Is any Obama ‘stimulus’ plan doomed to fail?

My colleague Rick already posted an entry about Solyndra, a manufacturer of solar panels and related technology that just filed for bankruptcy protection.  Solyndra is not only the latest “green jobs” debacle for President Obama — who personally endorsed the company and publicly touted it as “a testament to American ingenuity and dynamism” — it is also a perfect textbook example of why the Obama stimulus has utterly failed to restart the US economy.

LESSON #1: When stimulus funds are handed out to cronies or are used as rewards for loyal political supporters, instead of being spent in areas most likely to cause a broad increase in aggregate demand, the stimulus will fail.  Solyndra’s failure is all the more embarassing for the Obama Administration because the company received $535 million in special low-interest loan guarantees from the Department of Energy.  Why was Solyndra selected as the first recipient of Obama’s DOE green energy loans?  The details aren’t completely clear, but a major player in the deal seems to be Oklahoma banking billionaire George Kaiser, who also raised between $50,000 and $100,000 for Barack Obama during the 2008 election.

LESSON #2: When your stimulus is based largely on ideas that not only don’t work, but have been shown repeatedly to have the exact opposite affect that they are advertised to have, the stimulus will fail.  We need to be honest with ourselves and admit that at this point, “green jobs” are little more that a fantasy.  I can’t summarize this any better than what was recently written by Walter Russell Mead:

Let me put it this way.  A GOP candidate might feel a need to please creationist voters and say a few nice things about intelligent design.  That is politics as usual; it gins up the base and drive the opposition insane with fury and rage.  No harm, really, and no foul.

But if that same politician then proposed to base federal health policy on a hunt for the historical Garden of Eden so that we could replace Medicare by feeding old people on fruit from the Tree of Life, he would have gone from quackery-as-usual to raving incompetence.  True, the Tree of Life approach polls well in GOP focus groups: no cuts to Medicare benefits, massive tax savings, no death panels, Biblical values on display. Its only flaw is that there won’t be any magic free fruit that lets us live forever, and sooner or later people will notice that and be unhappy.

Green jobs are the Democratic equivalent of Tree of Life Medicare; they scratch every itch of every important segment of the base and if they actually existed they would be an excellent policy choice.  But since they are no more available to solve our jobs problem than the Tree of Life stands ready to make health care affordable, a green jobs policy boils down to a promise to feed the masses on tasty unicorn ribs from the Great Invisible Unicorn Herd that only the greens can see.

LESSON #3: When your stimulus results in government expansion that poaches workers from the private sector, instead of creating new job opportunities for the unemployed, the stimulus will fail.  The Mercatus Center at George Mason University has just released the first extensive study of job creation brought about by Federal stimulus money.  The results were not encouraging:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed. (emphasis added)

This is a huge factor that is regularly overlooked by those who are zealous about “shovel ready jobs.”  As I have pointed out to a number of exasperated liberal friends, what are laid-off bank tellers, IT technicians, security guards, safety training coordinators, financial planners, bus drivers, sous chefs, or book-keepers supposed to do with a shovel?  We no longer live in an era where the majority of the labor force comes from a farm labor, manufacturing, or skilled craftsman background, and can be easily integrated into construction or other manual labor-oriented jobs.   Professionals with an expert resume are a much better fit for bureaucratic or administrative jobs in government offices than they are for driving dump trucks or pouring concrete.  But there are only so many bureaucratic jobs available.  Perhaps this explains why a significant chunk of stimulus money was swallowed by bureaucratic costs, and why so few laborers to actually do the shoveling were ever hired.

LESSON #4: When government regulations and bureaucracy prevent stimulus funds from being quickly injected into the economy, the stimulus will fail.  President Obama has already admitted that “shovel-ready was not as … uh .. shovel-ready as we expected.”  George Will touched on one aspect of the problem when he recently quipped, in response to suggestions about creating a “new NRA,” “You couldn’t build the Hoover Dam today because they’d discover a snail darter in the Colorado River and would stop it.”  But the problem is greater than that.  By the time you factor in the participation of the Department of Energy, OSHA, the Environmental Protection Agency, Department of Commerce, Department of the Interior, Army Corps of Engineers, organized labor, and the incredibly complex Federal bid procurement system, a decade could easily pass before a project the size of the Hoover Dam ever had its first trench dug or its first cubic yard of concrete poured.  And that’s if we are lucky enough not to encounter a snail darter or desert tortoise or Indiana bat during the environmental impact studies.

This is a problem that largely did not exist during the 1930’s, and unfortunately it cannot be solved easily.  In 2005 President Bush was lambasted by Democrats when he proposed the use of no-bid Federal contracts in order to get cleanup efforts under way quickly in flood-ravaged New Orleans, in the wake of Hurricane Katrina.  Today, there are simply too many special interests (organized labor, Federal bureaucracies, state and local political bosses or established cronies expecting preferential treatment, etc.) for Federal government projects to be started quickly and completed at a reasonable cost.  And this is true regardless of which party controls the White House.

There is no doubt in my mind that President Obama’s new, highly anticipated jobs plan will be based almost solely on more “stimulus.”  But unless the President is willing to correct at least some of the serious problems that seem to be heavily impeding the current Federal Government “stimulus” efforts, any new government spending plan will be doomed to fail just as spectacularly as the American Reinvestment and Recovery Act of 2009.

And you can take that to the bank.

Time to act
Solyndra: An omen for Obama's soon to be announced jobs plan