boondoggle

How Wisely Is Stimulus Money Being Spent?

by Ryan Young on April 7, 2010 · 2 comments

in Economy, Stimulus to Nowhere

Not at all, to be honest. For starters, the very notion of stimulus violates basic economics. Taking money out of the economy and then putting it back in has no net effect. But it gets worse. Much worse.

When that money is put back into the economy, it goes to the weirdest places — $3.4 million is going to Florida to build a tunnel under U.S. Highway 27, so turtles can cross safely. A fish hatchery in South Dakota is getting $20,000 for new light fixtures. $50,000 is being spent to resurface a tennis court in Bozeman, Montana.

And so on.

These boondoggles aren’t getting nearly enough press. To help fill the vacuum, the good folks at Citizens Against Government Waste have put up a new website, MyWastedTaxDollars.org. Click on over and check it out. The best feature is an interactive map that shows just how unwisely stimulus funds are being spent all over the country.

Stimulus is worse than a zero-sum game. It is actively harmful. It is government saying that it knows how to spend your money better than you do; stimulus is the ultimate act of hubris. Kudos to CAGW and MyWastedTaxDollars.org for providing hundreds of examples of why government hubris should be replaced with government humility.

Green Jobs Fantasy

by Iain Murray on March 4, 2010

in Economy, Employment, Energy, Environment, Global Warming, Politics as Usual, Sanctimony

I have a piece in National Review Online today outlining the fantasy behind Sen. Lindsey Graham’s latest attempt to keep cap-and-trade alive. Here’s the beginning:

After declaring energy cap-and-trade “dead” in the Senate, the Left’s new favorite Republican, Sen. Lindsey Graham (R., S.C.) has been working hard to resurrect it under another name. Working with Senators Kerry (D., Mass.) and Lieberman (I., Conn.), along with lobbyists for the major electric utilities (and, err, Big Oil), Senator Graham appears to have come up with a new boondoggle that would institute a cap-and-trade scheme for utilities only, thereby creating a carbon cartel. The plan would impose a carbon “fee” on transportation fuels, driving up the price of gas, that would be rebated in the shape of funding for highway projects — which the Big Oil lobbyists appear to believe would help offset the rise in gas prices. All of this, of course, amounts to a new tax on energy, so Senator Graham and his cohorts are cloaking their smash-and-grab raid in the mantle of investment in “green jobs.”

Read the whole thing here.

Why Can’t We Have a “Three Strikes” Policy for Public Financing?

by Marc Scribner on January 12, 2010

in Economy, Politics as Usual, Stimulus to Nowhere

For residents of Minneapolis, few local policy issues can stir debate like the future of downtown’s Block E. The neighborhood long catered to a not-so-family-friendly clientèle, but it wasn’t until paranoia over punk rock and pornography swept the nation in the 1980s that the city of Minneapolis decided to clean house. This culminated in a 1987 city council decision to condemn the entire block and turn it into one giant open-air parking lot. Nearly overnight, Block E went from seedy business district to full-blown urban wasteland. The neighborhood’s astronomically high crime rates in no doubt helped a witty New York Times reporter famously dub the city “Murderapolis” in 1995.

Over the past few decades, hilarious crime-fighting and urban development programs have ensued, which include blasting Italian opera music over large speakers on the street corners to annoy dope-slinging gang members and building a new mall when the entire downtown was watching its retail consumer base dry up. Thankfully, Minneapolitans now have something to look forward to: the opening of Target Field, the future home of the Minnesota Twins. More than 75 percent of funds required for the $500+ million project come in the form of public subsidies, but at least Minnesotans will finally be able to enjoy the MLB season outdoors again–even though construction of the public-funded, indoor Metrodome was supported by the Twins in part because the owners said it was too cold outside for much of the year.

On December 31, 2009, the primary developer of the Block E retail boondoggle pulled out of the project and transferred ownership to a scandal-ridden union insurance fund. The Minneapolis Star Tribune editorial page, which typically goes into a scripted fit of cheerleading whenever the phrase “public-private partnership” appears in a city press release, is optimistic (although, they’re never optimistic about easing red tape and restrictive land-use policies). They quote a city apparatchik saying,

“Target Field presents a huge opportunity,” said Mike Christenson, Minneapolis’ director of Community Planning and Economic Development. “We have to give fans a reason to make multiple stops when they come downtown to a ballgame — to stay in hotels, to eat, drink, shop and walk around. This is our chance to reintroduce ourselves to the rest of the state.”

Of course, the same things were said when the city was busy “developing” the area surrounding the Metrodome. The Downtown East neighborhood only recently began seeing the economic benefits promised nearly three decades earlier, and much of that came at the height of the real estate boom in the form of trendy condo conversions. But don’t worry, Downtown East residents and business owners. You have not been forgotten. A plan is in the works to demolish the 27-year-old Metrodome in order to build a new Vikings stadium. Naturally, this project will go perfectly, and you’ll all get rich! And a pony.

Cash for Clunkers’ Real Cost

by Ivan Osorio on August 4, 2009 · 5 comments

in Bailout Watch, Economy, Politics as Usual

As Frederic Bastiat succinctly noted long ago, when determining the effects of a specific action, it is necessary to consider not only “what is seen” — the observed effects of that action — but also “what is not seen” — opportunities forsaken for the chosen course of action. In public policy, this means that it is necessary to look not only at the alleged benefits of a specific policy after it’s enacted, but also at what would have happened if that policy had never been enacted.

Viewed in this light, the Cash for Clunkers program is a costly boondoggle that will yield little net benefit. The car buying site Edmunds.com compared car sales under Cash for Clunkers with typical car sales over a similar period as that of the program’s existence, and found a net increase of only 50,000 cars — at a cost of $20,000 each.

How is this possible? Edmunds.com’s research shows that typically 200,000 vehicles worth less than $4,500 are traded in for new vehicles every three months. At best the current Cash for Clunkers program will fund 250,000 such transactions in the same time period — a gain of only 50,000 vehicles. Given that this program is budgeted to cost $1,000,000,000, this increase will come at the cost of $20,000 per extra sale.

But it may get worse yet. With so many car buyers taking advantage of what many perceive as “free” government cash, the Cash for Clunkers program is nearly out of money. Naturally, politicians who supported the program take this as a sign of success, and therefore now want more money for the program. They’re likely to get it.

Worse, the Edmunds estimate is actually conservative, which means that costs could go even higher. As Avery Goodman of the business site Seeking Alpha notes:

The highest rebate is $4,500, and the lowest is $3,500. If everyone qualified for $4,500 per vehicle, about 222,000 vehicles would have just taken advantage of the government’s money. At $3,500, 286,000 vehicles will have been sold.

I assume that, given all the raving, the government will eventually get around to assigning more money. It will take at least 2 or 3 months for the legislation to work its way through Congress. Meanwhile, if all buyers have qualified for the higher $4,500 rebate, the “cash for clunkers” program will mean a marginal increase in car sales of 22,000 this quarter. $1 billion divided by 22,000 means a net cost to the government of $45,354 per car.

If all buyers only qualify for the $3,500 rebate, it means a marginal increase in sales of about 86,000, or a net cost to the taxpayers of $11,628 per vehicle. In all likelihood, however, there will probably be a mix of vehicles qualifying for various rebates between $3,500 and $4,500. Based upon that assumption, Edmunds.com estimates that the average cost to the taxpayer will be about $20,000 per vehicle.

Thus, two important things are not seen by Cash for Clunkers advocates — the fact that most of these car sales would have occurred anyway and  the business investment taxed way to pay for this wreck. (Thanks to Margaret Griffis for the tip.)

Expensive Energy Does Not Stimulate the Economy

by William Yeatman on February 3, 2009

in Economy, Energy, Stimulus to Nowhere

Last week the House of Representatives passed HR 1, The American Recovery and Reinvestment Act, which allocates $816 billion to stimulate the economy. Environmental policy figures prominently in the House’s stimulus package, including $72 in direct spending for green energy and $20 billion in clean energy tax incentives. According to the liberal Center for American Progress, this $92 billion will create 459,000 green jobs by 2010, at a cost of $196,000 per job. What a deal!

The Senate will soon begin to debate over its own version of the stimulus package, S. 336, The American Investment and Recovery Plan, which would spend $887 billion to get the economy going. The bill includes $78 billion in clean energy spending, and $31 billion in tax incentives for renewables and energy efficiency.

Of course, the only reason that the clean energy industry needs generous taxpayer support is because it cannot otherwise compete with conventional energy sources. Which begs the question: How is it possible to stimulate the economy by forcing Americans pay more for energy?

An example will help clarify my point. President Barack Obama wants the stimulus package to spend $32 billion to provide 6 million homes with green energy by 2012. By comparison, the Navajo Nation in the Four Corners region plans to build enough coal-fired power by 2012 to supply 4 million homes in the rapidly growing southwest. Both plans would power a similar number of households by 2012. The difference between the two plans is that Obama’s renewables need $32 billion in taxpayer money to compete with conventional energy sources, whereas the Navajo Nation’s coal projects can make a profit without lavish government handouts.

For a detailed account of the green pork in both bills, click here. The numbers are appalling. Virtually every energy boondoggle is well positioned at the taxpayer trough, from synfuels to ethanol. It is farm-bill politics at its worst (N.B. “farm bill politics” is a style of legislating by which every possible stakeholder is bought off, so that there are no objections to a spending bill’s passage. As its name suggests, negotiations leading to a renewal of the God-awful farm bill every 5 years are the paragon of this governing technique).

Although both plans stink, they are not the same.  E&E Daily today reported that there are 3 major differences between the energy provisions of the House and Senate stimulus packages:

1. The Senate increases Loan Guarantee Program (authorized in Title 17 of 2005 Epact) by $50 billion in 2009. The program covers “commercial projects,” including nuclear and coal to liquid, which frightens environmentalists. The House keeps 2009 funding for “commercial projects” steady (at $38 billion), and amends Title 17 to include $8 billion in temporary funds for renewables and green transmission.

2. The House and the Senate disagree over tax incentives for renewable energy. HR 1 would fund up to 30% of construction costs for renewable projects that break ground in 2009 and 2010. I have not seen a cost estimate for this provision. S 336 does not have this provision. Senator Bingaman argued that grants are inappropriate because the taxpayer would not receive any compensation for its investment.

3. The Senate bill also provides about $5 billion less in direct energy efficiency investment than the House package. The greatest difference lies in the low-income assistance weatherization program, which would receive $2.9 billion in the Senate bill as compared to $6.2 billion in the House version.