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JOBS, JOBS, JOBS

Worthwhile Projects or Just More Puffery and Pork?

By ALLEN SANDERSON
   It seemed that most candidates for the Senate, House or gubernatorial posts in November focused on one single theme: jobs. With an unemployment rate that has exceeded 9 percent for almost two years (compared with the U.S. average of about 5 percent for the last several decades), this emphasis is understandable. Plus the unemployed have more time to vote! But what was baffling, and remains a puzzle, is that there has been blind acceptance and so little critical examination of this campaign rhetoric from the public and media.
  For example, here’s a simple $10 billion economic stimulus plan to consider. Have the federal government load $50,000 onto debit cards and give them to 200,000 Americans. The only constraints are that these cards expire in 90 days and the funds must be spent at malls, automobile dealerships, “big-box” outlets and local mom and pop stores (that is, not saved or otherwise hoarded). Spending would rise and these establishments would hire more workers to serve their new customers and/or increase production to rebuild inventories.
  Or, instead, pay 100,000 people salaries of $50,000 a year to dig holes in the ground every morning and another 100,000 folks  $50,000 annually to fill up those holes in the afternoons. That’s also $10 billion in spending—and 200,000 new jobs created. Of course, at the end of the day we will have the same level of output as before to show for our “shovel-ready” efforts.
  If we don’t care in either case who pays the bills or what the longer-term consequences would be, spending and job creation are, as they say, no-brainers, and thus probably well suited to politicians.  But we do care—or should care—which projects have higher rates of return and produce higher long-run growth for the economy. However, you’d be hard-pressed to tease that out from candidates’ stump speeches and websites last fall, or elected officials’ pronouncements currently.
  Enacted in 2009, the federal stimulus bill is providing in excess of $800 billion to repair bridges and roads, plus millions of dollars to make and plant signs that give credit to The American Recovery and Reinvestment Act for these improvements. But why don’t we just spend the whole $800 billion on the signs?  There is no real need to actually repair or build anything. It would put just as many dollars into the pockets of sign-making firms and their employees, who would then buy cars, new appliances, clothing and food with their largesse.
  Foolish you say? It would be efficacious in a simple Keynesian model, though probably not pass many laugh tests. And it is one reason the word “stimulus” has acquired four-letter-word status within the administration.
  The basic point is that there are an infinite number of ways to blow $10 billion—or $800 billion. We could repair roads or bridges, plow it into education or law enforcement, or produce and distribute more porno movies. In the short run the issue might be which of these various actions or projects would create more jobs; longer term we’d be more concerned with which one(s) would make our economy stronger and more humane. Any money spent to create jobs in Activity A could have gone toward job creation in B or C. And, of course, in an economy not run by Santa Claus or the Tooth Fairy, how we pay for everything—which either means raising taxes on someone, getting China and Japan to extend our line of credit, and/or reducing spending somewhere else in the public sector—has to enter into these discussions.
  It’s hard to object to  feel-good terms like “infrastructure” or “green” initiatives, but in a world of scarcity and choice, some spending is likely to be more beneficial, or at least less wasteful (Can you say Cash for Clunkers?), than another alternative. Do we choose bridges and overpasses instead of a high-speed rail network, restoring government buildings, more day-care centers and homes for senior citizens, or some elected official’s pet project to placate his or her political base of support? Or perhaps shore up our human capital infrastructure—education, health—or address environmental concerns?  In a world of finite resources, “Let’s do them all” is simply not an option.
  Bashing piñatas labeled China, banks and corporations may allow us to vent and politicians to preen, but it is generally not helpful. The familiar political refrain on both sides of the aisle of “jobs, jobs, jobs” is misleading, disingenuous, hollow, and likely injurious to the long-run health of the nation. Serious situations demand more serious thought and rhetoric.

Published: February 10, 2011
Issue: February 2011 Heart Health Issue

Comments

Criteria?
Point taken, but by what criteria should we judge the long-run return of projects? I find it pretty likely that maintaining or improvement transportation links will produce long-run returns, at least higher returns than porno movies. You're right that we must make choices, but if would helpful if you suggested how best to make them.
Jason, Feb-12-2011
easily debunked
Or, you know, the gov could just spend on worthwhile projects. To think in the macro-sense to do absolutely nothing with idle labor is the worst case scenario for the unemployed and the society as a whole. Last time we were in the great depression we payed people to wear green uniforms and shoot Germans and that massive increase in gov spending got us out of the depression. Now because of articles like yours that just laugh the very thought of stimulus, such a large scale thinking is politically impossible and low and behold, mass unemployment persists. Thanks for being part of the problem. The unemployed will sleep well at night knowing that they didn't get any dollars that they didn't deserve.
Tschäff Reisberg, Feb-13-2011
English courses
really nice post, i like it english course
english course, Feb-13-2011
tunnel vision
I agree with Jason and Tschäff. Was the Interstate highway system investment a waste of money?
bob, Feb-13-2011
Not Necessarily
"Was the Interstate highway system investment a waste of money? " Depends on how you look at it. Would we have been better served investing the interstate highway funds on public transportation infrastructures like passenger rail lines. Or even expanding freight rail? We could have broken the destructive chain of more personal vehicle use, high dependency on foreign oil imports, and still had just as effective delivery system for goods and people. Now don't get me wrong I love my cars, just offering this as a counterpoint. :) It just depends on how you look at it as to whether or not the interstate system was a a waste or not.
Jason, Feb-14-2011
jobs, jobs, jobs
Re: Eisenhower's interstate highway projects/rail instead comment. In the 1950s the issue of 'peak oil' was not in sight. The issue of two lane roads was. Why is it conservatives are so fearful of paying the bills rung up? And equally fearful of investments in public goods or in social compacts? IMO I think it's because most conservatives are paid to believe this way. The first 'capture' is of willing academics. They give absolutely horrible policy ideas the 'gloss' of respectability. For shame.
Beezer, Feb-14-2011
Jobs, Jobs, Jobs-Whose Money
Rule 1 - Government can't spend money without either first taking it from someone or creating it out of nothing (yea, that really works!) and 2) Government spending does not create wealth creating jobs, only wealth transfer. Why not encourage job creation by 1) reducing corporate tax to 10%, 2)repatriate foreign earnings with at a 0 tax rate, expense all capital investment in the year invested and do away with the minimum wage. Allow mining and drilling to continue, permit the building of coal and nuclear power plants. Drilling will add 2-5 million barrels of oil per day over the next 5-10 years and reduce the trade imbalance greatly - note "peak oil" is more of the same old "we're running out of everything bs." In a short time we'd be so short of labor that Canada and Mexico would be complaining about press gangs crossing the border to kidnap workers for good paying jobs!
Stan in Sugar Land, Feb-15-2011
Interstate highway system
"Was the Interstate highway system investment a waste of money?" Of course not. Government spending that is not utterly wasteful accomplishes some good. The question to ask is whether the money could have been spent on a better alternative. In the private sector, market forces tend to channel money towards investments with the highest return. No similar mechanism exist in the government sector, which is why much of government spending ends up being wasteful. Without a doubt, some dollars spent by the government produce a greater good than could be produced with a similar invesetment in the private sector. It is just very hard to tell what government investments fall within this category.
Pauld, Feb-16-2011
interstate highway system
Lets not forget the historical aspect of Eisenhower's interstate highway system. It was also to be used by the military for rapid transport of supplies from coast to coast in case of war with the Soviets. Ever wonder why overpasses are a certain height? It wasn't for semi-trucks, it was so missiles and their delivery systems could be transported across the country without hitting the above roads.
matt, Feb-16-2011
jobs?
Unfortunately the new U.S. average unemployment rate may become higher than 5%. More efficient production and higher population would seem to dictate it.
John W., Feb-18-2011
Worthwhile Projects or Just More Puffery and Pork?
"Enacted in 2009, the federal stimulus bill is providing in excess of $800 billion to repair bridges and roads" This is not what happened. "Serious situations demand more serious thought and rhetoric. " Odd that you write this after misrepresenting what has actually happened. How much of the stimulus was tax cuts anyhow? Ah well, perhaps someone with more serious thoughts can go over this.
Dave, Feb-18-2011
Get your facts right
Not all of the Recovery Act money was spent on job-creating investment projects. Because of Republican intransigence in the Senate, a lot of that $787 that coud have gone to job-creating spending instead was diverted to less stimulative uses. $70bn was spent adjusting the Alternative Minimum Tax--something that Congress would have done anyway--affecting mainly income unconstrained rich people. $282 bn was spent on tax cuts that had less stimulative power than infrastructure spending. And, yes, that infrastructure investment was and more still is needed. Public investments in infrastructure have not kept pace with our economy, it is crumbling, and this creates real inefficiencies for businesses and real costs to families. So, what was your point?
Adam Hersh, Feb-27-2011
Jobs, Jobs, Jobs
Good points all. At the risk of being labelled Libertarian by my son, I do think government has a horrible track record in using funding for anything. I say this not only from my research, but from benefitting from government programs and working for some.
Bill VH, May-19-2011