The Sovereign Mind

Free thought on politics and real life

What’s Wrong with the Recovery and Reinvestment Act?

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One word: “and”

To understand my point, imagine that you wake up one morning to the sound of rushing water. You find that your basement is quickly filling with water, coming from somewhere that you can’t identify. In a panic you call the number for the first plumber you can find in the phone book, and he agrees to come immediately.

After the plumber inspects the situation, he said, “Well, this is serious, but I think we can fix it and find someone to clean everything up.”

“How much is that going to cost me?” you ask nervously.

“Well, I’d say around 900 billion dollars,” he responds.

“What?! For a flooded basement?”

“Yes, and a few other things that need to be taken care of.”

You watch as a roofer truck drives up, followed by a delivery truck for the local appliance store, followed by a few other trucks, and lastly comes a sodding company.

“What are they doing here?” You ask.

“Well, I noticed that your shingles are looking pretty old. I wouldn’t be surprised if you have some leaks up there, so we’ll have to redo the whole thing. And your furnace is not Energy Star compliant, so we’ll be replacing that. And you must be loosing a lot of heat out of those old windows. The new ones you’ll be getting will save you a lot of money on your utility bill, along with the new lighting we’ll be putting in. And, your lawn could use some help. It’s very unsightly. The sodding company will take care of that.”

“But I don’t want any of that!” You respond angrily, “I just want the water to stop and my basement cleaned up!”

“Sorry pal, this is a package deal. Do you want your basement fixed or not? We don’t have much time.”

I probably don’t have to explain what I mean by that analogy, but I will just to belabor the point. As the title of the stimulus bill states, there are two purposes to the bill:

  1. Stimulate the economy to help us recover from the recession we are in
  2. Make other investments designed to help us in the long term

Stimulus must be fast. We have to inject enough money to create jobs and jump start the economy. The main measure of success is how many jobs are created, and how quickly.

On the other hand, investment implies a long term outlook. Just as you would with any of your personal investment, smart investors will take the time to do their homework. They want to be sure the investment will pay off in the long term, and that they will be getting the most bang for the buck. Most of the time, the short term gain from investing is small, so there is usually not a sense of urgency.

So how can you do these two things at the same time? They are counteracting. The result is a bill that is too watered down to stimulate, and too hasty to be a good investment for the long term.

The logical conclusion is to separate the two. Let’s pass the Recovery/Stimulus portion of the bill now, and then hash out the Reinvestment portion when we have time to debate and consider our options more carefully.

So what should we put off until later? I’ve analyzed the information from the Congressional Budget Office, a non-partisan office intended to give law-makers feedback on the budget consequences of bills. Their analysis is that only 65% of the money in the bill will be spent in the next two years. Even with that broad definition of stimulus, there is a lot in the bill that is not stimulus, but is being pushed into this bill as an attempt to get it passed quickly, without much debate. Some of these measures might be worthwhile, just as the new roof might be worthwhile for the poor guy with a leaky basement. But we should make sure these investments are the best they can be, and that means a separate bill that does not have the urgency attached.

So what can we get rid of from this bill? I looked at the CBO report, and specifically targeted any portion of the bill which does not cause at least 30% of so to be spent in the next two years. After removing those parts, we can decrease the cost of the bill by 112 billion dollars, but only decrease the amount of spending in the next two years by 20 billion. That would significantly increase the percentage of the bill that is actually stimulus. Here are the pieces I’ve identified:

Spending Item Total Amount (in millions) Amount spent in next 2 years
Distance Learning, Telemedicine, and Broadband Program 2825 467
Wireless and Broadband Deployment Grants 2,825 250
Energy Efficiency and Renewable Energy 18,500 2,635
Other Energy Programs 17,350 3,388
Federal Buildings Fund 7,500 1,300
Health Information Technology 20,231 521
Innovative Technology Loan Guarantee Program 8,000 1,680
Clean Water and Drinking Water 8,116 2,333
Other Transportation 16,100 4,300
Housing Assistance 11,129 3,217
Total 112,576 20,091

Some might argue that in a bill this size, why make such a fuss over a mere 112 billion? If your sympathetic to that argument, please read the question again a little slower. However, my number is only obtained by assuming we can either leave in or remove entire sections as they exist now. We could save even more by looking at each section individually and seeing what sub-parts we could leave for later, and which parts are truly stimulus. Lastly, we can look at what parts of this bill will be spent soon, but not on creating jobs. Considering that as the bill exists currently, each job will cost us over $200,000 to create each job, there ought to be some of that in there as well. That number has been attacked as “Limbaugh math”, but I have yet to hear the argument for why we should be OK with spending so much money on each job.

David Axelrod, advisor to Obama, responded to that number like this on This Week with George Stephanopoulos:

He’s missing the fundamental point. We’re not just spending money to create jobs; we’re investing money to strengthen this economy. We’re investing in areas like energy independence. We’re investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We’re investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country, and we’ve been very careful about that.”

Agreed, but if we want to be careful about that long-term investment, why try to push it through on the back of short-term stimulus?

Answer: because they know that if they don’t milk the current crisis for all that it’s worth, they might have a tough time getting these programs through later, when everyone’s thinking more clearly.

But there’s still hope. The bill has to get passed the Senate, and I hope is will be passed… without the “and”.

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Written by Mike

February 2, 2009 at 7:00 am

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