Stimulus to Nowhere

Even Liberal Reporters Sour on Stimulus-Funded California Rail Boondoggle

by Hans Bader on February 8, 2012 · 1 comment

in Economy, Mobility, Politics as Usual, Stimulus to Nowhere, Zeitgeist

Even reporters at the famously-liberal Los Angeles Times have soured on California’s $100 billion-plus rail boondoggle, whose cost will far outstrip whatever the state will get from the $800 billion stimulus package to build it.  But the paper’s editorial board, which supported the stimulus package, continues to back the project, which has ballooned in cost from $33 billion to over $100 billion.  (Managing to see the bright side of even the most pernicious government waste, the paper’s board cited other boondoggles with approval, like Boston’s disastrous Big Dig project, which resulted in motorist fatalities. It praised that infamous project for replacing “what used to be an expressway” with “a downtown park”, despite the fact that it caused “severe delays” for motorists and had a skyrocketing price tag of more than $15 billion.)

But as its own reporter, Steve Lopez, recently noted, there is no telling how much the project will ultimately cost, or when it will actually be completed:

The projected completion date has gone from 2020 to 2033. The anticipated cost has ballooned to as high as $117 billion, and no one seems to have a clue where the bulk of the money would come from. The state auditor and the state Legislative Analyst’s Office have raised serious concerns, and the rail authority’s own peer review group said the project represents “an immense financial risk” to the state. And two weeks ago, the railroad authority’s top executive resigned.To top it off, a poll last fall said nearly two-thirds of registered voters would run this train off the rails if they had a chance to vote again.

The rail project won’t even be useful or economically viable once it’s finished, since travelers will be able to travel more cheaply by road or air than by taking the train.  As syndicated columnist Amy Alkon notes, “this is a totally unnecessary train (and I say that as a train lover). It’s $59 from LA to SF on Southwest if you book in advance,” less than a train ticket will likely cost.  And although the project is misleadingly called a “high-speed” rail project, it turns out that “the train couldn’t really run high speed” after all.

As Tim Cavanaugh noted in Reason, the Los Angeles Times reporter, Steve Lopez, had

the good fortune to answer to the newsroom rather the opinion section, where bullet-train belief still reigns as supremely as it does in Gov. Jerry Brown’s rumpus room. The important thing is that one more prominent Golden State blowhard is sealing the case against the vacant and bankrupt high-speed rail project. . . . In a piece I missed earlier this month entitled “Keeping faith with California’s bullet train,” the ed board praised the High-Speed Rail project because it is similar to Boston’s notorious Big Dig and the building of the pyramids by slaves.

The Obama Administration still supports this boondoggle even though it has been criticized by other liberal newspapers like the Washington Post.  That paper, which has not endorsed a Republican for President since 1952, criticized the project in an editorial entitled “California’s High-Speed Rail System Is Going Nowhere Fast.”

As we noted earlier, the small fraction of the stimulus package that was earmarked for transportation was devoted disproportionately to laying the groundwork for wasteful “high-speed” rail boondoggles that are not actually “high” in speed. These multibillion dollar rail boondoogles would provide work at inflated wages for politically-powerful unions. But these projects are expensive white elephants that would be used by very few travelers at an enormous cost per mile, and not enable trains to go anywhere near as fast as they do in Europe, Japan, or China. (Other union-backed provisions in the stimulus package wiped out jobs in America’s export sector.)

Obama relied on exaggerated claims to push through the stimulus package, claiming it was needed to prevent an “irreversible decline” in the economy,  even though the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” Even an old-fashioned Keynesian stimulus might have been something that America could not afford at a time of record deficits. The Congressional Budget Office, ignoring various flaws in the stimulus package, argued that it would boost the economy in “the short run.” But even the CBO conceded that the stimulus would shrink economic output in “the long run” by increasing the national debt and thus crowding out private investment.

States Deliberately Qualify Non-Poor People for Food Stamps to Get Federal Money; Obama Administration Blocks Reforms

by Hans Bader on January 31, 2012 · 2 comments

in Economy, Politics as Usual, Sanctimony, Stimulus to Nowhere, Zeitgeist

As a Bloomberg News commentary notes, large numbers of people who are not poor are getting food stamps, due to perverse incentives that encourage states to deliberately classify people as eligible in order to draw federal money to their state.  People are eligible in some states even if they are not poor at all, but merely received an “informational brochure” for welfare, or a tiny amount of state money that the state deliberately gave them that they didn’t even need, in order to qualify them for food stamps:

As the article notes, food stamp rolls have risen by 29 million people in recent years:

[A] troubling reason for the increase is that state governments have found it easy to get their constituents federal money — that is, money mostly raised from current and future taxpayers in other states — by making more people eligible for food stamps. According to a mid-2010 report from the Government Accountability Office, 35 states have no limit on the amount of assets a food-stamp recipient can possess. More and more states — the count was 36 at the time of the report — are providing “categorical eligibility” for food stamps to anyone who receives welfare services. Merely getting an informational brochure from the Temporary Assistance for Needy Families program counts as receiving a service.

Another way that states and localities can get federal money flowing to them is by providing token amounts of assistance with home heating bills. Even a dollar of energy subsidies can make someone eligible for food stamps, or increase the benefit level for someone already on SNAP. Vermont, for example, sends $5 checks to public-housing residents, even though their subsidized rent already covers heating, to qualify them for food stamps. Liberal activists call this strategy for getting federal money “heat and eat.”

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Americans Now Owe $189,000 Each in National Debt and Unfunded Entitlements

by Hans Bader on January 30, 2012 · 1 comment

in Economy, Stimulus to Nowhere

As Michael Tanner noted this weekend in The New York Post, “the current state of our union can be summed up in just two words: We’re broke.”  In his State of the Union address,

The president devoted just 189 words to the deficit and our growing national debt, but the fact is that once again this year we will borrow 32 cents out of every dollar we spend. Overall, our national debt now tops $15.2 trillion (with Congress raising the debt ceiling to $16.4 trillion last week). And that doesn’t count the unfunded liabilities of Social Security and Medicare. Throw those in, and our total indebtedness exceeds $120 trillion.

That means that if one counts only the official national debt, every man, woman and child in America owes $48,700. Include the unfunded liabilities of Social Security and Medicare, and every one of us is in debt to the tune of $189,000. . . measured as a percentage of [our economy,] our budget deficit is roughly a quarter larger than France’s. In fact, among European countries, only Greece and Ireland have larger deficits this year than we do.

The debt figures paint an even grimmer picture. If one includes all the unfunded liabilities of pension and health-care systems, Greece’s total debt equals 875% of its GDP. . .The United States, however, now owes 885% of GDP, more than any other industrialized country.

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Enr1 Goes Belly Up; Yet Another Solyndra

by Hans Bader on January 27, 2012 · 0 comments

in Bailout Watch, Economy, Employment, Energy, International, Stimulus to Nowhere

“After spending $55 million of a $118.5 million grant from” the U.S. “Department of Energy, Ener1, an Indianapolis-based maker of batteries,” has just “declared bankruptcy.”

The White House had enthusiastically touted the company, which gave rise to an embarrassing gaffe by Vice President Biden:

Vice President Biden visited Ener1 one year ago, January 26, 2011. . .On several occasions, Biden called the company “Enron one” during his visit, invoking a seemingly unintentional but ultimately prescient reference to the collapse of the energy giant Enron. The company was also ranked number 67 in the White House Report: 100 Recovery Projects that are Changing America.

To some, the bankrupt firm is a “candidate in the increasingly competitive race to become the Next Solyndra.” But in reality, several other recipients of green-jobs subsidies under the stimulus package have already gone broke. CBS News had earlier reported that there were 11 Solyndras — that is, financially-troubled recipients of green-jobs subsidies, five of which had already filed for bankruptcy. After the CBS News report, Evergreen Energy, another green-jobs recipient, filed for bankruptcy.

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Obama’s False Claims about Outsourcing and Corporate Taxes in the State of the Union Address

by Hans Bader on January 25, 2012 · 0 comments

in Bailout Watch, Economy, Employment, Features, International, Stimulus to Nowhere, Trade

Post image for Obama’s False Claims about Outsourcing and Corporate Taxes in the State of the Union Address

President Obama has spent billions of dollars in taxpayer money on subsidizing foreign firms through his failed “green energy” programs, so it was ironic and hypocritical when he attacked outsourcing in his State of the Union address. As former congressional economist Chris Edwards notes, Obama made many blatantly false claims about outsourcing and corporate taxation in his speech. Here are just a few:

Claim: “Right now, companies get tax breaks for moving jobs and profits overseas.”

False: There are no such breaks. Instead, we punish U.S. and foreign businesses for investing and creating jobs here.

Claim: “If you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it.”

False: There is no such tax deduction. . .

Claim: “From now on, every multinational company should have to pay a basic minimum tax.”

False: We’ve already got a corporate “alternative minimum tax,” and it’s an idiotic waste of accounting resources that ought to be repealed.

Claim: “It is time to stop rewarding businesses that ship jobs overseas.”

False: We penalize them for locating jobs here. Besides, the overseas operations of U.S. companies generally complement domestic jobs by boosting U.S. exports.

Claim: “Companies that choose to stay in America get hit with one of the highest tax rates in the world.”

True: Our rate is 40 percent, which compares to the global average rate of just 23 percent.

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Obama’s State of the Union Address: More Failed Jobs Proposals?

by Hans Bader on January 24, 2012 · 0 comments

in Economy, Employment, Energy, Stimulus to Nowhere

My take on President Obama’s 2012 State of the Union address is at this link. It discusses one of the jobs proposals he will reportedly make this evening.

Stimulus was Designed to Provide Pork and Payoffs, Not to Revive the Economy

by Hans Bader on January 24, 2012 · 0 comments

in Economy, Employment, Labor, Regulation, Stimulus to Nowhere

Harvard University economist Jeffrey Miron argued that the $800 billion stimulus package wasn’t even designed to stimulate the economy, but rather to benefit special-interest groups, since it flunked even old-fashioned Keynesian policy prescriptions about how to revive the economy. Recently-disclosed memos obtained by the New Yorker provide more evidence for this argument: “over the objection of his economic advisors, President Obama replaced $60 billion of ‘highly stimulative spending’ with a slow-spending but ‘inspiring’ $20 billion for high-speed trains and $40 billion in pork for his Senate Democratic allies. And this is starting from a point at which he knew that his advisors thought that not more than $225 billion of the $826 billion total was high-quality, fast-spending, efficient stimulus.”

This is not the only way that Obama ignored economics in favor of politics when drawing up the stimulus. Originally, economists wanted the stimulus to include the kinds of transportation spending that could boost the economy. But the stimulus package was purged of most investments in roads and bridges, and filled instead with welfare and social spending, out of political correctness, after feminist leaders complained that fixing roads and bridges would put unemployed blue-collar men to work, rather than women. Christina Hoff Sommers points out that “of the 5.7 million jobs Americans lost between December 2007 and May 2009, nearly 80 percent had been held by men,” because men “predominate in manufacturing and construction, the hardest-hit sectors.” But when some administration officials floated the concept of “an ambitious . . . stimulus program to modernize roads, bridges,” and infrastructure as a way of “reinvigorating the hardest-hit sectors of the economy,” “Women’s groups were appalled,” denouncing “The Macho Stimulus Plan.”  The Obama administration quickly knuckled under to this pressure, resulting in a “stimulus” package that spent money instead on social services like welfare that are administered mostly by female employees.  As an AP story noted “Stimulus Aid Favors Welfare, Not Work, Programs.” (The stimulus package largely repealed welfare reform).

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Obama Seeks $1.2 Trillion Increase in National Debt Ceiling, To Pay for More Wasteful Spending

by Hans Bader on January 17, 2012 · 3 comments

in Economy, Politics as Usual, Stimulus to Nowhere, Zeitgeist

President Obama formally notified Congress on Thursday of his intent to raise the nation’s debt ceiling by $1.2 trillion. Congress will have 15 days to say no before the nation’s debt ceiling automatically is raised from $15.2 trillion to $16.4 trillion.

The debt ceiling would not need to be raised to this level if Obama had simply lived up to his 2008 claim that he would cut spending if elected. Obama campaigned in 2008 on a promise of a “net spending cut,” but soon after taking office, he proposed budgets that would add $4.8 trillion to the national debt. Federal spending is at record levels, and the Obama administration has run up the biggest budget deficits in history. “President Obama’s policies would add more than $9.7 trillion to the national debt,” the Congressional Budget Office said in 2010. That’s many times the cost of the Iraq and Afghanistan Wars combined.

The Congressional Budget Office reported last Spring that Obama understated budget deficits “by more than $2.3 trillion over the upcoming decade.” Obama objected to even a tiny two percent cut in the federal budget sought by Republicans, submitting a self-indulgent, smoke-and-mirrors budget that would actually increase spending even faster than previously proposed for 2012.

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Re-organizing the Federal Government to Crush Opposition

by Iain Murray on January 13, 2012 · 2 comments

in Deregulate to Stimulate, Economy, Politics as Usual, Stimulus to Nowhere

One of the few virtues of the federal government has been its inefficiency. With functions spread out across different agencies and duplicated powers and responsibilities, it has often proved unable to harm the economy as much as it could owing to power games and competition among agencies. Now the president wants to change all that. He wants a ruthlessly efficient government to intrude in all aspects of our lives without internal checks and balances. An efficient government might have been a good thing 30 years ago, when the government was spending much less per person. Now that it’s spending over $30,000 per household, the prospect is terrifying.

Take, for example, the proposal to transfer the National Oceanic and Atmospheric Administration from the Department of Commerce to the Interior Department. It’s clear that President Obama wants to create a European-style Department of the Environment. The merger gives the environmental lobby a one-stop shop for everything outside the EPA. It also creates a powerful behemoth that will be all-too-ready to trample property rights in the name of the environment. The Interior secretary and the EPA administrator will form a powerful alliance in the president’s cabinet, and the chances of protecting the environment through responsible stewardship and free market methods will be significantly diminished as this new bureaucracy expands its power.

Meanwhile, the proposed merger of the subsidies arm of the Commerce Department with such entities as the U.S. Trade Representative, the Small Business Administration, the Export-Import Bank, and other market-complicating agencies creates what one commentator called “a corporate welfare Voltron.” The whole purpose of this department will be to interfere with the free enterprise system to the benefit of the political flavors of the month. Rent-seekers across the country will delight that the process of diverting taxpayer money into their pockets will become simpler and easier. That may be efficient, but is is not responsible government.

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Medicaid Payments Go to Dead People, As Do Food Stamps and Stimulus Package Money

by Hans Bader on December 13, 2011

in Economy, Employment, Politics as Usual, Stimulus to Nowhere

The State of Maryland spends millions of Medicaid dollars on dead people, “about half of it from the federal government,” notes The Washington Examiner. Maryland officials ignored information in a federal Social Security database, and even information in their own computers, in approving this spending. Of the millions in improper payments, “$426,403 in postmortem Medicaid benefits had been paid to just 10 deceased individuals, nine of whom were enrolled in managed care organizations. In one case, Medicaid payments to a nursing home began eleven months after the individual had died.”

As we noted yesterday, dead people also get food stamps, and fraud in food stamp programs costs taxpayers billions of dollars. “While many recipients had invalid Social Security numbers and were double-dipping between federal and state programs, many of the recipients also happened to be dead. This has become a pervasive problem in the realm of government benefits. (The Social Security Administration also sends millions of dollars to recipients who are dead.)” As Jim Bovard noted in The Wall Street Journal, state attempts to prevent fraud in the food stamp program are being thwarted by the Obama administration: “The Obama administration is responding by cracking down on state governments’ antifraud measures.”

Obama’s stimulus package largely repealed welfare reform, encouraging states to make welfare payments to undeserving people. Much stimulus money has been wasted. It has gone to dead people and prisoners, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings. The stimulus package subsidized foreign green jobs and wiped out jobs in our export sector. Small wonder that Harvard economist Robert Barro called it “the worst bill that has been put forward since the 1930s.”

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