More evidence that Obama's stimulus falls short.

Gossip, speculation, and scuttlebutt about politics.
Jan. 27 2009 6:41 PM

CBO, Meet CWA

More evidence that Obama's stimulus falls short.

A new Congressional Budget Office study provides ample reason to doubt that President Obama's stimulus package will create jobs fast enough to meet the growing unemployment crisis. The CBO puts the total cost of the House version at $816 billion. Of that, $356 billion will be appropriated; $248 billion will be given out as benefit increases in programs like unemployment insurance, Social Security, and Medicaid; and $212 billion will be given out as tax cuts (of which close to half are corporate goodies of dubious value to economic recovery). Only the first of these spending categories—appropriations—will attempt directly to reverse growing unemployment (officially now at 7.2 percent, unofficially at more than 13 percent). How much of this $356 billion in job-creating money will go out the door between now and Sept. 30? Only $29 billion! Obama's budget director, Peter Orszag, had a cow last week after the Washington Post reported that less than half of the appropriations in the stimulus bill will be spent within the next two years. But the real shocker is that less than one-tenth of the appropriations will be spent during the current fiscal year, which still has eight months to go.

In an earlier column, Charles Peters and I pointed out that in 1934, Franklin Roosevelt was able to put 4 million people back to work within a period of two months through the Civil Works Administration, precursor to the WPA. Obama proposes to put the same number of people to work "over the next few years." The CBO analysis helps to clarify this discrepancy. "Lags in spending," the CBO explains, "stem in part from the need to draft plans, solicit bids, enter into contracts, and conduct regulatory or environmental reviews. Spending can be further delayed because some activities are by their nature seasonal. For example, major school repairs are generally scheduled during the summer to avoid disrupting classes, and highway and construction work are difficult to carry out during the winter months in many parts of the country."

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But under Harry Hopkins' impatient leadership, the CWA managed in the dead of winter to build or make substantial improvements to 40,000 schools and 255,000 miles of roads. This all happened between Nov. 1933, when the CWA was created, and April 1934, when it was shut down. That's five months. Hopkins was able to move so quickly because he didn't have to solicit bids and enter into contracts; he put workers directly onto the federal payroll. Indeed, the reason Roosevelt created the CWA was that Harold Ickes' Public Works Administration, similarly tasked to put people back to work quickly, had failed to spend money fast enough. The PWA, like Obama's stimulus bill, worked through private contractors.

"Brand new programs pose additional challenges," the CBO study continues. "Developing procedures and criteria, issuing the necessary regulations, and reviewing plans and proposals would make distributing money even more difficult—as can be seen, for example, in the lack of any disbursements to date under the loan programs established for automakers last summer to invest in producing energy-efficient vehicles." Although the CBO is here talking about government programs in general, it is telling that the example it cites is of a government program that works through the private sector. "Throughout the federal government," the CBO concludes, "spending for new programs has frequently been slower than expected and rarely been faster." Correct. Please note, however, that just yesterday, 11 companies announced mass layoffs that will result in the loss of 75,000 jobs. This would seem to be one of those times when the government needs to spend money faster than usual, not slower.

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.

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