The Porkfest Has Its Supporters

Where is the money going to go in New Jersey? Herb Jackson spins such a rosy picture with his breakdown of where our tax dollars will be going. Oh wait. It's not our tax dollars since this is all debt financing and the federal government is borrowing a trillion dollars to put these new programs and spending plans in place. Does anyone actually think that any of this federal money is going to make its way into repairing roads or bridges in 2009, when it is most needed? I don't. New Jersey's experience in building schools has shown that it is an awful steward of tax dollars - your money. Rosy pictures of hundreds of school projects completed accompanied the plans of the School Construction Corporation (now the School Development Authority) and the billions that were appropriated for school projects. That ended up in a cesspool of corruption and half finished projects, if they were ever started at all. Consider that Jackson notes that $420 million will go to school construction and renovations. Here's New Jersey's record with a far greater sum:

The SCC was founded after July 18, 2000, when the New Jersey Educational Facilities Construction and Financing Act allocated $8.6 billion for public school construction and renovation statewide, which included $6 billion for the 31 urban "Abbott" special-needs districts.

In July 2002, then Gov. James McGreevey created the New Jersey SCC to oversee the school construction projects.

However, over the last few years, the SCC was criticized for overspending on projects and fiscal mismanagement.

When Corzine took office in 2006, he created a committee to review SCC operations and develop a new process for school construction. The committee recommended a complete overhaul of management.

Since its inception, the SCC has completed 30 new schools and 26 major renovations. But funding shrank with only a few of the beginning projects underway, with over 300 projects still pending.

Billions of dollars spent and a grand total of 56 major projects were finished out of more than 300 proposed. The New Jersey portion of the porkfest will be a drop in the bucket based on how New Jersey spends money on schools. It certainly wont provide the kind of infrastructure improvement Obama claims, and it certainly wont help this year. It probably wont even help years from now as the backlog of projects from the original SCC is so long, and that's assuming that the projects have been spec'd out. The state will likely roll the money into the general fund so as to help the bottom line of the state, rather than address the structural problems with the state budget.

Even President Obama's choice for budget chief, Peter Orszag, who previously ran the Congressional Budget Office, thinks that stimulus plans such as the one that President Obama and the Democrats are ramming through Congress are awful and do nothing to actually stimulate the economy:

Timing. The timing of fiscal stimulus is critical. If the policies do not generate additional spending when the economy is in a phase of very slow growth or a recession, they will provide little help to the economy when it is needed. (Over the long term, the key constraint to economic growth is the rate at which the capacity of firms to produce goods and services is expanded—not aggregate demand.) Poorly timed policies may do harm by aggravating inflationary pressures and needlessly increasing federal debt if they stimulate the economy after it has already started to recover.

For numerous reasons, discretionary fiscal stimulus may not be properly timed, and it has often been mistimed in the past. The failure to forecast a coming slowdown or contraction in economic activity is generally thought to be the most important reason for poor timing and is referred to as a "recognition lag." Additional problems can arise if the policy change that is adopted does not affect spending immediately or if there are lags in enacting or implementing policies.

The historical record on the effectiveness of efforts to provide discretionary fiscal stimulus is mixed.8 Much of the research indicates that fiscal policy in the 1960s and 1970s was poorly timed and, in some instances, destabilizing. By contrast, the tax rebate in 2001 provided stimulus during the recession of that period.

The recognition lag is a major challenge in applying discretionary fiscal policy, but it may not be as critical as it was before the 1990s. One of the most severe recognition lags occurred in the 1974 recession, when economists generally did not perceive the economy to be in a recession until well after it had begun. This meant that the tax rebates ultimately adopted to spur the economy did not take effect until March 1975, after the economy had already started to recover. During the two most recent recessions (in 1990 and 2001), by contrast, economic weakness was recognized relatively quickly. Concerns about slow growth—a slowing that subsequently was dated as a recession that started in August 1990—were raised in September 1990. Similarly, the stock market crash that started early in 2000 alerted economists to the possibility of a recession, and by January 2001 economists generally expected very slow growth. The 2001 recession was subsequently dated to have begun after March of that year. One of the problems that made it difficult to recognize the poor state of the economy during the 1974 episode—a high rate of inflation that distorted the perception of the underlying weakness in real economic activity—has not been a problem in recent decades.

The current porkfest doesn't actually increase spending right now while we're in the recession, but actually backloads the spending into 2010 and beyond, when economists already predict a recovery even without any stimulus package.

James Pethokoukis notes the following as well from the CBO:

"Practically speaking, however, public works involve long start-up lags. Large-scale construction projects of any type require years of planning and preparation. Even those that are "on the shelf" generally cannot be undertaken quickly enough to provide timely stimulus to the economy. For major infrastructure projects supported by the federal government, such as highway construction and activities of the Army Corps of Engineers, initial outlays usually total less than 25 percent of the funding provided in a given year. For large projects, the initial rate of spending can be significantly lower than 25 percent.

Some of the candidates for public works, such as grant-funded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most of these projects could end up making the economic situation worse because they would stimulate the economy at the time that expansion was already well under way."

He further notes that only 15% of the entire porkfest will actually be spent during the fiscal year ending in October. In other words, the overwhelming majority of this money (which the nation doesn't even have) isn't going to be spent until well into the future and when its effects are going to be dubious at best.

Wall Street pundits may approve of the stimulus package passage because they think that it gives them a sense of stability, but it doesn't actually improve the economic outlook. Wall Street is into whatever will provide them with free money, and a porkfest is just the thing. That's why they were cheerleading for the last stimulus package, TARP, and now the current effort. They like stability, and that the bill passed gives them hope that things will stabilize, even though it papers over real problems with the economy and doesn't actually address the supposedly critical pieces of infrastructure that Obama claims must be improved.

Speaker Pelosi says that Democrats will be held accountable for the spending. Really? When have they ever been accountable for spending? Have they ever produced a budget that was smaller than the year prior because revenues didn't match projections? Have they ever practiced fiscal responsibility? She's just trying to spin the fact that the GOP didn't go along with the porkfest as something to be proud of. The "stimulus" package still includes pork such as providing money for contraceptives and the NEA and other government entities that provide no net benefit or job creation.

And you wonder why people think that the spending isn't going to be temporary?