Is any Obama ‘stimulus’ plan doomed to fail?

My colleague Rick already posted an entry about Solyndra, a manufacturer of solar panels and related technology that just filed for bankruptcy protection.  Solyndra is not only the latest “green jobs” debacle for President Obama — who personally endorsed the company and publicly touted it as “a testament to American ingenuity and dynamism” — it is also a perfect textbook example of why the Obama stimulus has utterly failed to restart the US economy.

LESSON #1: When stimulus funds are handed out to cronies or are used as rewards for loyal political supporters, instead of being spent in areas most likely to cause a broad increase in aggregate demand, the stimulus will fail.  Solyndra’s failure is all the more embarassing for the Obama Administration because the company received $535 million in special low-interest loan guarantees from the Department of Energy.  Why was Solyndra selected as the first recipient of Obama’s DOE green energy loans?  The details aren’t completely clear, but a major player in the deal seems to be Oklahoma banking billionaire George Kaiser, who also raised between $50,000 and $100,000 for Barack Obama during the 2008 election.

LESSON #2: When your stimulus is based largely on ideas that not only don’t work, but have been shown repeatedly to have the exact opposite affect that they are advertised to have, the stimulus will fail.  We need to be honest with ourselves and admit that at this point, “green jobs” are little more that a fantasy.  I can’t summarize this any better than what was recently written by Walter Russell Mead:

Let me put it this way.  A GOP candidate might feel a need to please creationist voters and say a few nice things about intelligent design.  That is politics as usual; it gins up the base and drive the opposition insane with fury and rage.  No harm, really, and no foul.

But if that same politician then proposed to base federal health policy on a hunt for the historical Garden of Eden so that we could replace Medicare by feeding old people on fruit from the Tree of Life, he would have gone from quackery-as-usual to raving incompetence.  True, the Tree of Life approach polls well in GOP focus groups: no cuts to Medicare benefits, massive tax savings, no death panels, Biblical values on display. Its only flaw is that there won’t be any magic free fruit that lets us live forever, and sooner or later people will notice that and be unhappy.

Green jobs are the Democratic equivalent of Tree of Life Medicare; they scratch every itch of every important segment of the base and if they actually existed they would be an excellent policy choice.  But since they are no more available to solve our jobs problem than the Tree of Life stands ready to make health care affordable, a green jobs policy boils down to a promise to feed the masses on tasty unicorn ribs from the Great Invisible Unicorn Herd that only the greens can see.

LESSON #3: When your stimulus results in government expansion that poaches workers from the private sector, instead of creating new job opportunities for the unemployed, the stimulus will fail.  The Mercatus Center at George Mason University has just released the first extensive study of job creation brought about by Federal stimulus money.  The results were not encouraging:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed. (emphasis added)

This is a huge factor that is regularly overlooked by those who are zealous about “shovel ready jobs.”  As I have pointed out to a number of exasperated liberal friends, what are laid-off bank tellers, IT technicians, security guards, safety training coordinators, financial planners, bus drivers, sous chefs, or book-keepers supposed to do with a shovel?  We no longer live in an era where the majority of the labor force comes from a farm labor, manufacturing, or skilled craftsman background, and can be easily integrated into construction or other manual labor-oriented jobs.   Professionals with an expert resume are a much better fit for bureaucratic or administrative jobs in government offices than they are for driving dump trucks or pouring concrete.  But there are only so many bureaucratic jobs available.  Perhaps this explains why a significant chunk of stimulus money was swallowed by bureaucratic costs, and why so few laborers to actually do the shoveling were ever hired.

LESSON #4: When government regulations and bureaucracy prevent stimulus funds from being quickly injected into the economy, the stimulus will fail.  President Obama has already admitted that “shovel-ready was not as … uh .. shovel-ready as we expected.”  George Will touched on one aspect of the problem when he recently quipped, in response to suggestions about creating a “new NRA,” “You couldn’t build the Hoover Dam today because they’d discover a snail darter in the Colorado River and would stop it.”  But the problem is greater than that.  By the time you factor in the participation of the Department of Energy, OSHA, the Environmental Protection Agency, Department of Commerce, Department of the Interior, Army Corps of Engineers, organized labor, and the incredibly complex Federal bid procurement system, a decade could easily pass before a project the size of the Hoover Dam ever had its first trench dug or its first cubic yard of concrete poured.  And that’s if we are lucky enough not to encounter a snail darter or desert tortoise or Indiana bat during the environmental impact studies.

This is a problem that largely did not exist during the 1930’s, and unfortunately it cannot be solved easily.  In 2005 President Bush was lambasted by Democrats when he proposed the use of no-bid Federal contracts in order to get cleanup efforts under way quickly in flood-ravaged New Orleans, in the wake of Hurricane Katrina.  Today, there are simply too many special interests (organized labor, Federal bureaucracies, state and local political bosses or established cronies expecting preferential treatment, etc.) for Federal government projects to be started quickly and completed at a reasonable cost.  And this is true regardless of which party controls the White House.

There is no doubt in my mind that President Obama’s new, highly anticipated jobs plan will be based almost solely on more “stimulus.”  But unless the President is willing to correct at least some of the serious problems that seem to be heavily impeding the current Federal Government “stimulus” efforts, any new government spending plan will be doomed to fail just as spectacularly as the American Reinvestment and Recovery Act of 2009.

And you can take that to the bank.

Time to act
Solyndra: An omen for Obama's soon to be announced jobs plan
  • Anonymous

    “Is any Obama ‘stimulus’ plan doomed to fail?”

    Anything Barry plans has failure stitched into its DNA.

  • retired.military

    Think about how much research into alternative energy that $500 million could buy,.  The govt doesnt need to build up infastructure into things that have proven are inefficient.  Instead put money into research to develop new ideas .   It is sorta like spending money to produce Model Ts in order to make more people use them instead of spending money to research ways into producing more efficient products.

    Harold FOrd didnt get money from the govt for his business model.  He filled a niche.  THe niche for solar is VERY small.   But spending money to research a much more efficient solar collector (and sell any beneficial results to private industry) would prove to be a much better use of taxpayers money.

  • Anonymous

    Point 4 is one of things that really scares me about the future of our nation.  We are placing so many restrictions on ourselves that we are being overtaken by China. 

    Compare the Big Dig to the Hoover Dam. 

    The Hoover Dam was approved in 1928 and completed in 1936 at a cost of $49M and came in under budget.

    The Big Dig was approved in 1987 and completed in 2007, which doesn’t include another 5 years of Environmental Impact Studies, at a cost of $14B, was originally supposed to cost $3B.

  • Anonymous

    RM, I think you mean Henry Ford.

    • retired.military

      Harold, henry.  close enough for govt work. 

      You have to excuse me.  I havent had my first cup of coffee when I wrote that post.

  • Anonymous

    Krugman believes that any money injected by the government for any reason will prop up the economy. So, Krugman thinks that spending to defend against a fake alien invasion will bring prosperity. THAT’S how crazy he is. Unfortunately, it seems like Obumble listens to him.

    Investing in “green energy” and things like Cash for Clunkers is only slightly less silly than spending to defend against a fake alien invasion.

  • retired.military

    Obama plans to immediately hire 1 million caddies to ease the travel his current caddy does.  By placing caddies at each golf course in the country it will alleviate the cost of caddies having to travel with him.

  • “Is his plan doomed to fail?”  Hasn’t it already?  I am not sure what part of the economy you live in but it has certainly failed in mine. 
    That was the plan all along, the Marxists want the economy to fail and government to control all aspects of our lives.

  • Anonymous

    I’m not holding my breath.  Barry is a one-trick Pony.  Socialist Truth is the ONLY “Truth”.  No way he can give up all his past “training” and “experience”.

    His “new” plan will be the same old tired ideas, wrapped in new verbiage.  The better to “communicate” His Vision to the great unwashed conservative masses.  And throw in the obligatory “obstructionist” and “unbending” and “uncompromising” attacks on conservatives. 

  • . .

    Yeah, but if Obama had not done a bunch of stuff that failed and added trillions in debt, think of how bad our nation would be!

  • PBunyan

    “There is no doubt in my mind that President Obama’s new, highly anticipated jobs plan will be based almost solely on more “stimulus.” “

    If that gets passed there will be another debt ceiling battle soon as Obama is blowing through the $2.1 trillion at such a pace that it might not even get him past the 2012 election.  If he wants to increase spending yet again he’ll need a much higher credit limit.

    Mostly though, I expect just empty words and tired cliches next Thursday and nothing of any substance.

  • Jeff Blogworthy

    “Stimulus” plans, “cash for clunkers” and the like are the economic equivalents of perpetual motion machines. Sucker bets. The notion that wealth is created by destroying wealth is too far-fetched to be believable by anyone. Which is why I don’t think they actually believe it. They are intentionally destroying the U.S. economy.

  • Anonymous

    Employers are not holding back hiring because they lack cash, they are by and large not willing to make what they view as a long term investment with a very uncertain future.  No matter what “stimulus” goodies Obama offers with one hand, the rapidly increasing regulatory burden in his other hand will cancel it out.

  • herddog505

    Michael Laprarie[W]hat are laid-off bank tellers, IT technicians, security guards, safety training coordinators, financial planners, bus drivers, sous chefs, or book-keepers supposed to do with a shovel?  We no longer live in an era where the majority of the labor force comes from a farm labor, manufacturing, or skilled craftsman background, and can be easily integrated into construction or other manual labor-oriented jobs.
    An excellent point.  Yes, I suppose that a laid-off, forty-three year old female admin assistant could learn to drive a bulldozer or handle a cement mixer, but what are the odds?  And what will she do once the bridge is built?
    Also, Bad Luck Barry often yaps about “education”; a “shovel-ready” job puts food on the table, but it doesn’t do much to train / retrain an autoworker whose plant has closed or a college grad who’s discovered that a bachelor’s degree in Mid-Nineteenth Century Romanian Feminist Poetry isn’t exactly leading to scads of six-figure job offers.
    retired.militaryFord didnt get money from the govt for his business model.
    Yep.  Indeed, the great inventors and businessmen in our history – in MOST history – didn’t get loans, grants, loan guarantees, etc. from Uncle Sugar.  Instead, they had a good idea, they worked hard to realize it, and built things themselves.  They might have USED government later on to (ahem) stifle competition, but they didn’t send in applications to the Dept. of We’ll Give You Cash If You Pinky-Swearz To Hire People to get started.

    Jeff Blogworthy“Stimulus” plans, “cash for clunkers” and the like are the economic equivalents of perpetual motion machines. Sucker bets.

    Yes.  They depend on the daffy idea that taking a buck from Peter, paying Uncle Sugar $0.25 in “processing fees” and giving the other $0.75 to Paul will SOMEHOW result in $1.25 being generated.  It’s the same “logic” (snort) behind the democrat assertions that unemployment checks stimulate the economy.  Well, thanks to Bad Luck Barry, we’re getting quite a lot of that sort of stimulus; how’s it working out?

  • Anonymous

    Hey now, Krugman is an economic intellectual powerhouse. He’s got a Nobel Prize!!! Yup, sits right up there with Yassar Arafat, Jimmy Carter, and our President. 

    Had Albert Nobel foreseen how his award would turn out, he’d have blown HIMSELF up.

  • Pingback: Daily Pundit » Obama: From Here On Out, It’s Not Policy, It’s Only Reelection Kabuki()

  • Pingback: Our Economy Can’t Win a Thrown Fight – Huffington Post | Financial News()

  • retired.military

    Krugman  wants to see a war with aliens to get the economy going again.

    Obama may try it since nothing else he has proposed has worked.

  • Pingback: Is any Obama 'stimulus' plan doomed to fail?()

  • Pingback: Is any Obama 'stimulus' plan doomed to fail? | Bachelor Party in Las Vegas()

  • Pingback: A New Obama Stimulus? No Means No Means No… | DBKP - Death By 1000 Papercuts - DBKP()

  • Anonymous