Alternative Insight
Can the Economic Stimulus
Plan Succeed?
After several months of implementation, economists are evaluating the
effectiveness of the administration's economic Stimulus Plan, which is
officially known as The American Recovery and Reinvestment Act of
2009.
Political bias,
incomplete data and controversial statistics mar the evaluations. The truth is
difficult to realize. More relevant is an analysis that attempts to reply to
the question: Can the Economic Stimulus
Plan Succeed?Although only a small
portion of the expected $787 billions in stimulus funds has been allocated, the
direction of these funds indicates its thrust.
This analysis utilizes timely information and discovery to provide
substance for a debate of the possible success of The American Recovery and Reinvestment
Act of 2009.
What is the Stimulus Plan expected to accomplish?
The Act explains its purpose:
A bill to create
jobs, restore economic growth, and strengthen America's middle class through
measures that modernize the nation's infrastructure, enhance
America's energy independence, expand educational opportunities, preserve and
improve affordable health care, provide tax relief, and protect those in
greatest need, and for other purposes.
These meritorious but
lofty and vague statements don't indicate a permanent solution to the United
States declining manufacturing employment or
to the trade deficit.
What has been its
recognizable accomplishment in the early stages?
The Stimulus Plan has stopped the bleeding: the
catastrophic fall in gross domestic product (GDP) and the escalating
unemployment. The government claims the Plan has created or saved 650,000 jobs - one problem - it is difficult to verify this is due to
the Stimulus, especially since unemployment is still increasing. GDP increased
by a revised 2.8% annual rate in the third quarter. The consumer confidence index rose in November to 49.5 from an
upwardly revised 48.7 in October but fell back in the last days of November.
One overlooked benefit is that the government
essentially rescued General Motors from complete collapse and suddenly, under
national care, GM has a forward looking and responsive management.
Where does the Stimulus Plan fail?
Most noticeable
is the huge government deficit of $1.7 trillion. Economic pundits are unsure what that means, but deficits somehow must be repaid; usually by inflation. The
influx of money into the economy has done as predicted; some increase in
spending for domestic goods, but also increased spending on imports, and a
lowered value of the dollar, which has stimulated exports.However, the trade deficit in September
increased 18 percent to $36 billion, not an acceptable trend.
The biggest failure of the
Stimulus Plan is its lack of stimulus to some essential industries and its
apparent assistance to foreign labor forces. As one example, tractor and harvester
manufacturer Deere & Co., one of the most profitable and significant
Perusal
of the largest awards for the first amounts of stimulus funds demonstrates
apparent limitations of the Stimulus Plan. Below are the largest awards by
contracts, grants and loans.
|
Contracts Recipient |
State |
Amount
Awarded |
|
SC |
$1,407,839,884 |
|
|
WA |
$1,359,715,229 |
|
|
ID |
$437,675,000 |
|
|
TN |
$338,697,231 |
|
|
MD |
$302,521,207 |
|
|
WA |
$299,728,838 |
|
|
TN |
$270,299,243 |
|
|
NY |
$257,613,800 |
|
|
WA |
$253,614,000 |
|
|
NM |
$230,835,000 |
|
Grants Recipient |
State |
Amount
Awarded |
|
CA |
$4,387,948,882 |
|
|
TX |
$2,177,682,329 |
|
|
NY |
$1,653,933,720 |
|
|
FL |
$1,479,922,294 |
|
|
DC |
$1,293,525,000 |
|
|
CA |
$1,226,944,052 |
|
|
IL |
$1,126,357,559 |
|
|
CA |
$1,124,920,473 |
|
|
CA |
$1,084,768,673 |
|
|
OH |
$980,685,675 |
|
Loans Recipient |
State |
Amount
Awarded |
|
CA |
$535,000,000 |
|
|
GU |
$88,536,000 |
|
|
WV |
$61,092,100 |
|
|
WV |
$28,075,000 |
|
|
WA |
$20,379,000 |
|
|
NE |
$17,000,000 |
|
|
NM |
$15,000,000 |
|
|
KY |
$13,243,100 |
|
|
MI |
$13,224,000 |
|
|
OR |
$13,099,000 |
Source: http://www.recovery.gov/Pages/home.aspx,
as of
Note that all the contracts, except for
the cancer research contract to SAIC,
are for clearing pollution, mostly from nuclear plants, ormanaging nuclear facilities. These tasks are
necessary and worthy endeavor, but are essentially make work projects, which
don't revitalize
The grants essentially transfer state
spending to federal spending and consist of service type grants which will not
have lasting effects on the economy.
Except for the loan to Solyndra, a company
that has great potential for manufacturing advanced solar systems, the loans
mainly assist local governments to maintain jobs; but not jobs which create
more jobs. These fulfill a need, but are they sufficient for recovering a
failing economy?
What
will be the outcome?
Frankly, the trend is to
the continued socialization of America.
The
Shouldn't the planners be working on a new
America?
alternative insight
dec. 1, 2009