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Sunday, April 12, 2009

"The Case for Waste"

Is the government too worried about preventing waste in the spending associated with the stimulus package, so worried that it is causing harmful delays in putting the spending in place?:

The Case for Waste , by Alec MacGillis, Commentary, Washington Post: As the $787 billion stimulus package starts to flow, the message from on high is clear: No one dare waste a dime of it. "This plan cannot and will not be an excuse for waste and abuse," President Obama declared last month... Sen. Susan Collins (R-Maine) has warned ... that "we must ensure that haste does not make waste" and that even minimal amounts of misspent money would be simply "unacceptable." And California Gov. Arnold Schwarzenegger has appointed an inspector general to oversee "every single dollar" of the $50 billion flowing into his state.

Missing amid all these high-minded calls to protect taxpayer dollars is an awkward question: When the whole point of a major government spending program is to stimulate the faltering economy as quickly as possible, what exactly counts as "wasted" money? After all, if some stimulus cash is misspent -- say an errant official or contractor buys himself a Cadillac or a Harley Davidson, only to suffer the full force of law -- might not such fraud boost the economy more than if the cash languished in a law-abiding state account? All that monitoring, however well-intentioned, may undercut recovery by compelling officials to spend more slowly to avoid hearings, prosecution, or embarrassment in the media. ...

Underlying this contradiction is a broader tension... Obama sold the package as a "down payment" on his goals for energy, education and health care and has expressed the hope that it will also renew confidence in government. From that perspective, it's crucial that the money have the desired policy impact and be spent in an above-board manner. Members of Congress calling for close oversight cite notorious examples of waste in Iraq war contracts and the Hurricane Katrina recovery.

But the stimulus package's main stated goal was to jumpstart the economy by getting billions of dollars into circulation fast, and that requires a different mindset. ... It was John Maynard Keynes who famously said that paying unemployed men simply to dig up bottles filled with cash and buried in abandoned coal mines would be "better than nothing" as economic stimulus.

Instead of catching a break because of the time pressures, the stimulus is receiving far greater scrutiny than regular government spending. ... Rob Nabors,... the White House's point man for the stimulus,... said that the increased oversight is justified because the legislation's policy aims are as much a part of it as the stimulus.

"Yes, from an economic perspective, the money is spent when the money is spent, but we are planning for this money to leave a lasting legacy," he said. "We expect to show not just X numbers of jobs created but X number of homes weatherized. We're looking to improve our parks system, modernize our infrastructure. Any dollar distracted from those purposes really is a wasted dollar." He added: "...and if that means we have to take an extra day to make sure the reporting is in line and we're doing things right, we tend to push the agencies to . . . slow down a little." ...

For all the political benefit of promising to protect taxpayer dollars, the rhetoric around accountability may also unintentionally raise the stakes when the eventual spending scandals do surface. ... "There may be a naive impression that, given the amount of transparency and accountability called for by this Act, little or no fraud or waste will occur... Some level of waste or fraud is, regrettably, inevitable."

It is politically harder to argue for spending that does not produce a tangible asset you can point to, a bridge or something like that (it can even be named after the stimulus package to maximize the political benefit). But even so, I think they have over-emphasized long-term investments that are really about the supply-side of the economy, and under-emphasized policies that can boost demand in the short-run quickly and effectively, but do not have the kinds of long-run impacts that provide "a lasting legacy."

    Posted by on Sunday, April 12, 2009 at 02:34 AM in Economics, Fiscal Policy, Politics | Permalink  TrackBack (0)  Comments (24)


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