Why the Stimulus Falls Short

by JOSHUA FRANK

Doug Henwood is the editor and publisher of Left Business Observer and is a contributing editor of The Nation. Henwood also hosts a radio weekly program on WBAI in New York and his first book “Wall Street” was published by Verso in June 1997. His latest, “After the New Economy“, was published in late 2003 by The New Press. He’s now in the early stages of a book on the current American ruling class. He recently spoke to JOSHUA FRANK about last year’s Stimulus Package.

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JOSHUA FRANK: Doug, in your last issue of Left Business Observer you have an interesting piece on the effects thus far of the StimPak. You seem to argue that while it has had some positive impact on the state of the U.S. economy, it has been far from being a complete savior. Do you believe this has to do with the size of the stimulus or more to do with where the funds are actually being allocated?

Doug Henwood: It’s more about quality than quantity. On paper, the StimPak is quite large. Of course, it’d be nice if it were larger, but as far as these things go in our imaginatively parched times, the size isn’t bad. But a fundamental problem with it is that the Dems didn’t want it to be seen as some New Dealish government jobs program – they bragged about how it was going to be about creating private sector jobs, which are somehow”realer” than public sector ones. I guess that means it’s realer to be a food stylist than a teacher.

Yes, I understand political constraints, meaning that Congress and the pundit class is chock full of baying yahoos, but you don’t really accomplish anything great by assuming the status quo is eternal. But Obama’s no FDR, as we know.

So what we got was a bill that did some good things – extending unemployment benefits, picking up health insurance costs for the laid-off, etc. – but one that also was too loaded with tax breaks and other indirect mechanisms that are supposed to create jobs. If you divide the amount of cash spent, according to Recovery.gov, by the administration’s estimate of jobs “created or saved” – whatever that means exactly – by the StimPak, you find that the cost per job is something around $250,000.

JOSHUA FRANK: That seems like a very ineffective, wasteful figure.

Doug Henwood: Yes, and if you allow for multiplier effects – someone whose job is saved spends more money than someone on the dole, which saves other jobs that would have otherwise evaporate – then it’s maybe $150,000-175,000 per job. That’s still preposterously inefficient, however. You could have created old-style public works jobs at about $50,000 a pop. You could bring the old manly road-building, pipe-laying model into a more gender-equitable world by creating or saving jobs in teaching and childcare.

JOSHUA FRANK: One of the more interesting things of your analysis is the state distribution of the stimulus money. Can you talk about that a bit?

Doug Henwood: Sure. The geographic distribution also looks extremely unfair. Using the data on Recovery.gov for spending through the end of September 2009, the biggest amount of stimulus money, relative to personal income, went to Washington, DC. The gov takes care of its own. But not far behind are thinly populated places like Alaska and the Dakotas. At the very bottom, heavily populated places like New Jersey, Florida, New York and California.

The average unemployment rate in the top 10 jurisdictions was actually lower than that in the bottom ten. And the top 10 were far more likely to vote Republican than the bottom 10. But that’s the nature of our government. It takes away money from the more liberal states and ships it to the ones where people don teabags and rail against Washington. Funny country we live in.

JOSHUA FRANK: A lot of people seem to be calling for an additional stimulus because the first one wasn’t large enough and is about to dry up. Others claim that Obama has to have the fed shell out more money for unemployment benefits, cash for clunkers type programs and a larger defense spending bill to keep the ball rolling. But if, as you say, it is more about quality than quantity, than will these types of programs, even if they aren’t dressed up as Stimulus Package #2, be useless in the long-run unless they are actually creating real jobs that start to make up for the 8 million lost since this so-called recession began?

Doug Henwood: Cash for clunkers was a horrible waste of money. It was financed by raiding funds originally intended for alternative energy research, which had a great potential economic and environmental payoff. Instead, we got a brief blip in car sales with little or no environmental benefit. It was American policymaking at its most idiotic. Extended unemployment benefits are a good thing – I wouldn’t argue against those.

But the best form of stimulus spending – for the economic kick it would provide, for the alleviation of suffering, and for the benefit of society as a whole – would be to create public sector jobs rebuilding our rotting infrastructure and ravaged environment, weatherizing old buildings, offering publicly funded high-quality childcare, and the like. That, and financial support to strapped state and local governments so they can continue to provide, and maybe even expand, basic public services.

JOSHUA FRANK: The WPA during the late 1930s employed some 2.5 million people, but the StimPak hasn’t created anything close to that. With all the talk about “green jobs” and the like, why aren’t the Democrats and Obama pushing for real public works programs to address this country’s failing infrastructure? What’s holding them back?

Doug Henwood: Their own predilections, and the configurations of elite and popular sentiment – though their predilections and elite sentiment overlap considerably. The Obama people like The Market, and want to nudge it into creating more private sector jobs. Elite opinion has always hated public sector jobs, except those that protect their property (cops, military) or make them money (contractors). Anything that lessens the disciplinary sting of unemployment, like WPA-style jobs, makes them worry about the workers getting too confident and too demanding.

Public sector jobs could also force up prevailing wages. And there’s a bias among neoliberals, like Obama & Co., that sees public sector jobs as phony and private sector jobs as real. I’m guessing that their reaction to the Massachusetts Senate loss is going to be to focus rhetorically on jobs, but since they won’t want to be seen as fiscally irresponsible – that driven by fear of the bond market and right-wing opinion – they’re going to emphasize tax breaks and other minimalist strategies. They won’t do much to create jobs. And, it must be conceded, there’s no popular movement demanding a public jobs program – and the unions are pretty quiet about it.

If such a movement did develop, the political atmosphere might change. But don’t expect Washington to lead the way.

JOSHUA FRANK is co-editor of Dissident Voice and author of Left Out! How Liberals Helped Reelect George W. Bush (Common Courage Press, 2005), and along with Jeffrey St. Clair, the editor of Red State Rebels: Tales of Grassroots Resistance in the Heartland, published by AK Press.

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