Saturday, July 3, 2010

Wasteful, Inefficient Stimulus

I've argued elsewhere that maybe we shouldn't engage in any additional stimulus spending because the government has a poor track record when it comes to spending money effectively. But don't take my word for it, here's liberal blogger Matthew Yglesias:

It’s good that this is happening, but sad to see it happening so late in the game considering when the American Recovery and Reinvestment Act was passed:

...So far, the administration has doled out $2.7 billion in grants, which is less than half of the $7.2 billion set aside in the stimulus plan for broadband Internet projects. The new funding, to be announced state-by-state Friday morning, will come from the Department of Commerce. That agency’s National Telecommunications and Information Administration and the Department of Agriculture have been responsible for the dispersement of stimulus funds.

I think this episode highlights some of the tensions and problems that have plagued our efforts at doing discretionary fiscal stimulus on an adequate scale. In the popular imagining, the big problem with government is that it’s wasteful and inefficient. So if you want to build political support for an agenda of activist government, in practice it’s crucially to be extremely careful with how you dole out the money. But care is the enemy of speed. For purposes of countering a deep collapse in aggregate demand, the important thing is to clear the relatively low bar of “this is more useful than having people sit around earning no money doing no work.”

When even supporters of activist government find reasons to be doubtful of government's abilities to carry out programs, what are the rest of us supposed to think.

I will grant that if many of the government's efforts could pass the simple test he proposes, that of being better than "people sitting around earning no money doing no work" there might be a few more stimulus supporters. But even this incredibly low standard often proves unattainable when it comes to federal government spending:

NEW YORK ( -- More than 1,200 prison inmates, including 241 serving life sentences, defrauded the government of $9.1 million in tax credits reserved for first-time homebuyers, according to a Treasury Department report released Wednesday.

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