By Liz Peek
Can you strain muscles by too aggressively patting yourself on the back? If so, the Obama administration must be stocking up on liniments. Not only is President Obama on TV almost daily extolling his team’s accomplishments, Vice President Joe Biden reported on October 1 that the stimulus program was a feat of government efficiency.
Imagine if your kid came home from school proudly displaying an A+ report card. You’d be impressed, right? Maybe not so much when you discover he produced it himself during recess.
Mr. Biden, of course, has been in charge of dispersing the Recovery Act monies; prepare for a positive assessment. The report crows that there have been few instances of outright fraud, that the money headed out the door in a timely fashion, and that few complaints have been lodged about the projects that were undertaken.Unfortunately, the report apparently ignores entirely the stimulus program’s shortcomings.
Though the injection of hundreds of billions of dollars into the economy did in fact marginally lift incomes and spending, it failed to produce as many jobs as originally anticipated, and did not provide a long-lasting boost to the economy. Moreover, it barely nicked the nation’s sagging infrastructure.
A fairer assessment might note that funds from the program were distributed quickly -- mainly because $242 billion were in the form of tax cuts (which can happen overnight) and another $232 billion was simply doled out to ailing state governments. Since decades of abusive labor union agreements have lengthened the list of candidates in the latter category, that giving, too, could happen seamlessly. That doesn’t mean it was positive.
If there is any positive residue of the current recession, it might be that state and local governments will be forced to tackle their unsustainable public employee payrolls. Taxpayers are wising up to the excessive handouts made to placate public employee unions over the past several decades.
New Jersey Governor Chris Christie, for instance, has tapped successfully into a well of resentment over sky-high retirement packages and bloated payrolls. He has even dared take on the teachers’ unions – an impressive and necessary political gamble.
When incomes were climbing, homeowners were not so resistant to hikes in property taxes justified for “investments” in local schools; today they tend to be crankier, and want to see results. Steve Malanga reports in his excellent book “Shakedown” that in California, employee pension costs soared 22-fold from $160 million in 2000 to $3.6 billion in 2010. As a result, the state is virtually bankrupt; they are not alone.
Unfortunately, the stimulus program has postponed that day of reckoning. In the latest quarter, by far the largest number of jobs was “created or saved” at the Department of Education – 454,000 – and the largest single program was the State Fiscal Stabilization Fund, Education State Grants, which accounted for 267,000 jobs.
In fairness, layoffs at the state and local level have been a drag on the economy, and the impact would have been worse but for the stimulus payouts. However, the crushing weight of pension and health obligations on state governments needs to be lightened. That the Obama administration is reluctant to help do so is not surprising. Unions representing state and local workers have been among the biggest rainmakers for Democrats.
Between 1989 and 2010, the American Federation of State, County and Municipal Employees Union, the second largest campaign donor in the country, gave out $42 million, 98% of which went to Democrats. The National Education Association handed out $31 million, 93% to Democrats, and the American Federation of Teachers funneled 98% of their $28 million in donations to Democrats.
These figures are the tip of the iceberg and don’t include voter mobilization drives, which favor Democrats, and other goodies. Stimulus payments to states to keep their teachers and other employees on the payroll keep that ball rolling.
Vice President Biden’s report also extolled the lack of fraud in the program. It didn’t dwell on stupid handouts, which might strike taxpayers as just as wasteful. In the understandable haste to get money into the nations’ bloodstream, numerous projects received funding which are downright silly.
Senators John McCain and Tom Coburn have been chronicling the nuttiest programs, including researching exotic ants in the Indian Ocean or creating computerized choreography; new stories continue to roll in. Recently Bianca Premo, an associate professor, was astonished to find she’d received a $59,000 grant from the Recovery Act to study litigious behavior in colonial Peru.
Ultimately, the Recovery Act did some good, and like most government projects, also produced some expensive and comical results. Unfortunately, only a small fraction of the money seems to have supported important technology or infrastructure with lasting value. Also, the cost per job remains high.
A month from now, Americans will put an election-day price tag on the stimulus program. It may turn out to have been very costly – at least for Democrats -- after all.
Liz Peek is a financial columnist who writes for The Fiscal Times.