American Elephants

Why Obama’s Stimulus Could Never Have Worked by The Elephant's Child

Economist Veronique du Rugy of George Mason University’s Mercatus Center explains, by using the example of neighboring Maryland, why Obama’s stimulus program could not have worked, why the ideas were flawed, and what happened when he put it into practice.

Doomed from the beginning, it’s another lesson in how “the road to hell is paved with good intentions.”

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In fact, the Veronique du Rugy is not saying that a stimulus could never have worked — she (and the male narrator) seems open to the idea in theory. What she points out is that it was done in the wrong way (“instead of actually thinking about where the money would need to go to hire those idle resources”) and concludes that “it can’t be directed by a top-down institution that pretty much fails at everything it does.”

What most of the rest of the video shows is: (a) the actions of sub-national government units can thwart the best intentions of the feds; (b) those “shovel-ready” projects were not so shovel ready; and (c) there is a lot of wiggle-room in the system that allows contractors to evade the original targets set for them.

One thing I have strongly argued against since the idea was first mooted (by Van Jones, President Obama’s former green jobs adviser) — including on popular environmental blogs — is that one can stimulate the spread of green technologies by pumping money into training for workers in the “green economy”. That shows a fundamentally simplistic and flawed misunderstanding of how improvements in environmental performance and resource efficiency come about. It is, as the Brits would say, like pushing on a string.

If there is a need for people with special skills, the private sector (and community colleges) is perfectly capable of rising to the challenge. But training people proactively, rather than in response to labor-market demands, both risks wasting money on the wrong kinds of training, and risks creating a glut in certain skills, thus depressing (rather than rewarding) those individuals who were prescient and undertook training (either on the job or in schools on their own initiative) in anticipation of an increase in demand.

There is a precedent, from the 1960s: the federal government saw the baby boom and the crowded classrooms and tried to steer many young people into a career in teaching. Just as those new graduates started to hit the job market, demand abated, and we had a glut of teachers. One result was a strengthening of the power and role of the teachers’ unions. And the rest is history, as they say.


Comment by Subsidy Eye

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