Posted by Joseph Y. Calhoun, III

I opposed the stimulus plan passed earlier this year based on economic principles. Having government take money from the private sector and spend it on the whims of politicians holds little hope for generating economic growth. The argument in favor of stimulus spending is that money spent by the public sector is more useful to the economy today than money saved by the private sector. That is somewhat true in that GDP is a measure of spending and therefore will certainly be improved if there is more spending, no matter who is doing it. It is also somewhat true, I suppose, if you don’t mind moving future economic activity to the present. One of the problems I have with moving that activity from the future to today though is that the activities dreamed up by politicians for today are unlikely - in the extreme - to match the quality of what the private sector might spend on in the future. If the money is saved today, some future entrepeneur might spend it to start the next Google or Apple Computer. If it is spent today it will almost certainly be spent on something stupid (but certainly politically correct) and won’t be available to a future Sergei Brin or Steve Jobs.

The stimulus passed last year was passed with nary a Republican vote so the results belong to them completely. The same can’t be said about the first stimulus plan passed by the Bush administration in 2008. You might remember that Bush pushed a tax rebate, endorsed by Nancy Pelosi and a host of Republicans, as the remedy for a recession that had yet to be declared. The tax rebate sent checks to most taxpayers with the expectation they would spend it and rescue the economy from potential recession. The tax rebates were deficit financed and it doesn’t require knowledge of Ricardian equivalence or the permanent income hypothesis to determine that taking money out of Uncle Sam’s left pocket and putting it in his right is unlikely to change the path of economic growth. No matter to the politicians; they tried it and as economic theory and common sense dictates, the majority of the rebates were saved rather than spent. The only thing better about the tax rebate is that the politicians didn’t get to spend the money on stupid stuff. As a “stimulus” it accomplished no more than the current version. By the way, a better alternative at the time would have been to have the Fed finance the tax rebates by purchasing Treasuries in the open market. An even better way would have been to make permanent tax cuts and finance them at least for a period of time by the Fed. And by the way, Bernanke knows this; he recommended exactly that for Japan in 2003. Why he doesn’t recommend it for us today is a mystery.

Anyway, never let it be said that I am a partisan. There are a number of politicians who understand economics and talk a good game. The number who talk the talk and actually walk the walk is very small. Most of them can’t resist doing something that is popular even if it is stupid because stupid and popular also might mean re-elected. Smart and unpopular isn’t a recipe for attracting votes.

Anyway, all of this is lead in to this report from John McCain and Tom Coburn about stupid stimulus tricks. Some of this stuff sounds like a Saturday Night Live skit, but all of them are apparently true. A sampling of how your tax dollars are being spent in the name of economic recovery:

• Taxpayers in Oregon may be surprised to learn that the largest stimulus project in their state is not a new road or bridge, but a $133 million makeover for the federal building in downtown Portland. The money will go toward ?greening the Edith Green/Wendell Wyatt Federal Building in the hope of making it a model for energy efficient government offices in the Northwest. That said, for $133 million some may wonder why they did not simply tear it down and start over.It is not yet clear how all of the money will be spent—those decisions will largely be made by a contractor to be hired by the General Services Administration. For now, agency officials expect to construct a type of vegetative skin—made of plants—on the exterior of the building, to help with heating and cooling costs. Vegetative facades on buildings, however, are a little studied field according to some experts. In 2007, a new federal building was constructed in downtown San Francisco with similar state-of-the-art energy efficiency features for $144 million—nearly the same cost to merely renovate the Portland Federal Building.19 Both buildings are eighteen stories tall, built with energy efficient technologies, and house federal agency offices. The major difference is that the San Francisco building is much larger, with an additional 100,000 usable square feet in comparison with its counterpart in Portland.
• A $2.2 million stimulus grant will help pay for new pipes to pump recycled water to the Sharp Park Golf Course in San Francisco, California. Unfortunately, the golf course may not exist for much longer. The City Council is considering closing the public course over concerns for the California red-legged frog and the San Francisco garter snake that live in the area.Both endangered animals are struggling for survival, with the golf course sitting squarely in the middle of their habitat. Environmental advocates are hoping to dismantle the golf course and turn it into park land, while a determined band of golfers are hoping to have the golf course deemed an ?historic landmark.

  While the golf course was designed by Alister Mackenzie, best known for designing Augusta National,  Sharp Park has not followed in Augusta‘s successful footsteps. The number of rounds played has decreased nearly 48 percent since 2002 and the course now operates at half of its capacity. If the golf course ultimately is closed down, the usefulness of the new pipeline would be significantly reduced.

  The San Francisco Board of Supervisors recently received a recommendation from its parks director to keep the golf course open, but then delayed a vote on the matter after public outcry. Adding to the uncertainty of Sharp Park‘s future is its status as a money-loser for the city; the golf course lost $42,784 in fiscal year 2008-2009.41 Despite these concerns, the Department of the Interior awarded the North Coast County Water District a $2.2 million grant for the creation of a recycled water pumping station, which will primarily serve the Sharp Park Golf Course.

• Few security analysts see the dinner cruise industry as a key vulnerability in our nation‘s efforts to combat terrorism. But, that did not stop the Department of Homeland Security from awarding nearly $1 million to the privately-held Entertainment Cruises, LLC, to step up its security efforts.The Chicago-based company has 23 vessels in eight cities, including Boston, Chicago, Philadelphia and Washington, D.C., which according to the company, help to provide ?superior dining and entertainment experiences for its guests. One ship, the Spirit of Boston, which received stimulus funds to pay for an alarm and surveillance system, is a three-deck vessel, boasts ?chic table settings two dance floors and the ?largest outdoor patio deck on Boston Harbor.

  In an interview on the company‘s blog, Dan Russell, General Manager for Chicago, said that his favorite cruise ship was the Mystic Blue: ?It is very laid back atmosphere (which I really need right now), casual, good food. It‘s like a lounge on the water.

  Entertainment Cruises vice president, Gary Frommelt, noted that it was unusual for his company to get terrorism-prevention funding, ?We feel that we‘re really a low threat for a terrorist incident. But the stimulus was a nice perk.‘‘

• A half-million dollar bike path in Minnesota will lead pedestrians and bicyclists to the doorstep of the Minnesota Twins. Local baseball fans are reportedly thrilled, but it has drawn criticism from at least one prominent local former lawmaker who thinks the trail will never be used enough to justify its cost. A former member of the Minnesota House of Representatives called it ?the Bermuda Triangle of boondoggles. The trail, known as the Cedar Lake Trail, would begin at the stadium and lead to downtown Minneapolis.
• The federal government has grown by at least 25,000 people since the beginning of the year, and agencies have spent more than $186 million on stimulus-related overhead. Most of the new employees are focusing solely on implementing the stimulus, and the government does not expect those to remain as permanent jobs.
• An Internal Revenue Service (IRS) building that was slated to close as a cost-cutting measure is now getting a massive renovation. In 2008, 90 million tax returns were filed electronically, representing almost 60 percent of all returns and a huge decrease in the use of paper returns. While less paper is good news for the taxpayer and the environment, there is considerably less need for IRS service centers around the nation that handle paper returns. At the end of 2008, the IRS made cost-cutting plans to shut down its operations for its facility in Andover, Massachusetts that managed paper tax forms. Just days prior to the passage of the American Recovery and Reinvestment Act, members of Congress intervened, and ultimately succeeded in keeping the center open at least for an unspecified time. Despite the judgment of the IRS that the facility was no longer needed, the General Services Administration has awarded the Andover building $117 million for a ?green building modernization.
• Last year, the U.S. Department of Housing and Urban Development (HUD) found significant mismanagement of more than $6.4 million in federal grants by Georgia‘s Fulton County Department of Housing and Community Development. For example, HUD‘s inspector general identified $6.4 million in questioned costs as a result of failing to ?prepare or maintain proper documentation, ?conduct or document project monitoring, or ?properly maintain and manage program staff. This year, the department is slated to receive $11.9 million in the stimulus Neighborhood Stabilization Program funds from HUD.
• Road warriors travelling along I-10 between Houston and Beaumont, Texas will soon have two new rest stops where they can surf the Internet. The Texas Department of Transportation approved $15,500,000 in stimulus funds to go toward two safety rest areas in Chambers County, though the actual costs may come in closer to $13.8 million. According to Randy Redmond, Beaumont District Engineer, ?this is more than a rest area. Planners for the two new rest areas consider them high-tech travel centers. Not only will visitors be able to use restrooms, but they will be able to access the Internet free of charge. Each center will also offer lessons in local Texas history and the surrounding natural habitat through interactive exhibits, an interpretive center, and nature trails. Picnic tables and parking spaces for large trucks and passenger vehicles will also make the center more attractive. Although construction begins in January 2010, the centers will not be completed until mid-2012.
• Some states have chosen to use all of their transportation stimulus money on roads and bridges, forgoing the option to advertise the projects with road signs. Others have chosen to spend a great deal on signs. The state of Ohio could spend $1 million on stimulus signs for road projects with Pennsylvania spending $140,000. The reason: the state wants taxpayers to know ?where their stimulus dollars went, said a spokesman for the Ohio Department of Transportation. Estimates are between $2,000 to $3,000 to ?supply, install and remove signs for all 365 Ohio projects. New York spent nearly $100,000 on highway signs until it was shamed into halting its plans to purchase $900,000 more in signs. Colorado has spent at least $55,000 on signs, prompting local politician Mike Coffman to call them ?a slap in the face to the American people.
• Indiana University professors received $221,355 in economic stimulus funds to study why young men do not like to wear condoms. The research will ?advance our understanding of…the role of cognitive and affective processes and condom application skills in explaining problems with condom use in young, heterosexual adult men, and to create ?education strategies tailored to the needs of individuals who have trouble using condoms effectively.

This is just a partial list obviously. Go here to read more…

Our economy suffers from a lack of capital because we haven’t saved enough over the last couple of decades. The only way to remedy that situation is to limit our spending and build up new capital. These types of wasteful spending projects just delay the recovery.