Obama/Pelosi/Reid “Stimulus” Spending? Or Federal Money Laundering?

There are now two “stimulus” bills:  the American Recovery and Reinvestment Act of 2009 and the Aid to States for Medicaid, Teacher Employment, and Other Purposes Act which was signed into law 8/10/2010.  Aside from questions of whether and how the federal government should intervene in the economy, will this “stimulus” actually do anything to get the economy moving?  In fact, this “stimulus” is mostly a big federal money laundering operation to return to taxpayers the money they had paid as taxes and to recycle tax dollars as campaign contributions.  Other than a grab for more economic power and control over people’s lives, why does Congress think this makes sense?  Be sure to ask the candidates who want your vote in November.


“Stimulus” Mostly Stimulates More Government

Based on Budget Account information on Recovery.gov (see details below) for the two “stimulus” bills, highlights of this “stimulus” spending include:

• $152 billion to help states fill gaping holes in their budgets for Medicaid and education, primarily teachers’ jobs.
• $134 billion for transfer payments, payments directly to individuals primarily for health care, education, unemployment, food stamps, and something in the Social Security Administration called Economic Recovery payments.
• $74 billion for grants to various entities outside of the federal government.
• $64 billion for government-provided infrastructure and federal government operating expenses.

Some agency reports on Recovery.gov contain wild guesses about the government and government-related jobs which may be created or saved or whatever.  Other than that, the only thing which even resembles stimulus for the real economy is Washington DC’s “politically correct” industrial policy for alternative energy businesses which would fail or never start up were it not for Congress generously throwing taxpayers’ money at them.

People may save or spend the “stimulus” money which they receive directly or indirectly, but for the most part, it will stop there.  There is nothing in this “stimulus” to encourage the private sector (a.k.a. the real world) to start and grow businesses, create jobs, innovate, and help the economy grow to everyone’s benefit.  The only lasting effect is likely to be bigger government which creates more problems than the “stimulus” may solve.

Project Vote Smart provides contact information for candidates.  Be sure to ask the candidates who want your vote if they understand this “stimulus” only stimulates more government.  Find out how they plan to actually help the private sector grow and create real economic growth and jobs.


Self-Inflicted State Budget Problems

Budget problems in various states regularly make the news including my own great state of Illinois.  The story is pretty standard.  When the US economy was growing through 2007, the states had a windfall of tax revenues.  Politicians, doing what they always do, assumed the windfall would go on forever and overspent accordingly.

In 2008, the US economy stopped growing, and the recession started.  Much to the shock and surprise of state politicians (if no one else), tax revenues dropped with the economy.  Now all of this overspending has some campaign contributor on the receiving end, and the politicians tell us in hushed tones about the “painful” cuts needed for all this overspending. 

Then the federal government comes to the rescue printing, borrowing, and spending endless amounts of dollars, and Congress leads the way to help states continue to live beyond their means.  The $76 billion Medicaid fix is yet another exercise in futility to make nationalized, socialist health care work, sort of a preview of ObamaCare.  The $58 billion education fix is mostly to save jobs for members of the National Education Association and American Federation of Teachers who can be counted on to return the favor and recycle part of this money to their patrons in Congress as campaign contributions.

All of this generosity with taxpayers’ money comes with strings attached.  There is a requirement for a permanent increase in state spending equal to the stimulus money.  For example, the Texas Budget Sunshine Review talks about how the federal money for teachers requires Texas to maintain this spending through 2013.  Basically, a one-time federal shot of “stimulus” steroids will make current state budget problems worse in future years.  Perhaps Congress will also solve this by printing, borrowing, and spending more money.

Nothing in this temporary state budget fix will encourage the private sector to grow and create real economic growth and jobs.


Transfer Payments

If done correctly, transfer payments can help people get through temporary difficulties and get back on their feet.  In this economy, many people face unemployment, mortgage problems including foreclosure, exhausted savings, and uncertain retirement.  To the extent that transfer payments can get people through a tough stretch and back on their feet financially and into real jobs, transfer payments can be helpful.

If not done correctly, which is more often the case, transfer payments create a larger government presence, and these “temporary” problems become permanent.  This creates permanent dependency and a permanent constituency for politicians in Congress who support this type of spending.

The $134 billion in transfer payments is basically the same as Ben Bernanke’s idea to drop money out of helicopters with a healthy dose of left-wing class warfare and income redistribution.  In the short term, this money will probably be spent or saved.  It will do nothing to encourage the private sector to start businesses, create jobs, and grow the economy.


The Data and Recovery.gov

The source used here for “stimulus” spending information is Recovery.gov.  Select an agency in the dropdown box, click “Go”, and click “Budget Accounts.”  This appears to be the most accurate and complete of various government and media sources.  This site is run by the Recovery and Accountability Board created by the American Recovery and Reinvestment Act of 2009 which consists of a chairman appointed by the president and inspectors general from various agencies. The Recovery.gov Web site includes $26.6 billion for state Medicaid and education budgets from the Aid To States for Medicaid, Teacher Employment, and Other Purposes Act which was signed into law 8/10/2010.  The agencies included in this analysis are:

• Departments of Agriculture, Commerce, Energy, Interior, Transportation, Treasury
• Departments of Education, Health and Human Services, Housing and Urban Development, Labor
• Departments of Defense, Homeland Security, Justice, Veterans Affairs
• General Services Administration, Social Security Administration
• National Science Foundation
• Army Corp of Engineers

I took the budget account information (total of $434 billion) for these agencies and categorized it into various high level categories to understand how taxpayers’ (our) money is being spent.  Deciphering and categorizing this data is challenging and requires some judgment calls.  Please email me if you would like the spreadsheet I used for this.  These categories, discussed above, are:

• Money for State Budgets:  Education and Medicaid
• Transfer Payments
• Grants
• Government Operating Expenses and Government-Provided Infrastructure