February 5, 2009

February 5, 2009 | Commentary on

Empty 'Stimulus'

The economy's worsening by the day and in need of a quick boost. Yet the $800-plus billion "economic-stimulus" bill now being rushed through Congress is anything but.

Democrats tend to believe that you can help jumpstart an economy by investing in transportation projects. Yet only 7 percent of the plan's spending component is aimed at our highways and byways.

And most of that is unlikely to actually do much good. The US Department of Transportation notes that only about 27 percent of the transportation stimulus money would be spent the first year. And the bill allows the spending to go for projects that may not be completed for three years - meaning that some of today's unemployed might have to wait until 2012 for a job from this measure.

Worse, the rest of the bill's spending does even less to boost the economy. It's little more than a massive bailout of marginal federal programs and profligate state governments.

Perhaps the most laughable initiative in the bill is its bid to revive public housing -- a program that leading Democrats as well as Republicans have been phasing out since the early 1970s in favor of the more attractive, and cost-effective, housing vouchers.

The "stimulus" bill would spend $5 billion to build more public housing.

Huh? This recession started in good part because of a housing glut: The collapse of the housing bubble meant that America had built more homes than it could pay for. As a result, the number of vacant housing units is at an all-time high.

Why not instead take advantage of the millions of vacant units in a process that could also help deter foreclosures?

Probably because, under the Davis-Bacon law, anyone building new housing with federal money must basically pay union wages. Using vouchers, by contrast, relies upon the marketplace, where unions must compete fairly. And unions are a core Democratic Party constituency.

The bill also rewards other federal programs with doubtful stimulus benefits: aquaculture, the National Endowment for the Arts, the Fish and Wildlife Service, energy-efficient federal buildings, the Smithsonian, Pell Grants, Head Start, lead-hazard reduction and wild-land fire management. ACORN and similar groups would gain access to some of the billions in new community-development funds.

Amtrak, meanwhile, would get another $1 billion on top of a multibillion-dollar increase (over five years) that Congress gave it late last year.

And let's not forget state governments, which would share in $79 billion of general fiscal relief, plus $87 billion more in Medicaid assistance.

In this regard, the plan represents a massive and unprecedented peacetime transfer of wealth and income from the beleaguered taxpayers to a bloated public sector - where, oddly enough, the unemployment rate remains remarkably low.

On top of all the new money to expand existing programs, the bill would also extend the federal government deep into new areas of responsibility, like public-school construction and rural broadband investment - from which it would likely never extract itself.

But this, regrettably, is the least of the failures of the supposed "stimulus." At a time of economic peril, it will make things worse - by absorbing massive amounts of scarce resources and credit that could better be deployed to the nation's already troubled financial markets and loan-starved businesses.

This measure is most likely to leave us with double-digit unemployment rates a year from now -- and Congress responding with an even larger bailout. America would find itself stuck with a mediocre economy more like continental Europe's than the vibrant system that made us the most prosperous nation on earth.

The nation needs a stimulus plan that actually addresses the problem we face - the very real prospect of an economic catastrophe. This plan doesn't do that.

President Obama must decide whether the voters put him there for a purpose no better than validating a massive congressional fraud on the nation's workers. To show real leadership, he should reject this costly and ineffective proposal in favor of something that will work.

Dr. Ron Utt is the Herbert and Joyce Morgan Senior Research Fellow of the Thomas A. Rowe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Ronald D. Utt, Ph.D. Herbert and Joyce Morgan Senior Research Fellow

First appeared in the New York Post