The Foundry

Defending the ever ballooning size of the Obama Administration’s proposed economic stimulus package, Obama’s soon to be White House economic adviser Lawrence Summers told Bloomberg: “There is not going to be any spending money for the sake of spending money.” Oh, really?

First let’s dispose of the complete fantasy that there is any measure of logic or reason going into the crafting of this stimulus plan. Just witness the wide range of numbers being thrown about for total size of the measure:

• Vice President-elect Joe Biden on ABC news this Sunday: “There’s going to be real significant investment, whether it’s 600 billion dollars or more or 700 billion dollars.“
• The Washington Post on Friday: “According to notes taken by a participant and shared by a senior congressional aide on the condition of anonymity, the pair said Obama is putting together a package of $670 billion to $770 billion but that he expects additions by Congress to jack up the total to about $850 billion, or 6 percent of the nation’s economy.“
• The New York Times on Saturday: “At the meeting on Tuesday, Ms. Romer also laid out recommendations from private sector analysts and liberal to conservative economists for a government stimulus that ranged from $800 billion to $1.3 trillion over two years.“

So in the span of just one week, the Obama Administration claims it is planning on spending anywhere from $600 billion to $1.3 trillion all to save a very scientific sounding 3 million jobs over two years. All of these numbers are complete fantasy. There is no body of economic research out there that is informing these ‘experts’ guesses as to how big an economic stimulus needs to be. The Obama Administration is pulling these numbers out of thin air. George Mason University economist Tyler Cowen writes:

The bottom line is this: we are being asked to believe that a big, trillion or even multi-trillion fiscal stimulus can boost the current macroeconomy. If you look at history, there isn’t good reason to believe that. Any single example, such as the Nazis, can be knocked down for lack of relevance or lack of correspondence to current conditions. Fair enough. But the burden of proof isn’t on the skeptics. It’s up to the advocates of the trillion dollar expenditure to come up with the convincing examples of a fiscal-led recovery. Right now we’re mostly at “It wasn’t really tried.” And then a mental retreat back into the notion that surely good public sector project opportunities are out there. So what you have is the possibility of faith — or lack thereof — that our government will spend this money well.

And just how fine tuned is the Obama Administration’s system at telling the “surely good public sector project opportunities” from the bad ones? The Washington Post reports:

An Obama adviser involved in crafting the stimulus package said the transition team was keenly aware of the potential pitfalls and was focused on funding ideas that would quickly pump money into the sagging economy, fulfilling Obama’s promise to create or preserve 2.5 million jobs by 2011. Because many ideas probably won’t meet that standard, the adviser said, the team is developing a screen to keep them out.

That better be one hell of screen because the Sacramento Bee reports:

Cash-strapped states and cities are salivating at the prospect of the largest public works program since the New Deal.
…
In California alone, officials have identified $28 billion worth of ready-to-go projects. They range from upgrading the access to the Golden Gate Bridge to realigning Interstate 5 north of Redding – and everyone wants a piece of the action.
…
“It was like make-a-wish,” said a skeptical Rep. Dennis Cardoza, D-Merced. “People saw this as, let’s see if we can hit the federal government lottery.”