Again: It Wasn’t Stimulus; It Was a Government-Insulation Program

We’ve argued multiple times, ’round here, that the federal government’s approach to “stimulus” — especially as defined by President Obama — was not, in fact, designed to stimulate the economy and yield job growth. Rather it was designed to insulate government structures from the effects of an economic recession… at the expense of the economy. In case you missed it, here’s one more bit of evidence from recent weeks:

A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama’s first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an “urgent need to accelerate job growth.”
An Associated Press analysis of stimulus spending found that it didn’t matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.

As Rhode Islanders who follow state and local politics should be amply able to attest, such infrastructure money from the feds only serves to take the pressure off lower tiers of government, which tend to neglect obvious, necessary expenditures in favor of less popular, more ideological ones. They typically float bonds and create targeted taxes to accomplish the building and repairs that must obviously be done for the good of the local society, but in the current environment, taxpayers were likely to resist either strategy, requiring governments to cut back on other areas of spending.
The “stimulus” money, in other words, didn’t create any new work. It merely enabled continued profligate behavior. And the reason it “only barely helped the beleaguered construction industry” is that the government has instituted policies that create high barriers to entry in order to compete for its contracts, sending the money mostly to companies that were already prepared (and expecting) to receive it.

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