A new GAO review of the $787 billion stimulus package tells us what we should have known all along. When government spends money themselves to stimulate the economy rather than let citizens have their own money to spend, the only part of the economy that gets stimulated is government itself.
The GAO report attempts to put the best possible spin on Porkulus in action, but it admits two key details. First, on page 3, the GAO explains what happened to the money that went to states in block grants. While the Obama administration insisted that the money would go to “shovel-ready projects” that would produce jobs, the GAO admits that states used it to bridge budget gaps instead:
“Overall, states reported using Recovery Act funds to stabilize state budgets and to cope with fiscal stresses. The funds helped them maintain staffing for existing programs and minimize or avoid tax increases as well as reductions in services.”
None of this money went to even creating new government jobs. They may have prevented cuts, but what the money also did was allow states to postpone decisions about their own policies, the costs they produce, and whether those make sense. In any case, those funds did not get spent on “shovel-ready projects,” and the Obama administration's promised explosion of private-sector jobs from government-to-government transfer has never materialized.
Even if the states did spend money on shovel-ready jobs, they'd be hard pressed to prove that they created jobs. The GAO also reports that the states don't have appropriate reporting and auditing functions in place to track federal stimulus dollars. Nor will they have anything ready at all until October, and that will only work for money spent afterward:
“States have implemented various internal control programs; however, federal Single Audit guidance and reporting does not fully address Recovery Act risk. The Single Audit reporting deadline is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to Recovery Act risks. Finally, state auditors need additional flexibility and funding to undertake the added Single Audit responsibilities under the Recovery Act.”
One of the criticisms of Porkulus in its march to party-line passage was that it spent money too fast and in the wrong direction. Republicans in particular raised this issue during the debate, and questioned how auditors could keep up with the massive amounts of money pouring out of the Treasury in so many directions. Daniel Levinson, the Inspector General at the Department of Health and Human Services, said that the amount heading to his bureaucracy alone would require the existing inspectors to track more than a billion dollars each – an impossible task.
In fact, the New York Times openly wondered whether the true employment boom from Porkulus would come not from construction on shovel-ready projects, but from the sharp increase in demand for government auditors. They needn't have worried. In the end, neither got hired, at least not from the state grants.
The Republicans in Congress issued a report stating that none of the above really matters anyway, because the Obama administration essentially “rigged” the metrics of the stimulus to defy argument. The White House and the Office of Management and Budget have repeatedly spoken of jobs “created or saved,” a construct to which even Democrats in Congress eventually objected. When pressed, Rob Nabors, the deputy director of OMB, told Congress to “count the people being paid out of Recovery Act dollars.”
Unfortunately, as the report notes, that's hardly an accurate metric:
“For example, if the employee was previously unemployed, and was able to find work as a result of Recovery Act funds, that employee should be counted as a job created. However, if the employee was employed elsewhere and likely to maintain that employment, but changed jobs as a result of the Recovery Act, unemployment was not reduced as a result of the expenditure. Instead, the Act merely shifted resources from one sector, industry, or business in the economy to another sector, industry, or business. Even under the discredited and outdated Keynesian economic theory adopted and advanced by the Administration and the Democrats in Congress to justify the Recovery Act, this shift in resources would have very little, if any, stimulative effect.”
This is even more true in a recession, where businesses are likely to avoid filling open positions. If an employee leaves to take another job, employers will wait as long as possible before adding to their costs unnecessarily. If this happened in an expanding economy, it would more likely result in hiring someone else – but then, we wouldn't need to do this in an expanding economy in the first place.
But the OMB didn't stop at just counting heads. The Obama administration set up the rules to count jobs as “saved” even when they were not at risk. For instance, they attempted to claim credit for tenured professors using ARRA funds for their programs:
“Therefore, for purposes of ARRA reporting of jobs created or retained, colleges and university [sic] may count, proportionately, the percentage of effort directly charged to ARRA awards as an FTE [full-time equivalent] equivalent [sic]. For example – A [sic] faculty member charging 50% effort on an ARRA award will be counted as .5 FTE.”
This is, simply put, absurd. Tenured professors were not about to be shoved onto the street in the economic downturn. It takes nearly an act of God to remove a tenured professor at any university, let alone state-run universities, as the Ward Churchill saga proved. Claiming them as “jobs saved” is dishonest, and shows the entire enterprise as the equivalent of a three-card monty game.
Porkulus stimulated one thing, and one thing only: government.
Edward Morrissey's Bio
Ed Morrissey writes for Hot Air, where he also has a daily political talk show. Ed has written for the Washington Post, the New York Post, the New York Sun, and has made numerous television and radio appearances. He lives in Minnesota with his wife, son, and two granddaughters.
Posted
07-09-2009 11:03 AM
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