Wintery Knight

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Harvard economist says stimulus was designed to reward Democrat constituencies

EVERYONE  PLEASE GO VOTE TODAY! (NOVEMBER 2nd, 2010)

Hans Bader at the Competitive Enterprise Institute comments on a new published paper by Harvard economist Jeffrey Miron, which explains why the stimulus failed to stimulate the economy and to create more jobs.

The paper is here. (PDF)

Excerpt:

Harvard economist Jeffrey Miron explains why the $800 billion stimulus package failed in a recent article.

What’s interesting about Dr. Miron’s critique is that he shows how the stimulus was a failure even if you take for granted liberal assumptions about economic policy (such as Keynesian economic theory), since it was so badly designed and executed that it failed to achieve its goals, spending wastefully while failing to revive the economy.  Indeed, the stimulus was so poorly tailored to the economy (and the goal of reducing unemployment) that Miron concludes that it was designed to reward politically connected “constituencies” and special-interest groups, like public-employee unions, rather than being focused on ”economic stimulus.”

Other Harvard economics professors like Robert Barro have also criticized the stimulus package. Barro called it “the worst bill that has been put forward since the 1930s.”  Former Obama economic advisor Martin Feldstein, a Harvard professor who is a big believer in stimulus packages in principle, said that the stimulus designed by Obama and congressional Democrats was “poorly done

Much stimulus money has been wasted.  It has gone to prisoners and dead people, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings.  The stimulus subsidized foreign green jobs and wiped out jobs in America’s export sector.

The “’stimulus’ is not the road to economic recovery. It’s the problem, not the solution, writes Nobel Prize winning economist Vernon L. Smith.” Other Nobel Laureates like Gary Becker have also criticized the stimulus package.  200 economists signed a statement publicly opposing the stimulus package in an ad published in the Washington Post and New York Times.

So the stimulus bill was a failure because it was not designed to grow the economy or create jobs.

What was the real purpose of the stimulus bill?

George Mason University professor Veronique de Rugy looked at recovery.org and found that Democrat districts got more stimulus money than Republican districts.

Here’s the first chart:

Stimulus spending by voting district affiliation

Stimulus spending by voting district affiliation

She writes:

…based on my new analysis of the Recovery.org data, Democratic districts are getting 1.8 times more money on average than Republican districts. Using Recovery.gov data, and cleaning it up seriously to be able to use it, we find that Republican districts are getting on average $260.6 million in stimulus awards while democratic districts are getting on average $471.5 million. The average is award per district is $385.9 million.

Interestingly, my data also confirms that the stimulus funds are not allocated based on unemployment rates or even variations in unemployment rates. So basically,  if the administration believes that government spending can create jobs, the allocation of the funds doesn’t show it.

And here’s the second chart showing which government departments got stimulus money.

Stimulus spending by government department

Stimulus spending by government agency

She writes:

Based on the Recovery.gov data, more than two third of the 594,754.3 jobs “created or saved” with the stimulus funds were “created or saved” in the Department of Education (see chart).  Basically, what the administration meant by shovel ready projects was funding for your next door teacher.

[...]A third of all union jobs are in Education

33 percent of the education industry is unionized

The union boss, Andy Stern, was appointed to be on the president’s debt commission.

The stimulus bill was never about stimulating the economy. It was about rewarding Democrat special interest groups. Remember, people who disagree with Obama are his “enemies”. And that means he isn’t there to govern for all the people equally. He’s there to reward his people. With Your Money.

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