Obama’s Stimulus Plan: American Recovery and Reinvestment – My Final Word

I have listened and I have read. I have analyzed and quibbled. I have come to a conclusion: The American Recovery and Reinvestment plan is not a stimulus plan. The plan is a spending plan. Each item in the plan has merit; each item in the plan has costs.

I don’t believe the plan will create jobs. I do believe that the plan will redirect job creation. Clearly this plan will create jobs in the energy sector. At the moment we have very little invested in the Smart Grid; these jobs will be new jobs. These jobs will come at the expense of some existing jobs – see this post () for my views on crowding out.

If you have any doubt as to the nature of the bill pending in congress, take a look at the $650 million for DTV conversion coupons. The $245 million for the farm service agency. The $15.6 billion for Pell grants. The $1 billion for child support enforcement. The $1.15 billion for the 2010 census. This spending may be necessary; it may satisfy the requirements of efficient government spending. The spending is not stimulus. And, it certainly is not the best use of funds if this bill is intended to provide stimulus to a deteriorating economy.

I listened carefully to President Obama’s inauguration speech. The speech was a good one. The President clearly has a vision for the United States. Elements of the American Recovery and Reinvestment plan clearly fit into his vision. His vision may very well be the correct vision for the United States.

Since the plan is clearly not stimulus, I have no further views on the subject. The optimal size of government is a public policy question not one of cut and dried economics. In general, our models punt on the optimal size of government. Government spending is at its heart a transfer program, a reallocation of wealth. Clearly reallocation can be optimal; it depends on the welfare function. Without understanding the clear intention of the spending (a better future is not a specific goal), I cannot make an unbiased judgment on the subject.

This is my final word on this plan. (At least until I write on it again.)