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Supervisor Brad Mitzelfelt

Is Stimulus ‘Shovel-Ready’ After All?

There’s a massive government program that has been sold to the American people with the help of a whole lot of shoveling by the Obama Administration and the Democrat-controlled Congress. 

I’m talking about the “stimulus” program, which was supposed to get “shovel-ready” projects built right away, giving an immediate shot in the arm to the economy.

It’s no wonder, of course, as many a president elected during (and therefore almost invariably because of) economic downturns has, during his first 100 days, spent immediate political capital on stimulus.  Our current situation has been no exception as job losses and personal net worth are declining at a pace not seen since the late 1970s.  The national economy continues to lose jobs at a breathtaking speed, with about 1.5 million jobs lost just in the time since President Obama entered office. 

The President’s Keynesian proposal to jumpstart the economy is ambitious in one dimension – size.  The $700-billion-plus “stimulus package”, called the American Investment and Recovery Act, was sold as a “shovel-ready” plan intended to employ many of those out of work in private-sector-contracted public works construction. 

The problem is that way too little of the stimulus money has been designated for real stimulus – building expensive new infrastructure and triggering employment and spending from construction and related jobs and the sale of materials and services.  That’s what the people were promised, but it’s not what they’re getting.

Remember when Vice President Biden was asked how the stimulus plan was going to help someone’s small business, and his reply was, “We’re gonna build a bridge so that people can get to your small business,” or words to that effect?  Well that wasn’t very close to the truth.

That’s because only about 15 percent of the $300 billion in stimulus money being sent to the states was actually designated for building infrastructure projects.  Fifteen percent!

That comes out to about $45 billion divided among the 50 states.  California gets about $1.5 billion for “shovel” projects.  But since Sacramento has moved 2008-2009 public transportation money (about $1.5 billion) into the general fund, we will be using the federal money to backfill transportation money that was previously moved to the general fund in order to backfill shortfalls in social programs.

The Associated Press’s Judy Lin recently identified this inconsistency between the rhetoric that sold the President’s stimulus package and the reality that much of the money is being used solely for the purpose of propping up underfunded government programs like unemployment insurance, food stamps and other social services. 

At the federal level, stimulus money was infused across the board into myriad agencies and programs, propping up federal bureaucracy at the expense of what the people bought into, which was more highways and bridges.

In March, many folks in the Mojave Desert I represent were excited by the stimulus, since the Democrats announced their intention make “green” jobs the first priority in the “shovel-ready” category.  Green jobs include solar and wind energy, for which San Bernardino County’s desert has more potential than any other part of the country.  But now environmentalists (big believers in renewable energy and global warming) are moving to put a major kink into Gov. Schwarzenegger’s plan to expedite renewable energy projects in the desert through new wilderness designations and a proposed new “national monument”.  As of this writing, not one solar or wind generation job seems likely to be expedited by the Recovery Act in our desert. 

This isn’t to say that some benefit isn’t reaching our area.  Thanks to quick and smart work by my colleagues and myself on the board of directors of SANBAG, San Bernardino County’s transportation commission, our $80 million in transportation stimulus was parlayed into $128 million after the state was convinced to allocate $48 million of its stimulus funds toward the second and third phases of the Interstate 215 widening project, which has been stalled due to a lack of state funds.  This will put 6,000 people to work over the next couple of years. 

And, despite the debatable Constitutional appropriateness of some of these programs, there are stimulus dollars that will fund summer jobs for youth, additional law enforcement and firefighters for temporary programs, a few million extra dollars in community development block grants, a new energy co-generation plant and other projects on our military bases and other dollars that will flow through existing channels into counties and cities as the deliverers of services from the federal and state governments.

But just imagine how much more than 15 percent of those stimulus dollars should have, if they had to go anywhere, gone into building permanent structures like an equivalent to the Hoover Dam or several smaller “dam”-type projects.  When it comes down to a choice between one-time dollars spent on services versus one-time dollars spent on infrastructure, there’s no question that the latter is the better alternative.  The American people know that, and they were misled to believe that’s what the stimulus program was all about.

When you’re looking at printing money to prevent an economic catastrophe, the risk of hyperinflation is balanced by the actual return on investment.  Last week, the U.S. Treasury attempted to sell a 10-year bond to pay for the stimulus plan.  They had to temporarily halt the sale because buyers drove the yields on those bonds up so far, so fast, that the fear of severe inflation is now pervasive in the bond markets.  The 10-year bond yield is the benchmark used for home mortgage rates; both the yield and rates moved together at their fastest increase since 2003.  This may not sound bad – 10-year bond yields at 4% or mortgage rates at 5%.  But these rates were hit with just an $11-billion sale.  Imagine what the rates will look like after $300 billion in bonds is sold.  Mortgages have the potential to reach 15% (or higher), which would effectively kill any recovery in the housing market, which is a key foundation of any significant economic growth. 

At this point, the Democrat majority party in power in Washington would be wise to appropriate a lot more of that stimulus money to employment opportunities rather than social services.  Local communities, including those represented by SANBAG, have a variety of projects planned and “shovel ready”, like extra interchanges along Interstate 15, a Devore widening project at the I-15/I-215 interchange, and an extra freeway lane from Ontario to San Bernardino — all of which would help relieve heavy traffic congestion while putting thousands of people to work.

If we are going to see significant interest rate increases and/or inflation, we might as well have employed people who can better afford these drains on their dollars and whose employment is building permanent improvements to our infrastructure. 

Deficit spending to fund infrastructure versus welfare is a lesser of two evils.  But it’s a question that will be crucial toward how soon our economy recovers.  Take a wild guess as to which choice the ruling Democrat party will probably take.