During the 2016 presidential campaign, candidate Bernie Sanders called for $1 trillion in infrastructure spending to fix our roads and bridges and to modernize our transportation, power and communication systems. Bernie was able to get a huge portion of the democrat party excited about feeling the Bern, but didn’t we just spend $1 trillion on infrastructure?
Most people may recall the Obama Administration’s first big initiative was a plan to spend a massive amount of federal government money on infrastructure. The American Recovery & Reinvestment Act of 2009 (ARRA) was a highly partisan plan to stimulate the US economy during the Great Recession. Obama pitched the plan as massive public works spending on infrastructure projects and “shovel ready jobs” that would stimulate the economy and keep unemployment below 8%. The plan called for approximately $800 billion dollars in tax credits and infrastructure and renewable energy spending.
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Besides direct budgetary allocations for new startup operations, ARRA provisions established new federal tax incentives, unemployment benefits expansions and authorized a Presidential Economic Recovery Advisory Board. Much like FDR’s “New Deal” 1930s Great Depression-era legislation, the ARRA was designed from the Keynesian macroeconomic theory model. This theoretical ideology is based on the expectation that increased governmental spending will offset decreased private spending and will save jobs, thereby preventing further economic deterioration. Thus, by providing supplemental income sources for the hardest hit individuals and businesses during recessionary climates, federal imperatives like ARRA aim to “prime the pump” to jumpstart new economic growth stimulation.
Upon initial passage, ARRA’s total cost during the next 10 years from 2009 to 2019 was estimated at $787 billion but was later revised to $831 billion over that same timeframe. Since then, ARRA has also been a topic of vehement controversy and has been a very toxic political issue. The primary issue of controversy is whether its stated intention was served, given that the actual gross cost thus far is estimated in excess of $1 trillion. Liberal economists Alan Blinder and Mark Zandi give the Stimulus great credit for a key role in keeping a lid on the U.S. joblessness rate that would have otherwise risen to double digit levels. Likewise, the liberal economist and Nobel laureate Paul Krugman expressed support but criticized ARRA as “too weak to cover even a 3rd of lost spending”. In other words, he thinks we needed $3 trillion in infrastructure spending.
Full-fledged critics submit the Stimulus Plan’s fatal defect was failing to direct funds toward areas in most urgent need of attention. One such example is ProPublica reporter Michael Grabell who authored a book subtitled “Money Well-Spent? Truth Behind Trillion-Dollar Stimulus”. Per Grabell, the Stimulus did fail to prompt a vibrant economic recovery because funds were spread too thin rather than concentrated to gain the most bang for the buck. For instance, “shovel-ready” projects designed to get jobless folks back to work fast took far too long to even break ground. Meanwhile, more worthwhile longer-term projects were often sped up to meet arbitrary deadlines that caused poor results and thereby tainted the entire Stimulus Plan’s image. Even Barak Obama himself was eventually forced to concede that his so-called “bedrock shovel-ready” projects didn’t exist for any practical purpose or intent.
Despite that admission, Grabell opined that viable shovel-ready jobs indeed exist but Obama’s Administration just didn’t know how or where to find the right ones.
Grabell goes on to cite a prime exemplar at the Savannah River Site in Aiken, SC, given $1.6 billion in Stimulus grant funds during mid-2009. Very soon after, the defunct nuclear facility hired thousands of workers to service reactors, install liquid waste equipment and ship solid waste to a Chihuahua Desert salt mine. As out-of-town hires flocked into town and took up residence in apartment complexes or hotels and patronized local businesses, county joblessness went down from 10.5% to 8.5% within just a few months.
According to Grabell, the Savannah Site’s shovel-ready job program key success ingredients were a ready-made physical plant and well-laid plan already in place. This combination enabled federal government decision makers to send almost $2 billion to private contractors already poised for immediate mobilization.
However, a vast majority of similar projects failed because Stimulus Plan guidelines were defined too broadly with mandatory shovel-readiness by 90 days post-funding. But once formally codified, ARRA provisions required most state jurisdictions to wait 120 days for road construction upgrade project approval. Which in turn meant total length was typically 6 to 12 months before shovels could turn the first load of dirt.
Another major problem with the ARRA was the political nature of the spending. A huge amount of money went to groups and businesses that donate heavily to the democrat party. For example, education spending went directly to teachers and labor unions which donate to and vote for democrat candidates consistently. Also, a large amount of ARRA spending went to renewal energy companies which also donated heavily to democrats. The fact that several high profile renewable energy companies that received ARRA funds went out of business was also very troubling.
At the end of the day, letting the government spend massive amounts of money is usually going to be a bad idea. Eventually, the taxpayers will have to pay for all that spending and the government is terribly inefficient. One must wonder if it would have been better for the government to lower taxes by $1 trillion instead. Imagine what businesses and individuals would have done with that money and how much that would have stimulated the economy.