An Unstimulated Recovery

Having just read promises of impending economic recovery, readers may have a common question in response to news about the implementation of the "stimulus" program:

THE STATE HAD SPENT $254.2 million of the $1.1 billion [promised to Rhode Island] as of July 24, according to data released by the state Office of Economic Recovery & Reinvestment. Close to $207 million — more than 80 percent — has gone to help plug budget holes, although $31 million was used to increase unemployment benefits and another $5.6 million was spent to expand food stamp access.

Which URI Economics Professor Len Lardaro reinforces as follows:

"I will say, not that the stimulus is perfect, but the fact that there is so much criticism is because the economy is doing so much better. We can afford to gripe," he said.

So, if only $10.6 million has gone toward projects that do more than plug budget gaps and mitigate the experience of the unemployed, and yet the economy is recovering, why do we have to spend the millions and billions of taxpayer dollars still in the pool? One begins to suspect a scam:

Andres Carbacho-Burgos, an economist at Moody's Economy.com, notes that Rhode Island so far has received more stimulus dollars per capita than any other state, save Alaska.

There was no immediate impact on job growth, he says. But hundreds of jobs were saved as cash-strapped schools and state and local governments used stimulus funds to plug budget holes that would have caused widespread layoffs.

The government has done little more, it would seem, than redistribute wealth from the private economy — present and future — to government workers. Sure, we know you're hurting, they say, but be encouraged about how healthy we are!

The political gamesmanship from RI Democrats, of course, is to blame Governor Carcieri for failing to spend the money more rapidly, but that is the nature of government. If he'd dumped $1.1 billion on the stairs of the State House and the corruptocrats who loiter in the shadows, there, had soaked it all up, the Democrats would be pointing to him when it came time for reckoning.

Look, if you pour money into the machine of the economy, it's going to run for a bit. Not efficiently. Not in a self-refueling way. But it'll run. That doesn't change the fact that government spending is minimally stimulative, slow, and prone to fraud. The slower it is, the less stimulative it will be, and the faster it is, the more prone to fraud it will be. Moreover, it can do no more, for this inefficient and wasteful effort, than steal money from other parts of the economy, including the economy of decades to come.