because she looks at the spending over 10 years.  Since the stimulative effect of infrastructure spending in this recession is, at most, limited to 2009-2010 spending, and since the infrastructure spending is more back-end loaded, the percentage is much lower in the first 2 years -- something like 6-7% as I calculated here (I will go back through the CBO reports with an update when I get a chance, but Kevin Drum links them here, hilariously saying they "scored well."

Unfortunately, even this seems to wildly underestimate the true cost of the bill.  In creating the bill, Congress increased the general operating funds for zillions of departments and programs  (remember, 80+% of the spending is departmental budget increases, not infrastructure construction).  However, they show these increasing disappearing after a couple of years.  We all know that Democrats consider removing an increase to be "a massive cut" so we can assume that at some point, these budget increases will be extended for eternity.  If one makes this more realistic assumption, then the cost of the stimulus bill is over $3 trillion!  [update:  Carpe Diem demonstrates this with a nice set of graphs]

My other project I am working on is to look at some of the "shovel ready" projects on the mayor's list here  (warning!  600 page pdf!!) in the Phoenix area.  My incoming hypothesis is that any project on here either:

  1. Is not shovel ready, as it takes years to get a project through planning, procurement, and environmental permitting, but once anyone in DC finds that out, they won't take back the money, -OR-
  2. Is something that the local residents, who will enjoy the benefit, refused to fund, raising the question as to why the rest of us should fund it.

I won't spill the beans yet, but here are a few tastes from the Phoenix area:

  • A major upgrade to the water system of the town of Paradise Valley, a small community embedded in Phoenix which is, by a fairly good margin, the single wealthiest zip code in the state.
  • A lot of solar.  Solar is a particularly good choice for this list because 1)  Obama has a hard-on for it, so he is unlikely to question it  2)  Solar's problem is high capital cost vs. the amount of electricity produced, but if someone else is paying the capital cost....
  • http://zoominac.com Matt

    Its funny you say that we will be posting about the stimulus for years - I feel like we already have. It seems like this stimulus has taken over my blog. I could probably start a whole blog devoted specifically to the stimulus. That might be a good idea, come to think of it.

    I just don't see how anyone - even a Democrat - could pass a bill this large without reading it. I was joking with a coworker that there could be some hidden provision to put a couple billion on a boat and sink it in the ocean. Then I realized that would probably be better than anything in the 'stimulus' because it doesn't fund a department, make citizens dependent on the government, and maybe help inflation by lowering the money supply. I'm very much looking foward to your stimulus highlights though!

  • Link

    The Stimulus Bill gives pork a bad name. As you detail, there's little "investment" in it ... usually pork builds something that we probably don't need ... but once the money is spent, at least we have something to show for it. Ironically, the late inclusion in the Stimulus Bill of the "Harry Reid Memorial ... Los Angeles to Vegas ... Gamblers Express" may be one of the few things in it with a measurable payback period.

    Whether you're a capitalist or a socialist, you can't avoid "opportunity cost." If we had instead spent $800 billion on nuclear reactors we could have more than doubled the contribution of nuclear to the US electricity supply from 20% to over 40% ... maybe then we'd have the juice to fuel those electric cars Obama wants us to drive.

    Don't underestimate Obama's hand in the stimulus bill ... he got a major win for his personal agenda. The stimulus bill gives him a huge war chest to act the role of a profligate big city mayor, but with his own dollar bill printing press. Much of this money will bailout states and cities ... expect a heavy political hand in how it's distributed. Favored states won't have to worry anymore about balancing their books. Obama will give them the funds so they can keep increasing their spending.

    The current recession will likely be over by the end of this year, so Obama can use Stimulus Bill funds to "make it rain" for favored constituencies going into the 2010 elections. If the economy doesn't totally suck in 2010, the Democrats will retain control, and be positioned to do even more damage.

    The best argument for why we needed McCain elected in 2008 was to stop precisely this. We can't trust the Democrats in control of House, Senate and White House ... but neither could we trust the Republicans. The Prescription Drug Benefit was actually bigger on than the Stimulus Bill, just to name one thing. There are literally something like 200 House Republicans who voted for the Prescription Drug Benefit who are still in Congress ... but now say they're outraged by the Stimulus Bill. Both parties are the enemy of our future, I'm convinced.

    This is the path we're on ... the federal government is sucking up more and more of the annual pie ... and will only be stupid and political about how it distributes it. Most voters won't care ... and will even embrace this ... so long as they're getting some kind of check from the government. Because economic growth is almost entirely driven by the private sector ... which will be starved for investment resources ... growth will be anemic at best. Without growth, future social spending commitments will be even more unsustainable.

    The potential crisis from this stretches out later than 2010. As a rich nation we can afford to make a few trillion dollar mistakes ... but we can't make it an annual habit. Much of the Stimulus Bill is set-up to be recurring, so expect future versions of it ... and annual trillion dollar deficits to continue. This is unsustainable, but I'm not sure of exactly how and when it will break down.

    As a nation we've dealt with worse. But this daunting ... and to me, maddening ... as it's mostly self-inflicted.

  • http://neubranderinc.com/blog Nobrainer

    I would also hypothesize that "shovel ready" projects are already "in the queue" and as such the federal spending will only be replace state and municipal spending.

  • Scott Wiggins

    Today's fringe benefits are tomorrow's expectations...The democrats have wasted scant time adding another trillion of government debt to our entitlement society. They get there way this time but for how much longer? Government entitlements are destroying the soul of our society. Take high-school graduation rates as an example. The number is around 65-70 percent nationwide depending on what statistic is applied. So, 30-35 percent of our youth don't even care enough about their future to finish what has been bought and "paid for" for them. I'm sure they have a feeling that someone will provide for them. After all, anyone can see that we have millions of young mothers who have children outside of marriage with no means of supporting themselves without an alphabet soup of government agencies providing for them and their children. We are an entitlement society gone mad it seems...How long will working families and foreign debt purchasers keep this crazy train on the rails? As mentioned, Obama and the dems get their way this time. But, breeding sloth and dependance will have an ugly end eventually.

  • Bob Smith

    Don't forget the pernicious side effect of the package: there's no way the higher spending levels of the various departments will be rolled back. Federal agencies almost never reduce their budgets.

  • https://www.quadrant.org.au/blogs/warby Lorenzo (from downunder)

    Your title has a surplus 'y'.

    On an entirely different matter, you may enjoy my latest post on a wee inconsistency between Marxian economics and Marxist ethical critique.

  • http://westanddivided.blogspot.com/ mw

    That post title just says it all.

  • http://herdgadfly.blogspot.com/ gadfly

    Warren . . . Great post. I look forward to your further insights.

    You might want to look into Popular Mechanics observations on "shovel ready" projects which I wrote abouthere.

    The Mayor's List for Fort Wayne were as Nobrainer suspected . . . prokects rejected by local voters.

  • Allen

    Any ideas on what high speed trains could possibly be "shovel ready" right now? They earmarked $8 billion for them.

  • http://unreligiousright.blogspot.com/ UNRR

    This post has been linked for the HOT5 Daily 2/15/2009, at The Unreligious Right

  • Mercy Vetsel

    Hey, what happened to Coke and Pepsi? Do we still think the fact that Obama and McCain ended up on opposite ends of the Taxpayer's Union and Club for Growth scorecards is irrelevant?

    Three weeks into total Democrat control and we've already blown the entire cost of the Vietnam War (inflation adjusted real dollars), the entire cost of Iraq war, three years of Bush era deficits. We've got credible attempts at protectionism, boosts for trial lawyers and the sort of big labor support policies that put the Great in the Great Depression.

    We've got the return of welfare as we know it, the continuance of corporate welfare in the guise of energy policy and by the way, no plans to cut a single dime of the spending that happened in the last eight years, unless you count tax cuts as spending.

    Basically, we have Bush policies plus an addition 10% of GDP consumed by the federal government, but I'm suppose I'm only looking at the negative side. At least now we don't have to worry about those crazy folks on the religious right ending taxpayer funding for stem cell research or taxpayer funding of abortion in the third world.

    I hope all of you big government libertarians are getting a lot of cocktail party mileage out of your pristine ideological purity that allows you to avoid aligning yourself with those backwards religious types and to stay above the fray with cute lines about Coke and Pepsi, because it's really screwing up the country.

    -Mercy

  • Link

    The Stimulus Bill gives pork a bad name. There's precious little "investment" in it ... usually pork builds something that we probably don't need ... but once the money is spent, at least we have something to show for it. Ironically, the late inclusion in the Stimulus Bill of the the "Harry Reid Memorial ... Los Angeles to Vegas ... Gamblers Express" may be one of the few things in it with a measurable payback period.

    Whether you're a capitalist or a socialist, you can't avoid "opportunity cost." If we had instead spent $800 billion on nuclear reactors we could have more than doubled the contribution of nuclear to the US electricity supply from 20% to over 40% ... maybe then we'd have the juice to fuel those electric cars Obama wants us to drive.

    Here's a question for the group: Did Obama get rolled by Pelosi - Reid, or did he get exactly what he wanted? I believe the latter, and that Obama is clever and Machiavellian. He's no Bambi. The Stimulus Bill gives Obama a huge war chest to act the role of a profligate big city mayor, but with his own dollar bill printing press. Much of this money will bailout states and cities ... expect a heavy political hand in how it's distributed. Favored states won't have to worry anymore about balancing their books. Obama will give them the funds so they can keep increasing their spending.

    The current recession will likely be over by the end of this year -- unless our big banks are totally toast -- so Obama can use funds from the Stimulus Bill to "make it rain" for favored constituencies going into the 2010 elections. If the economy doesn't totally suck in 2010, the Democrats will retain control, and be positioned to do even more damage.

    We can't trust the Democrats in control of House, Senate and White House ... but neither could we trust the Republicans. The Prescription Drug Benefit was actually bigger than the Stimulus Bill by some measures, just to name one thing. There are literally something like 200 House Republicans who voted for the Prescription Drug Benefit who are still in Congress ... but now say they are indignant about the Stimulus Bill. Both parties are the enemy of our future, I'm convinced.

    A question for Mercy Vestel: I tried aligning myself with "the backward religious types" but we got a dysfunctional party happy to support a buffoon in the White House. The Republicans didn't deliver, and in fact accelerated the trend of fiscal profligacy. Obama & Co has just seen that bid and wants to "go all in."

    We need to put a lid on the growth of federal government in all ways. That's the small "l" libertarian answer. Unless we do the federal government will suck up more and more of the annual pie ... and will only be stupid and political about how it distributes it. Most voters won't care ... and will even embrace this ... so long as they're getting some kind of check from the government. Because economic growth is almost entirely driven by the private sector ... which will be starved for investment resources ... growth will be anemic at best. Without growth, future social spending commitments will be even more unsustainable.

    The potential crisis from this stretches out later than 2010. As a rich nation we can afford to make a few trillion dollar mistakes ... but we can't make it an annual habit. Much of the Stimulus Bill is set-up to be recurring, so expect future versions of it ... and annual trillion dollar deficits to continue. This is unsustainable, but I'm not sure of exactly how and when it will break down.

    As a nation we've dealt with worse. But this daunting ... and to me, maddening ... as it's mostly self-inflicted.

    Per our Constitution, we're supposed to have a limited federal government. We now have anything but. That big sucking sound you're hearing is money and power being vacuumed into DC from the rest of the country.

    The more that power and money go to DC, the less accountable it is. I actually think my town government isn't bad. The voters have recently twice turned down bond approvals for school fields because the school board had larded it up too much. We even had a tie vote for mayor in 2005, so my vote actually counted!

    If we're going to have a tyranny in DC, I'd prefer to be ruled by the Chinese Communist rulers than our own. Our rulers make dumb, short-sighted decisions ... Republicans and Democrats both ... the Chinese leaders at least are smart and have vision.