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The Other Reason Stimulus Won't Work

January 22, 2009, 10:01 am

Frequent readers will know that I do not buy into the Keynesian multiplier effect for government spending.  But there is an even better reason why the stimulus bill will never work:   it is simply impossible to break ground on any new government construction project in less than a year.

A year from now, any truly new incremental project in the stimulus bill will still be sitting on some planners desk with unfinished environmental impact assessments, the subject of arguments between multiple government agencies, tied up in court with environmental or NIMBY challenges, snarled in zoning fights, subject to conflicts between state, county, and city governments, or all of the above.  Most of the money will have been spent by planners, bureaucrats, and lawyers, with little to show for in actual facilities.

The couple of exceptions I can think of are:

  • The project has already been proceeding for years, and thus is just about to start construction anyway.  Which implies the spending is not incremental and that we are just substituting federal dollars for local dollars in completing local projects, never a good idea.
  • It may be possible to get a repair project going faster, but even that is probably impossible.  The contract award process alone can take up to 6 months, and it is probably no accident that federal highway funds are one of the few areas the government budgets multi-year.

To illustrate, let me tell a story.  We operate a marina and campground on a lake in Ventura County, California.  The marina office and store used to be a small floating building attached to the dock and floating on the lake (this is a fairly typical arrangement in small marinas).  The County decided it, for whatever reason, did not like having a floating store building any more, and it wanted the floating building closed and a new modular building put in a corner of the parking lot, on dry land.

So we get a modular building and park it in the parking lot near the dock entrance, as ordered.  Having been required by the county to take these steps, we were subsequently shocked to find that a variety of County offices refused to permit the new structure.  Eventually, it took nearly 4 months and $10,000 in fees to obtain the 8 County permits and approvals we needed to park a trailer in the parking lot.   And this does not include the cost of a fairly senior manager spending half his time chasing down all these approvals.  At one point, the County demanded a soil sample, and so we had to have a company come out and saw into the concrete parking lot to obtain a sample of the soil underneath.  God knows how long it would take to approve new construction on virgin land with water, sewer, etc.

Finally, some of you might be thinking that these government hurdles would be easier for the government itself to clear.  Wrong.  You have never, ever seen a government employee display as much energy as they will muster when they think another government agency is bypassing his or her authority.  I made a presentation a while back to a group of county commissioners in California, and it seems like most of their jobs involve dueling with various state agencies and local governments.

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Category: Government

11 Comments

  1. Max Lybbert:

    Yes, I recently read that most of FDR's infrastructure projects took a few years to get off the ground, compared to his "hire lots of teachers and tutors" programs that were implemented much faster. I found it interesting that Obama's pinned his hopes on infrastructure programs and "developing green technology" (however defined) when that has a long track record of disappointment.

    My understanding is that even with the money already allocated and the permits either in hand or waived that it still takes a year or more to navigate the various federal bureaucracy in putting the project up for bid, choosing a contractor, writing the contract, and guaranteeing that the contractor (1) pays whatever the government has defined as "fair market wages" *and* (2) uses union workers for whatever jobs the government requires be unionized.

    Of course, getting the money allocated and permits waived or in hand is no small feat.

    January 22, 2009, 11:12 am

  2. morganovich:

    oh, it will work all right. these projects will get off the ground just as the economic recovery gets into swing. therefore they will look fantastic in terms of efficacy and then be used to further the case for Keynesian intervention.

    the best was to get your own parade is to find one already in progress and get in front of it.

    January 22, 2009, 11:17 am

  3. Mark:

    Plus, there is only so many "infrastructure" projects that can be done at once. I live in Minneapolis and I would argue that we are already at the maximum capacity of road and bridge work that can be done. Any additional projects would create so much congestion and chaos that they cannot be done.

    The idea for infrastructure that is by far the best is to build nuclear power plants. The "green" revolution will need electricity and nuclear is the best option for such green production. Without substantial increases in electrical power generation it will be impossible to convert to electrical powered vehichles or hydrogen powered vehicles.

    But, the "geniuses" that are now running the government clearly cannot understand this fact.

    January 22, 2009, 12:38 pm

  4. Chris Byrne:

    Well yes, but that presumes that the so called stimulus plans are even intended to work.

    They are not.

    Their real purpose is to a. increase governmental authority and control over the private sector and b. increase the patronage money and opportunities for politicans to buy votes...

    ... but I'm pretty sure you knew that already.

    January 22, 2009, 12:43 pm

  5. ElamBend:

    Obama could use some of the federal power to break through red tape and banana and nimby to cause the construction of more nuke plants or a true national grid.
    In fact, drop the nuke plants; just a true national grid on the scale of the interstate system would be something he could hang his hat on. It won't happen. In the end money will be thrown at small little deals that can happen right away ("shovel ready" connected deals) or sound right (green jobs [btw, how are all those ethanol plants doing now]). In the end, they will do no good for the economy in the short term and leave us without any tangible result to point to.
    It's all going to be the biggest hog trough in the world.

    January 22, 2009, 6:06 pm

  6. John Moore:

    The inability to start these projects soon has always been an obvious fly in the ointment.

    Anyone who has watched how the left obstruct progress should know this. The telescopes on Mt. Graham, AZ were delayed for ages while an environmental ESA suit was battled (and won, of course, by the astronomers). As soon as the environmentalists gave up, the Indians raised religious objections, delaying it still more.

    The same tricks are now being used to try to stop the renewal of Peabody Coal's licenses in NE Arizona, at a time when coal is something we really need.

    The Nimbys, the Enviros, and (with leftist recruitment) the Native American activists will seek to stop anything.

    January 22, 2009, 6:44 pm

  7. ElamBend:

    And they'll blame someone else when the lights go out

    January 22, 2009, 10:02 pm

  9. Heretic:

    You've hit on it. The infrastructure aspect is a farce. The intent here is to stimulate the starving constituants in the legal profession and the regulatory state as a whole.
    Imagine how many lawyer-ready infrastructure projects there are!

    Then imagine how many government and activist jobs will be created to regulate the projects into stalemate. Look at it this way, and the "stimulus" is instantaneous. Heck, the lobbyists are already being "stimulated", paid to fight for their bit of slop at the trough.

    January 23, 2009, 11:06 am

  10. Scott Wiggins:

    The country will learn that electing persons to high office who have "no experience" running anything will bring certain perils with it. Of course, the press will continue to shill for him and our electorate are becoming increasingly confused and befuddled by anything coming from the government so that Obama's stimulus will be just another event of which they have no control and they will merely hope for the best. Here are a couple of random points with regard to infrastructure spending. Yes, it will take years. As a retired military officer I have seen up close how some of this stuff happens. I was based at Tustin, CA. It was on the base closure list in the mid-1990s even as the government was building new family housing units which were completed a year or two before the base closed for good. Well, the money had already been alotted so it had to be spent, right? Another thought with regard to infrastructure spending. Construction jobs are heavily represented by illegal aliens nowadays. Are we going to spend money for jobs, many of which will go to persons in this country illegally? Paying for jobs Americans won't do? It is my firm belief that we will get 5 cents of value for every dollar the government spends. A handful of companies will get rich and state and local governments will get a few new parks and bridges. In the end, you will be hard pressed to see where the money went...My two cents...

    January 23, 2009, 9:43 pm

  11. djaces:

    For the 8-9 Trillion dollars the Congress and the Fed have pumped into this fiasco since last summer the government could have sent a check for 25-30 Thousand dollars to every man, woman and child in the country. This wouldn't necessarily have been a wise thing to do, but it would certainly have done more to resolve the problem than their past and continuing blundering efforts. The negative consequences of either of these approaches are probably quite severe, but as it stands, we;ll have to face them without the benefit of seeing any of the cash.

    January 25, 2009, 2:01 pm