From this AM's WSJ.
The stimulus failed because it was based on the failed notion that gov't could substitute demand fro the private sector. But there is no substitution because the private sector spends money differently from the gov't. Note in this story how one contractor was told to use smaller tiles to inflate the cost so they would use the money up.
More at the source.
Review & Outlook:Why the Stimulus Failed - WSJ.com
Here is Michael J Boskin showing how Obama failed to deal with the issues he was handed.
Michael J. Boskin: The Obama Presidency by the Numbers - WSJ.com
The stimulus failed because it was based on the failed notion that gov't could substitute demand fro the private sector. But there is no substitution because the private sector spends money differently from the gov't. Note in this story how one contractor was told to use smaller tiles to inflate the cost so they would use the money up.
More at the source.
Review & Outlook:Why the Stimulus Failed - WSJ.com
For those who say the stimulus prevented Great Depression II, the evidence is simply not there.Even zero jobs growth in August doesn't seem to have disrupted President Obama's faith in the economic policies of his first three years, so one theme we'll be listening for in tonight's speech is how he explains the current moment. Why did his first jobs planthe $825 billion stimulusso quickly result in the need for another jobs plan?
For readers who want to know, an important account is offered in a pair of new Mercatus Center working papers by the George Mason economists Garett Jones and Daniel Rothschild, who did field research on what they call the supply side of the stimulus.
The Keynesian theory was that a burst of new government spending would take up some of the slack in aggregate consumer demand. This was justified in 2008, again in 2009, and is still defended now based not on real-world observation but on abstract macroeconomic models that depend on the assumptions of the authors. The Congressional Budget Office's quarterly studiesoften cited to claim the stimulus created tens of thousands of new jobsare based on such a model. By informative contrast, Messrs. Jones and Rothschild interviewed actual people who received stimulus dollars and asked how they spent the money.
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In the first paper, the authors survey 85 different businesses, nonprofits and local governments across the country and conclude that "As is often the case when economic models are transferred from the blackboard to actual public policy, there was a gap between theory and practice."
One of the major patterns Messrs. Jones and Rothschild uncovered was that the top-down stimulus was poorly targeted. In one redolent example, a federal contractor said he was told to use smaller, nonstandard tiles that are harder and more expensive to install in order to increase the cost of the project. That way, the government could claim the money was moving out the door faster. The famous Milton Friedman line about government ordering people to dig with spoons to employ more people comes to mind.
In another case study, a budget shortfall forced a mid-size city to lay off 185 public workersbut the city received a $4 million stimulus grant to improve municipal energy efficiency. The manager of a construction company received funds for "the last thing on our list; and truthfully, the least useful thing." It happened to be a crane and a forklift.
A carpenter forman surveys a construction site funded by federal stimulus in Lakewood, Colorado, in 2010.
The authors are careful to note that such anecdotes do not mean that all of the stimulus was a waste, and they did find some success stories. The problem is that all but the most reductionist Keynesians of the Paul Krugman school believe it matters what the government spends money on. A dollar that eventually will be taken out of the private economy through borrowing or higher taxes to fund pointlessly expensive projectsa la the tiny tilesis not the way to nurture a recovery.
The second paper suggests that the stimulus did not "create or save" nearly as many jobs as the models indicate. On the basis of 1,300 interviews, Messrs. Jones and Rothschild estimate that merely 42.1% of the firms that received grants hired people who were unemployed. Instead, they poached workers from their competitors.
Here is Michael J Boskin showing how Obama failed to deal with the issues he was handed.
Michael J. Boskin: The Obama Presidency by the Numbers - WSJ.com