The Inevitable Waste and Corruption of “Stimulus” Spending

September 16, 2011 · Posted in Politics · 1 Comment

A good theory has predictive power. A prediction doesn’t automatically make a theory true, but it’s a good first test in my opinion.

Quite a while ago, I made the case, based on praxeological reasoning, why bureaucracy can’t ever accomplish its stated objectives in the long run.

Based on that theory I suggested many times over that government stimulus programs will not be a panacea to economic sluggishness, quite the contrary.

In particular I wrote almost 3 years ago:

The $800 billion spending bill that is currently being discussed will not fix the US economy.
(…)
This bill was never [Obama's] bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him.
(…)
To ignore [those who oppose it] would be the biggest mistake Obama could make now.
(…)
If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

Here we are, almost 3 years later, with an unemployment rate higher than it was at the time (~9% now vs. ~8% then), which I would submit as one piece of evidence that the stimulus did not work. (My readers will know that there are many more, but that’s not the main point of this post!)

(And yes, I know the good old argument that “it would have been much worse, had it not been for the stimulus” etc. I would only kindly ask that anyone wanting to submit such an argument please logically refute the counter arguments that I have already laid out very clearly in The Trouble With Bureaucracy, and empirically supply specific examples that corroborate this thesis and that outweigh any evidence that may exist to the contrary.)

But in addition to that, I would say that the corruption, scandals, waste, and the ensuing political backlash that I predicted above, have only just begun to unravel: The case of Solyndra is suddenly a big thorn in the administration’s side, and it doesn’t seem to be going away any time soon:

Pressure on the Obama administration over the loan guarantee given to Solyndra ratcheted up after the discovery of e-mails from a White House official warning of possible political ramifications of the loan. As Carol Leonnig and Joe Stephens reported:

A White House official fretted privately that the Obama administration could suffer serious political damage if it gave additional taxpayer support to the beleaguered solar-panel company Solyndra, according to newly released e-mails.

(…)

Solyndra, the first renewable-energy company to receive a loan from the stimulus law creating the guarantee program, had its headquarters raided by the FBI last week. As AP reported:

The FBI raided Solyndra’s headquarters last week and interviewed company executives at their homes. A U.S. official, who spoke on condition of anonymity because the case is under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government.

The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company’s headquarters last year.

Even as Obama declared that “the future is here” during a May 2010 visit to Solyndra, warning signs were being sent from within the government and from outside analysts who questioned the company’s viability.

At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program.

… and as was predictable, Republicans are happy to pounce:

“What did the stimulus give us last time? It gave us Solyndra,” Bachmann said to cheers at a packed Tea Party fundraiser this week in liberal Marin County. “Wasn’t that great?”

Bachmann is among the growing ranks of Republicans, including the lineup of 2012 GOP presidential candidates, who are increasingly salting their stump speeches, press releases and talking points with references to the Fremont firm that once was a poster child for the Obama administration on alternative energy jobs before it shut down last month.

The Minnesota Congresswoman and Tea Party darling delights audiences when she dryly quotes Vice President Joe Biden’s past observation that the federal government’s $528 million loan to Solyndra “was exactly what the stimulus act was all about.”

“It’s exactly true,” she said to cheers and applause from conservative activists in Marin on Thursday. “I tell you … we have so much material, it’s going to be a joy.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/09/16/MNED1L5MRI.DTL#ixzz1YAbztAT7

I would actually be shocked if this will remain the only example of blatant stimulus waste that will come back to haunt the president.

Actions have consequences; stupid decisions, whose long term impact you are unable to assess, will come back to bite you in the ass, particularly during election year. From the Republicans’ viewpoint, Obama could not have picked a better time for pushing the stimulus bill, since it usually takes at least a few years for all the filth and corruption of giant government programs to build up and trickle through the shiny, pompous, and mindless facade of politics.

But as I have come to realize about politics a while ago, the best thing to do in my opinion is to abstain from participating in these spectacles, sit back, relax, and don’t hurt your head too much about petty, boring, and small minded sociopaths who aspire to exercise power over millions of people year after year.

Tags: obama, Politics, stimulus

Mish on Tech Ticker on Stimulus & Markets

July 10, 2010 · Posted in General Economics, Investing · Comment

There’s no hotter debate right now than stimulus vs. austerity, as folks like Paul Krugman and even Barack Obama call for more spending to fix the economy.

Michael “MISH” Shedlock is not having any of it, arguing that the financial pump has failed, and that the only way to get the economy back on track is to pursue a policy of less government, and less spending, with a special focus on reforming pensions, public sector unions, and other institutions that drain the government of its resources.

As evidence: Japan. The country has now seen multiple decades of recession despite massive pumping on both the fiscal and the monetary side.

But at least Japan hasn’t had a debt crisis yet, right? The key word there, says Mish is “YET.” The fiscal situation in Japan is getting more and more tenuous, and it’s no sure thing that the market will retain its confidence in the Japanese government’s ability to finance its debt. And of course the same thing could happen here.

But for now in the US the big risk is deflation, which you can see in housing and other economic categories. Spending won’t solve this problem; actual economic adjustment is what’s needed to start growing again.

The bulls have pushed aside the bears on Wall Street — for now. Signs of optimism following three consecutive winning days in the stock market have replaced the doom and gloom mood so prevalent in the two prior weeks.

Having already heard the bullish case from Doug Kass and James Paulsen earlier this week, Tech Ticker decided to invite Mike “Mish” Shedlock, author of Mish’s Global Economic Trend Analysis, back on the show to hear the other side of the argument.

Is he bearish? You bet!

“The optimism out there is rather insane,” he says. There’s only a 15-20% chance of the market rallying, Mish tells guest host and Business Insider deputy editor Joseph Weisenthal. “It’s more likely we go down there and test the March lows, and there’s a decent chance actually that we break those lows,” he says.

Mish says “it is nuts to be net long” stocks right now in the face of all these headwinds:

– Slowdown in Europe as austerity measures take hold.

– Slowdown in U.S. as stimulus fades, housing remains weak, state and local governments cutback

– China looks to cool its economy in the face of growing housing bubble

Until Mish sees signs of sustainable job growth, he’ll be firm in his bearish stance. “Without a driver for jobs I don’t know how someone could be bullish on the stock market.”

If not stocks, then what?

Mish is sticking with what’s worked this year: Treasuries and gold. Treasury yields are still near record lows, but he think with the macroeconomy the way it is, it’s very possible, “the bull market in Treasuries is not over.” As for gold, he’d buy on the dips.

On Thursday, a slew of retailers posted monthly same-store sales. They were described best as a “mixed bag.” There was no obvious trend in terms of up or down, even within specific categories of retailers. But bulls on the economy should be disappointed.

For one thing, notes Mike “MISH” Shedlock author of Mish’s Global Economic Trend Analysis, the same-store sales gainers benefited by the general reduction in store locations. Essentially, survivorship bias is skewing the numbers. If somehow you could take into account all the locations that had been shuttered, you’d see that things were much worse.

And there’s evidence for this, notes Mish. State sales tax collections remain depressed, with no indication of a rebound. That, more than the corporate numbers, is the key thing to pay attention to.

And with states thirsting for cash, this is a crucial problem that will play out in terms of further budget cuts, and a further drag on the economy.

Ultimately it’s all about jobs. Without a jobs recovery, there will be no consumer recovery, and without a consumer recovery, there’s little reason to be excited about the market or the economy.

Tags: markets, mish, stimulus

Spending Freeze, Fed Scepticism, Political Gridlock a.k.a. “Hitting a Wall”

January 26, 2010 · Posted in General Economics · Comment

Markets have been sending stronger signals over the past few days:

The Dollar has continued to extend its rally as expected.
US stocks have dropped by over 5% in very short time
Chinese and other foreign stocks are beginning to lose ground again after a short bounce

Economic data most recently indicated that existing home sales suffered the biggest slump in 40 years:

Sales of previously owned homes took their biggest tumble in at least 40 years last month as the impact of a buying spree spurred by a tax credit for first-time buyers waned, according to industry data released Monday.

Those who rushed to meet the original November deadline to take advantage of an $8,000 tax credit for first-time home buyers caused a surge in sales earlier in 2009, but left the market wobbly by the end of the year. First-time buyers, who made up more than 50 percent of sales earlier last year, represented just 43 percent of the market in December. The shift also resulted in fewer sales of lower-cost homes, which first-time buyers typically seek.

After three months of increases, sales of existing homes, including condos and single-family residences, fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million in December compared with the previous month, according to National Association of Realtors data. That was a bigger drop than analysts had expected and the lowest sales rate since August. It was also the biggest monthly decrease on records that date to 1968, according to the industry group.

The December decline “was payback for the tax credit,” said Patrick Newport, an economist for IHS Global Insight.

… once the tax credit incentive vanishes home prices will head south again, this is really something that intuitively nearly everyone I talked to knew from the get go, the only question is how much longer Congress wants to keep extending it. It seems like they don’t have a whole lot more to play with.

Today, the Obama administration leaked plans for a spending freeze:

President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Mr. Obama’s State of the Union address on Wednesday and of the budget he will send to Congress on Monday for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

Last but not least, there is growing skepticism among lawmakers about Ben Bernanke and of course the Federal Reserve in general:

Even if Mr. Obama and the Senate majority leader, Harry Reid, get the 60 votes necessary to surmount a threatened filibuster against Mr. Bernanke, the Fed appears to have taken a hit to its reputation.

“The public’s confidence in the Fed has been dramatically eroded, and that’s not good,” said Laurence H. Meyer, a former member of the Fed’s board of governors who runs a consulting firm, Macroeconomic Advisers. “The vulnerability of the Fed to a loss of independence is higher than it’s ever been. And the chairman’s credibility with Congress is very low, and that’s not good for the institution.”

… but of course good for the American people, I may add.

Not that any of the things I outlined above will change anything as far as the general direction of government growth and power grabbing is concerned. But in the short run it clearly looks like they are hitting a wall right here and now, at least it is hard to find many signs to the contrary.

As I explained before:

The key thing to keep in mind in all of this: The recent rally, green shoots, and recovery hopes have been created and/or fueled by massive government expenses, and by a believe in the omnipotence of our leaders in Washington.

But government spending sprees, too, will have to come to an end sooner or later. On top of that, all that the recent government programs have accomplished is to get marginal individuals back to the same flawed habits, such as owning unaffordable homes, buying too many cars, etc.

The interest that the government has to pay on its debts when it runs up sky high deficits, and the taxes it will have to raise in order to make those payments, will be hanging over the recovery like a Damocles Sword. The Federal Reserve, too, will be faced with a similar situation. Let’s assume, for the sake of the argument, that lending activity on homes, cars, etc. were to pick up again. What will the Fed do then? Cut interest rates? Add more bank reserves? Surely not, quite the opposite.

Once existing stimulus programs and credit expansion attempts subside, there won’t be much left to pick up the slack. The consumer won’t be able to go back to business as usual unless he goes through a long period of reduced consumption, deleveraging, and savings, a period during which the majority of production and spending inside the US will have to be focused on capital goods, so as to restore a balanced ratio between the production of consumer goods and the production of capital goods.

At the point when these government stimuli wind down, Keynesian clowns will be jumping out of the bushes left and right, and demand that the government take on more debt and spend more money. But at some point their mindless tirades will no longer appeal to an overtaxed and overleveraged populace. Their ivory tower nonsense will be way too far detached from simple realities.

Any temporary recovery we witness now, is likely to be remembered as just that, a temporary phenomenon. All actions taken so far have set the perfect stage for a double dip recession of enormous proportions, the worst possible prolongation of the necessary correction.

If it was our dear government’s objective to repeat the playbook from the Great Depression one by one, then they have indeed succeeded phenomenally.

Tags: dollar, double dip recession, markets, stimulus, stocks

Government Spending Fails To Create Jobs – Economists Confused As Always

January 13, 2010 · Posted in General Economics · 2 Comments

A brilliant government is again surprised as Unemployment unchanged by projects:

A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama’s first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an “urgent need to accelerate job growth.”

An Associated Press analysis of stimulus spending found that it didn’t matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.

With the nation’s unemployment rate at 10 percent and expected to rise, Obama wants a second stimulus bill from Congress including billions of additional dollars for roads and bridges – projects the president says are “at the heart of our effort to accelerate job growth.”

Transportation Secretary Ray LaHood defended the administration’s recovery program Monday, writing on his blog that “DOT-administered stimulus spending is the only thing propping up the transportation construction industry.”

Road spending would total nearly $28 billion of the Jobs for Main Street Act, a $75 billion second stimulus to help lower the unemployment rate and improve the dismal job market for construction workers. The Senate is expected to consider the House-approved bill this month.

But AP’s analysis, which was reviewed by independent economists at five universities, showed the strategy of pumping transportation money into counties hasn’t affected local unemployment rates so far.

“There seems to me to be very little evidence that it’s making a difference,” said Todd Steen, an economics professor at Hope College in Michigan who reviewed the AP analysis.

And there’s concern about relying on transportation spending a second time.

“My bottom line is, I’d be skeptical about putting too much more money into a second stimulus until we’ve seen broader effects from the first stimulus,” said Aaron Jackson, a Bentley University economist who also reviewed AP’s analysis.

For the analysis, the AP reviewed Transportation Department data on more than $21 billion in stimulus projects in every state and Washington, D.C., and the Labor Department’s monthly unemployment data to assess the effects of road and bridge spending on local unemployment and construction employment. The analysis did not try to measure results of the broader aid that also was in the first stimulus such as tax cuts, unemployment benefits or money for states.

Even within the construction industry, which stood to benefit most from transportation money, the AP’s analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.

“As a policy tool for creating jobs, this doesn’t seem to have much bite,” said Emory University economist Thomas Smith, who supported the stimulus and reviewed AP’s analysis. “In terms of creating jobs, it doesn’t seem like it’s created very many. It may well be employing lots of people but those two things are very different.”

Despite the disconnect, Congress is moving quickly to give Obama the additional road money he requested.

“We have a ton of need for repairing our national infrastructure and a ton of unemployed workers to do it. Marrying those two concepts strikes me as good stimulus and good policy,” White House economic adviser Jared Bernstein said. “When you invest in this kind of infrastructure, you’re creating good jobs for people who need them.”

Even so, transportation spending is too small of a pebble to create waves in the nation’s $14 trillion economy. And starting a road project, even one considered “shovel ready,” can take many months, meaning any modest effects of a second burst of transportation spending are unlikely to be felt for some time.

“It would be unlikely that even $20 billion spent all at once would be enough to move the needle of the huge decline we’ve seen, even in construction, much less the economy. The job destruction is way too big,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America.

Few counties, for example, received more road money per capita than Marshall County, Tenn., about 90 minutes south of Nashville.

Obama’s stimulus is paying the salaries of dozens of workers there, but local officials said the unemployment rate continues to rise and is expected to top 20 percent soon. The new money for road projects isn’t enough to offset the thousands of local jobs lost from the closing of manufacturing plants and automotive parts suppliers.

“The stimulus has not benefited the working-class people of Marshall County at all,” said Isaac Zimmerle, a local contractor who has seen his construction business slowly dry up since 2008. That year, he built 30 homes. But prospects this year look grim.

The stimulus has produced some jobs. And a growing body of economic evidence suggests that government programs, including a $700 billion bank bailout program and the $787 billion stimulus, have helped ease the recession.

Highway projects have been the public face of the president’s recovery efforts, providing the backdrop for news conferences with workers who owe their paychecks to the stimulus. But those anecdotes have not added up to a national trend and have not markedly improved the country’s broad employment picture.

The 400-page stimulus law contains so many provisions – tax cuts, unemployment benefits, food stamps, state aid, military spending – economists agree that it’s nearly impossible to determine what worked best and replicate it. It’s also impossible to quantify exactly what effect the stimulus has had on job creation, although Obama points to estimates that credit the recovery program for creating or saving 1.6 million jobs.

It is also becoming more difficult to obtain an accurate count of stimulus jobs. Those who receive stimulus money can now credit jobs to the program even if they were never in jeopardy of being lost, according to new rules outlined by the White House’s Office of Management and Budget.

The new rules, reported Monday by the Internet site ProPublica, allow any job paid for with stimulus money to count as a position saved or created.

Rep. Darrell Issa, R-Calif., complained in a letter sent last week to the government board monitoring stimulus spending that the new policy would make job counts “even more misleading.”

But Republicans aren’t expected to oppose Obama’s plans to increase transportation spending, a politically popular idea supported even by some in the GOP who have criticized other stimulus programs.

The road money ripples through the economy better than other spending because it improves the nation’s infrastructure, said Bernstein, the White House economist.

But that’s a policy argument, not a stimulus argument, said Daniel Seiver, an economist at San Diego State University who reviewed AP’s analysis.

“Infrastructure spending does have a long-term payoff, but in terms of an immediate impact on construction jobs it doesn’t seem to be showing up,” Seiver said. “A program like this may be justified, but it’s not going to have an immediate effect of putting people back to work.”

This is simply funny. This is the only assessment I can make. You have all these economists running around, looking up data, and trying to figure out what is happening and why no “jobs are being created” as a result of government spending.

Well, let me break it down for these people in very simple terms: The government is a group of people that obtains money from other people by the use of force or threat thereof. It uses that money for certain projects. But it doesn’t need to sell anything at any price. This is the phenomenon of bureaucracy. Thus it doesn’t need to create value in any way. Thus it opens the doors to corruption and rackets that make a few people and corporations very rich and in the very process, simply by it’s nature, destroys value.

To think that government spending would improve the jobs situation in the country is plain nonsense. For where does the government take the money from that it spends on projects? It takes it from the taxpayer. The fact that this has to be pointed out and nowhere appears in the page long analyses of ivy league economists is certainly annoying, but we have to deal with these amateurs unfortunately.

If Carl Consumer used to spend $10 per week in the bakery, Bob Bakery will use that money to cover cost like staff, appliances, etc. If Gordon Government holds a gun to Carl’s head, threatens him with kidnapping, and takes those $10 per week from him, then he won’t have the money to spend it in the bakery anymore. Gordon Government can now hire his campaign backer Conrad Contractor for that money to fix potholes in a road, or to dig holes in the desert, or whatever Conrad’s field of expertise is. Conrad Contractor will be happy about his new occupation, while Bob Bakery will be sad and will have to let people go due to fewer bread sales.

This transaction in itself is a zero sum game, as far as immediately visible numbers are concerned. But doesn’t the fact that Gordon Government uses the threat of violence to get to that money in the first place give you at least some little doubt as to whether or not he will spend the money wisely? If so, then you are on the right track. Because this is at the root of all government expenses. What destroys value and long term jobs in this process is the Trouble With Bureaucracy.

“Aaaah, …” says now the boring Princeton kindergarten economist with beard, “… you amateurs fail to realize that the government does NOT fund this effort via taxation, but instead borrows the money, and uses sound deficit spending to create wealth and jobs out of nothing. See it’s really simple: The government spends more money and through the well known multiplier effect the entire economy is turned around, saved, and turned into a paradise of sugar trees and chocolate rivers.”

OK, very well, let’s say Gordon Government does borrow the money. Who does he borrow the money from and under what premise? He borrows the money from Ian Investor who has saved up some money looking for alternative investments on the capital markets. He tells Ian Investor: “Hey, Ian, look no further, forget about all these visionary entrepreneurs and fascinating projects you are planning to fund. Give me that money. I will use it for some road projects or something else I will somehow come up with on the fly, but I will make sure today’s children, who luckily can’t vote yet, will be forced via the threat of imprisonment to pay off your debt at some distant point in the future! I call it taxation and I’ll make everyone believe it’s justified! Isn’t it great?? :))” Ian Investor now swiftly tells Ed Entrepreneur who was looking to hire people for his electric car startup, that he found a better prospect and gladly turns his funds over to drooling Gordon.

Get it? Is this so hard? Is there anything anybody doesn’t get about this in Congress? Of course not. These people are well aware of what they are doing. But they don’t care about what they are doing to the common people. They don’t care that they are destroying value. Why not? Why should they?? You and you, and you over there have given them the power to violently take your money under the threat of imprisonment. Why in the world would they care what happens to you??

Wake up people!

Tags: stimulus, unemployment

100 + 1 Examples of “Stimulus” Waste – Obama Job Approval At All Time Low

December 10, 2009 · Posted in Government · 1 Comment

Mish has a sampling of some stimulus projects, all of them trying to outdo each other in their uselessness – a schoolbook example of what happens when the government gets to spend billions:

1. “Almost Empty” Mall Awarded Energy Grant ($5 million)
The Department of Energy has announced an award for up to $5 million6 to install a geothermal energy system capable of heating an ―almost empty‖ mall in Oak Ridge, Tennessee.

2. Renovations for Federal Building as Expensive as New Building ($133 million)
Taxpayers in Oregon may be surprised to learn that the largest stimulus project in their state is not a new road or bridge, but a $133 million makeover for the federal building in downtown Portland. The money will go toward ―greening the Edith Green/Wendell Wyatt Federal Building in the hope of making it a model for energy efficient government offices in the Northwest. That said, for $133 million some may wonder why they did not simply tear it down and start over.

Agency officials expect to construct a type of vegetative skin—made of plants—on the exterior of the building, to help with heating and cooling costs.

In 2007, a new federal building was constructed in downtown San Francisco with similar state-of-the-art energy efficiency features for $144 million—nearly the same cost to merely renovate the Portland Federal Building. Both buildings are eighteen stories tall, built with energy efficient technologies, and house federal agency offices. The major difference is that the San Francisco building is much larger, with an additional 100,000 usable square feet in comparison with its counterpart in Portland.

3. DTV Advertising Agency Generates Three Jobs ($5.9 million)
An advertising agency that ultimately reported little job creation received a multi-million dollar contract to help the government overcome a poorly managed transition to digital television, only to report three jobs created.

4. Research to Develop Supersonic Corporate Jets ($4.7 Million)
Lockheed Martin will receive a total of more than $21 million in federal money—with $4.7 million funded through the American Recovery and Reinvestment Act—from the National Aeronautics and Space Administration (NASA) to advance research for supersonic jet travel. High ticket costs, fuel-guzzling and the infamous sonic ―boom helped doom commercial supersonic travel in the past; the last Concorde jet flew in 2003.

5. Water Pipeline to a Money-Losing Golf Course ($2.2 million)
A $2.2 million stimulus grant will help pay for new pipes to pump recycled water to the Sharp Park Golf Course in San Francisco, California. Unfortunately, the golf course may not exist for much longer. The City Council is considering closing the public course over concerns for the California red-legged frog and the San Francisco garter snake that live in the area.

7. Program to Control Home Appliances From a Remote Location ($787,250)
Fifty homes on Martha‘s Vineyard in Massachusetts will participate in a test program to allow an outside party to control their energy use, ―Big Brother style. The initiative will allow participating households to purchase discounted appliances from General Electric (GE) that are capable of communicating with – and being controlled by – an off-site computer system.

20. Repaved Georgia Road . . . Getting Repaved Again ($88,000)
Georgia Department of Transportation (GDOT) contractors are using stimulus funds to repave a busy street in Atlanta—part of which was repaved just two years ago. Rebecca Serna, a local bicyclist, noted that the existing road is ―pretty much the smoothest ride in town right now, adding about the new project, ―I don‘t know if it‘s necessary, but it‘s nice.

23. Studying the Icelandic Arctic Environment in the Viking Age ($94,902)
The University of Massachusetts-Boston received an almost $95,000 stimulus grant to ―count pollen grains collected from farms in Iceland and allowed researchers to continue studying the role the arctic environment played in the evolution of civic life during the Viking Age.

33. Study on “Hookup” Behavior of Female College Coeds ($219,000)
The National Institute of Health (NIH) is using stimulus funds to pay for a year-long $219,000 study to follow female college students for a year to determine whether young women are more likely to ―hookup — the college equivalent of casual sex — after drinking

35. Study of Wildflowers in a Ghost Town ($448,995)
A few dilapidated buildings are largely what remains in Gothic, Colorado, a ghost town that is also home to the Rocky Mountain Biological Laboratory. Over the next five years, however, Gothic will host a $448,995 National Science Foundation study by Dr. David Inouye on the impact of climate change on the town‘s wildflowers.

38. Recovering Crab Pots Lost At Sea ($700,000)
A $700,000 grant will pay for 48 people to help Oregon crabbers recover crab pots they have lost at sea. The two-year project expects to yield 2,000 lost pots a year. Oregon crabbers reportedly lose an estimated 15,000 crab pots a year. The effort will use 10 boats, planes, and a telephone hotline for people to phone in crab pot sightings. If all 4,000 pots are recovered as expected, the grantees will spend an average of $175 per crab pot, though John‘s Sporting Goods in nearby Everett, Washington sells new crab pots online for as little as $19.95.

50. Arizona Ants Work While Some Arizonans Remain Unemployed ($950,000)
Two major universities in the state are receiving a combined $950,000 to examine the division of labor in ant colonies. Arizona State University was awarded $500,000 in stimulus funding by the National Science Foundation, while the University of Arizona will receive $450,000.

51. Study On Why Young Men Do Not Like Condoms ($221,355)
Indiana University professors received $221,355 in economic stimulus funds to study why young men do not like to wear condoms.

56. Homeland Security Funds Assist Boat Tours of Alcatraz ($50,783)
A ferry service that once contracted for the federal government will receive over $50,000 in stimulus homeland security grants, despite no longer doing any work for the government.

60. Town of 838 to Renovate Old Hotel into a Welcome Center ($300,000)
Tourism may not be booming in Crofton, Kentucky (population 838),267 but the town has received $300,000 in stimulus funds to convert an abandoned downtown hotel into a visitors‘ center.

79. Money for Lighthouse Repairs on Uninhabited Island (Nearly $1.5 million)
Located on a barrier island accessible only by water, Monomoy National Wildlife Refuge on Cape Cod, Massachusetts, is an area that has been empty for decades. However, the Department of the Interior will spend nearly $1.5 million in federal stimulus funds to fix the lighthouse and other facilities on the Refuge. The project will restore the lighthouse, living quarters and an oil shed.

I would like to submit one more. The irony couldn’t be more rampant. Right after the $787 billion spending bill was passed, the administration launched www.recovery.gov. “Recovery.gov is the U.S. government’s official website providing easy access to data related to Recovery Act spending and allows for the reporting of potential fraud, waste, and abuse.” After a few months the administration decided to redesign this site … and awarded an $18 million contract to SmartTronix, a company that supported House Majority Leader Hoyer’s campaign:

ABC reports this morning that the Maryland firm Smartronix has won what seems like an enormous $18 million contract to re-design the Recovery.gov website. Approximately $9.5 million would be spent by January in order to make “Recovery 2.0″ out of the site that is supposed to track the spending of federal stimulus funds in detail.

Smartronix, a medium-sized Maryland-based firm (over 500 employees) founded in 1995, boasts a large number of government clients, mostly military. The company appears to have just one important political connection: according to FEC records, Smartronix president, Mohammed Javaid, vice president Alan Parris, and partner John Parris have together given $19,000 to House Majority Leader Steny Hoyer (D) since 1999. There is no record of a Smartronix employee contributing to any other federal politician.

UPDATE: Smartronix got $260 million in other federal contracts

Smartronix has received more than $260 million in federal contracts since the year 2000, with the top awarding agencies being the U.S. Navy, Federal Technology Service, U.S. Air Force, U.S. Minerals Management Service, and the Office of Policy, Management and Budget (not clear which department or agency issued this contract), according to USASpending.gov.

Nearly $180 million of the contracts awarded to Smartronix during the period 2000-2009 were awarded on less-than-competitive basis, including $21 million for non-competitive awards. Another $33 million was awarded in competitive processes in which Smartronix was the sole bidder.

Ed Morrissey at Hot Air has more details on Smartronix government contract awards. — Update by Mark Tapscott.

Want a comparison?

UPDATE III: USASPENDING.GOV much cheaper

Although the short timeline of the Recovery 2.0 project may render the comparison unfair, the site will be vastly more expensive than USASpending.gov, whose purpose is similar. The USA Spending site, which came about as a result of transparency legislation written by then-Sen. Barack Obama, D-Ill., and Sen. Tom Coburn, R-Okla., tracks federal contract spending by state, zip code, and Congressional District, as well as by contractor and type of award. It also gives details down to the transaction level for contracts made in every year since 2000.

The software package for USASpending.gov was purchased from a non-profit budget watchdog group, OMB Watch, for just $600,000.

I am from this business, so I can tell you that $18 million for redesigning one website to track something like this is a complete and utter outrage. Heck, I know of venture funded businesses that were happy about an $18 million investment that could carry them over a few years.

But all of this is of course completely expectable and the people are at fault for applauding Obama for pushing this rip off at the time it was being discussed. Back then I wrote:

Obama is gambling with the future of his administration. If he doesn’t deliver true change, things will get worse and worse. If he shoves this bill down the throats of the American people, it will be him and Democrats in Congress who will have to share the blame. This bill was never his bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him.

… I hope people are paying attention …

Barack Obama’s presidential job approval rating is 47% in the latest Gallup Poll Daily tracking update, a new low for his administration to date. His approval rating has been below 50% for much of the time since mid-November, but briefly rose to 52% last week after he announced his new Afghanistan policy.

… maybe they are :)

Tags: stimulus, waste

Not Feelin’ The Stimulus …

July 9, 2009 · Posted in Interventionism · Comment

CNNMoney.com writes Stimulus spending short sighted – watchdog:

Fiscally-stressed states are using their stimulus dollars to satisfy immediate needs rather than undertake longer-term reforms, according to a government report released Wednesday.

For example, states are spending education funds to prevent layoffs and maintain programs, a Government Accountability Office report found.

Trying to survive one of the worst economic downturns since the Great Depression, state and school district officials say they don’t have the money to undertake projects such as building new schools and expanding early-childhood education.

Similarly, states are using nearly half their infrastructure funds for pavement improvements, which can be implemented quickly and don’t require environmental clearances and in-depth design work.

The $787 billion recovery act walks a fine line between trying to get funds out quickly to stimulate the economy and spurring longer-term initiatives.

In Flint, Mich., for instance, no new school buildings have been constructed in more than 30 years. While the district would love to use stimulus funds to renovate its facilities, the cash-strapped city must use the money to maintain current programs.

Near 2,000 teachers will retain their jobs in Florida’s Miami-Dade district because of stimulus funds. Officials in half the states surveyed said recovery act money will prevent layoffs.

The recovery act’s architects had hoped districts would use the funds to put in place longer-lasting educational reforms that improved student achievement. In order the receive the funds, schools must assure they will increase teacher effectiveness, provide support to turn around troubled schools and advance in creating college-ready and career-ready standards.

The budget crisis, however, is putting those efforts on the back burner.

“Many school district officials also reported that using [stimulus] funds for education reforms was challenging given other more pressing fiscal needs,” according to the report.
GAO finds flaws

The GAO is charged with tracking stimulus spending in 16 states and the District of Columbia that combined will receive two-thirds of the funds. Wednesday’s 161-page report is the second it has released.

The federal government is pushing out stimulus funds slightly faster than expected. As of June 19, $29 billion was given to states and localities — 90% of which has gone toward Medicaid and education.

The money is helping states deal with their budget crunches, Acting Comptroller General Gene Dodaro told a congressional committee Wednesday.

Still, the agency found that some states have been giving short-shrift to a recovery act requirement that infrastructure projects be located in economically distressed areas. Officials in many states told the GAO that they had picked the projects based on other priorities and only later gave consideration to ones in economically troubled areas.

And some stimulus money is going untouched, in part because state agencies are still waiting for federal guidance or approval or are still soliciting bids. For instance, public housing agencies have only spent 1.1% of the federal money made available for rehabilitating apartments.

States are also cutting back on staffing, leading to concerns about how well they will be able to report their use of stimulus dollars. Officials are finding it tough to create initiatives — such as a summer youth employment program — in the tight timeframes required by the act.

“Once the recovery act was passed, states and local areas had only about 4 months to get their new summer youth employment activities up and running — a process that officials told us would normally begin many months earlier,” according to the report.

The GAO report recommended the White House improve reporting requirements and ensure more direct communication with state officials. It also raised red flags about the reliability of the data on the government’s site, www.USAspending.gov, and the level of accountability for monitoring the funds’ use.
What about the jobs?

Lawmakers, however, were more interested in grilling Robert Nabors, deputy director of the White House budget office, about the number of jobs the stimulus funds have created or saved.

The administration has said stimulus funds have already created or saved 150,000 jobs, and should create another 600,000 by summer’s end. The figures are based on estimates that each $92,000 in stimulus money spent creates one job.

Nabors said that while America is still losing jobs, it is doing so at a slower pace because of stimulus money. The number of positions that disappeared in June, 467,000, was fewer than the monthly job-loss pace of 691,000 in the first quarter.

“We are making progress, but we have a long way to go,” Nabors said.

Republican lawmakers lashed into Nabors, questioning his figures and saying that the recovery act hasn’t lived up to President Obama’s promises.

“How can you justify that?” said Rep. Jason Chaffetz, R-Utah, of the estimate.

What a bunch of nonsense. Created or saved 150,000 jobs? What is that even supposed to mean? It is based on the assumption that taking $92,000 from a taxpayer and spending it on fixing potholes will create new jobs. What they are forgetting is that when the money is taken from somewhere else it will be missing somewhere else, curb consumption there and cost jobs there. It substitutes bureaucratic jobs for productive jobs. It is sad to hear these mindless statements made with impunity again and again. It is annoying to see people act surprised about 100% predictable outcomes.

As I said before, this stimulus bill won’t fix a darn thing …

The $800 billion spending bill that is currently being discussed will not fix the US economy. Just as too much government intervention caused (not fixed) the Great Depression in 1929 and the following years, just as the Bush administration’s spending spree which turned surpluses into deficits, just as the rise of government expenses over the past 100 years, more government spending will not solve a darn thing. Quite the opposite. It will dig us a deeper hole. There is no way around this truth. There is no point ignoring or denying The Trouble with Bureaucracy.

There is no “Change” in having the government spend more money. If government spending was good for the economy, the United States should by now have the best economy in the universe. Spending more money is in fact precisely the opposite of change. It is more of the same.

In fact, the administration itself realizes that the “stimulus” is obviously not working. What solution do they have on the table now? Of course, a second stimulus:

The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an outside adviser to President Barack Obama.

Insanity? Why, yes that’s exactly what this is. And guess what: If there were to be a second stimulus it won’t work either. And what will be the proposed solution after that? You know it.

Which brings us back to the likely outlook for the US over the next years:

Thus the long term outlook for the US economy is the fate Japan took: A long lasting correction supercycle with one failing “stimulus” program after another, and with on and off periods where the economy slips out of and back into recessions from time to time.

Tags: fiscal stimulus, stimulus

Stimulus for Everyone

April 1, 2009 · Posted in General Economics · 3 Comments

The US faces the most severe crisis in history. Everyone is facing the threat of bankruptcy. If everyone were to go out of business, everyone would lose their jobs. Everyone is too big to fail. It is not just those who are directly employed by everyone, millions of people are contractors and vendors who supply everyone. They, too, would be affected.

Unfortunately the stimulus for everyone faces strong opposition in Congress. Only a few brilliant public figures have realized how severe the situation is:

Financial Services Committee Chairman Barney Frank had the following to say:

“If we don’t help everyone, we will see a disastrous ripple effect that will affect everyone. In a crisis like the current one we cannot afford this.”

House Speaker Nancy Pelosi:

“Bankruptcy is simply not an option for everyone. It takes way too long to go through the Chapter 11 proceedings for everyone. There is too much at stake here. We’re not just looking at anyone here, we’re talking about everyone!”

President Barack Obama:

“We need a stimulus for everyone. Everyone employs roughly 100% of the American workforce. We can’t afford unemployment to jump up to 100%.”

A businessman from Detroit who sells stuff and is directly affected by everyone’s financial problems:

“Imagine you buy something from everyone and then it breaks. Who’s going to fix it when everyone goes out of business?”

The money for this historic stimulus would of course have to be raised through taxes, levied upon everyone. It is imperative that the government step up to the plate and take money from everyone in order to stimulate everyone, whether everyone likes it or not. Now is really the time for everyone to set aside their selfish greediness and do what is right for everyone.

Thus, this April 1st let’s all get together and stimulate everyone.

Tags: stimulus

Strategy Room with Judge Napolitano, Ron Paul, Peter Schiff

February 21, 2009 · Posted in Politics · Comment

Great panel discussing the scams, boondoggles, and crimes perpetrated by the Bush and the Obama administrations.

Part 1/6:

Part 2/6:

Part 3/6:

Part 4/6:

Part 5/6:

Part 6/6:

Tags: andrew napolitano, fiscal stimulus, peter schiff, ron paul, stimulus

DeMint Unveils ‘The American Option: A Jobs Plan That Works’

February 10, 2009 · Posted in Politics · Comment

The intentions behind this proposal are good, but the execution of introducing it is pretty sad. He suggests tax cuts but doesn’t dare to touch the holy cow, spending. As long as republicans approach their counterparts in Senate or the President in this manner their demands will fall on deaf ears. Spending has been the main problem that has driven the US economy into a ditch. Democrats are now offering the solution: More spending!

The only conclusion they can draw from the examples of The Great Depression, the 70s crisis, or the Japanese crisis is that they didn’t spend enough.

After all $800+ billion are spent and as all these new measures fail miserably, their only conclusion will be that we need more spending. This is a far greater disaster in the making.

This spending plan will forever be remembered as President Obama’s Iraq War.

Tags: demint, stimulus

Obama Makes an Unnecessary Gamble

February 6, 2009 · Posted in General Economics · 2 Comments

The $800 billion spending bill that is currently being discussed will not fix the US economy. Just as too much government intervention caused (not fixed) the Great Depression in 1929 and the following years, just as the Bush administration’s spending spree which turned surpluses into deficits, just as the rise of government expenses over the past 100 years, more government spending will not solve a darn thing. Quite the opposite. It will dig us a deeper hole. There is no way around this truth. There is no point ignoring or denying The Trouble with Bureaucracy.

There is no “Change” in having the government spend more money. If government spending was good for the economy, the United States should by now have the best economy in the universe. Spending more money is in fact precisely the opposite of change. It is more of the same.

Comments on some of President Obama’s flawed statements from today:

“We’re not going to get relief by turning back to the very same policies that, for the last eight years, doubled the national debt and threw our economy into a tailspin,” he said. “We can’t embrace the losing formula that says only tax cuts will work for every problem we face…”

The idea to drastically cut government expenses and use the cost savings to cut taxes is not more of the same. Why would it be? Who ever suggested that the Bush administration cut spending and subsequently cut taxes significantly? It simply didn’t happen. If, of course, you cut taxes by a little bit and borrow and spend ever more nothing will change. This is what happened. The tax cuts were completely insignificant, the spending kept on growing. In fact, the only period in the post war history of the US where taxes where higher than now was from 1997 through 2002. That aside, taxes are at an all time high right now. So please , everyone, stop spreading the nonsense that what has happened in the past 8 years is a proof that a policy of limited government, little government spending and low taxes has failed.

The idea to return to a sound monetary system is not more of the same. It is the opposite. What has led to this crisis is credit expansion and the inevitably ensuing business cycle, caused by excessive money printing by the Federal Reserve Bank, an institution detached from reality and from any checks and balances. There is no change in more deficits and government debt, monetized by an unchecked Federal Reserve. It is more of the same.

The idea to cut taxes on small incomes, payroll taxes, capital gains, dividends, and interest has nothing to do with “trickle down” economics. Who pays the payroll tax? It’s the little guy, the worker, who receives a monthly paycheck which has a large chunk deducted for income and payroll taxes immediately. It’s him who saves part of what is left in stocks and bonds to receive interest and dividend income for his retirement. How is this “trickle down” economics? In fact, I can’t see a better example for “trickle up” economics than this one.

To critics who argue that the government shouldn’t be spending billions with a large and growing deficit, Obama said, “I found this national debt doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office.”

The American people called for change in November, he said, “and that’s what we’re going to deliver.”

The Americal people voted for your program which promises fiscal soundness. They didn’t vote for another $1 trillion additional spending. In case anyone cares what they think on this specific issue, please consider Public Realizes – Stimulus Won’t Work.

Obama rejected calls for more tax cuts and significant slashing of the bill’s more than $800 billion price tag, and said complaints the package was a spending bill rather than a stimulus bill were off base.

“What do you think a stimulus bill is?” he said. “That’s the point.”

Well, Mr. Obama, you keep talking about the “failed policies that doubled our national debt”. What do you think it is that doubled the debt?? What do you think it is that the government has been doing for the past 8 years and beyond that? What do you think has led us to where we are right now? That’s the point.

“They did not vote for the false theories of the past, and they didn’t vote for phony arguments and petty politics, and they did not vote for the status quo.”

President Obama promised change. Cutting taxes and spending would be change. Keeping taxes as insanely high as they are, even considering to raise them, and spending more money is not change. It is the exact opposite of change. It is more of the same. More of the same failed policies that have led to the demise of the US economy.

Considering the facts that

a. the public opposes this bill and
b. it will not work and make things worse,

Obama is gambling with the future of his administration. If he doesn’t deliver true change, things will get worse and worse. If he shoves this bill down the throats of the American people, it will be him and Democrats in Congress who will have to share the blame. This bill was never his bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him. His partisan speech today might very well have marked an early end to bipartisanship for the rest of his tenure.

His fundamental misunderstanding on this matter is that he believes these disagreements are nothing but political games. They are not. They reflect sincere and deep-rooted concerns of the direction where this country has headed. They represent the voices of millions of frustrated workers, businessmen, housewives, students, and retirees calling their representatives, jammed fax machines, letters, town hall meetings, and the like. The movement for liberty is not one of political expediency. Its members are not in it for personal, monetary, or political gain. They are in it for true conviction and with all their heart. But on top of that, it is a movement of substance, reason, logic, and sound understanding of historical and economic facts. There is nothing in the world that could change some one’s mind, once one has understood the true blessings of Freedom, Liberty, Peace, Prosperity, and Happiness. It is a patient movement. It is not in a rush. It isn’t going away. It will grow stronger year by year. To ignore it would be the biggest mistake Obama could make now.

If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

Tags: president obama, stimulus