A Stimulus To Nowhere

By Michael Hough and Jonathan Williams

[With its passage through the Senate, the so-called Stimulus Bill now heads to the House-Senate conference to resolve differences between the House and Senate versions.]

As in any time of crisis, Washington is suffering from a predictable case of the "do something" disease.

Unfortunately, for our elected officials in Washington, simply calling legislation a "stimulus" bill doesn't mean it will actually help the economy.

It seems like almost every economist and political pundit today is claiming that massive infrastructure spending, specifically in transportation, is the best way to jump-start the economy.

However, history has shown us, time and time again, the most effective economic stimulus comes from monetary policy and tax relief-not Keynesian spending. 

This view is shared by the chair of President Obama's Council of Economic Advisors, Christina Romer, who has written that increased spending on the New Deal "had little direct expansionary effect on the economy."

Even if you assume government infrastructure spending is an effective stimulus, current efforts in Congress should be heavily scrutinized.

The non-partisan Congressional Budget Office (CBO) has released numbers showing the bulk of the money promised for transportation and highway construction will not be spent in the next two years, and will most likely be spent when the nation has already recovered from our current recession.

In fact, the CBO projects that only $136 billion of the $355 billion of infrastructure spending will be used by Oct. 1, 2010.

Of the $30 billion to be spent on highway construction-only $4 billion will be spent over the next two years.

For these funds to actually be used on any new road projects, it will take nearly 10 years from the time the road is planned until construction actually begins.

This is due to the burdensome and highly regulated process the federal government uses to build roads.

For these funds to have any impact, Congress will need to cut a great deal of government red tape. 

Proponents of this stimulus package argue that states will be forced to spend a great deal of the money within 90 to 120 days, and therefore the funds will go to "shovel-ready projects."

However, a great deal of these projects are "shovel-ready" because the money has already been appropriated by a state.

Therefore, federal funding will simply replace state funding, resulting in a net stimulus effect of  zero.

Finally, one has to wonder how effectively the money will be spent, given that elected officials across the country are lining up with long lists of projects for their states.

Requests include some important projects, like repairing bridges, while other projects are less important, like installing new putting greens on golf courses. 

Congress has even added $335 million to prevent sexually transmitted diseases. While this may be an important program, it certainly won't help the economy.

If some members of Congress had gotten their way, we would have seen even more hundreds of millions of dollars allocated to fund contraceptives.

Even ACORN is eligible to benefit from the current economic stimulus package, due to $750 million for "neighborhood revitalization."

The bill also contains payoffs for union bosses, with Davis Bacon prevailing wage requirements for every project, which the Heritage Foundation predicts will cost taxpayers $17 billion.

While state lawmakers may enjoy having their budgets bailed out by the federal government, there is little evidence these funds will create new jobs.

A federal bailout of the states does nothing to address the fundamental issue of states overspending taxpayer dollars.

State spending has grown at an unsustainable rate over the past decade.

In fact, state spending is up 124 percent from where it was just 10 years ago, and state debt has increased by 95 percent during that same period.

New estimates from the CBO show Uncle Sam's budget deficit has reached $1.2 trillion, and with $10 trillion in national debt, Uncle Sam isn't in the best position to bail anyone out.

If the past is any indication, this current stimulus bill will not simulate the economy. 

Even worse, it will surely end up full of pork projects, while the majority of infrastructure funding will not be prioritized.

With Uncle Sam this deep in the hole, the last thing taxpayers need is more wasted money on "Bridges to Nowhere" and other spending adventures. C

Michael Hough and Jonathan Williams are Task Force Directors at the American Legislative Exchange Council (ALEC) for the Commerce, Insurance and Economic Development, and Tax and Fiscal Policy Task Forces respectively.