Bryan Clapper: $14.5 million tab nets area 20 jobs

Published 6:00 am Saturday, November 7, 2009

bryanOne out of every 7,523 people in the 49120 zip code has the Economic Recovery and Revitalization Act of 2009 to thank for saving or creating their job.

What, no applause?

According to recovery.gov, the Web site the federal government spent $18 million to redesign in order to provide all kinds of data to policy wonks like me, the total number of jobs created or saved because of the Recovery Act in the 49120 zip code is 4.7, thanks to eight grants totaling $5.9 million. If the primary purpose of the bill was to save and create jobs, then each job created or saved in Niles cost taxpayers a cool $1.3 million.

Granted, some good spending came out of the bill, such as grants to local school districts, but if the purpose was to revitalize the economy, I have to admit that I could have created a lot more than five jobs for $5.9 million.

In the Dowagiac area, the numbers are a lot better: $1.9 million to create or save 15 jobs. But that’s still $127,000 per job created or saved, and I can guarantee none of the benefactors of those grants are making that. Four of the jobs “created” in Dowagiac are laborers to resurface a parking lot. What will happen to those jobs once the resurfacing is done? The Pokagon Band also received a grant for $724,000 to build new housing, creating 11 jobs.

The Cassopolis area was given $3.9 million in 15 grants to create or save – wait for it – one job. The Edwardsburg area received just over $1 million in two grants to create or save no jobs. In the Buchanan area, the Recovery Act is providing two grants totaling $1.8 million to create or save no jobs.

This is all according to the government’s own reporting, and you can explore all of the data yourself at recovery.gov. Many pundits scoffed at unusually high numbers nationally, saying the data is skewed to favor the Obama administration. If the numbers for our area are inflated, it sure isn’t helping the administration’s cause.

In our immediate area, then, the grand total is $14.5 million to create 20.7 jobs – in other words, $700,000 per job saved or created.

This illustrates the problem I’ve had with the Recovery Act since the very beginning: Government cannot stimulate economic growth as well as the private sector, if at all. Government cannot create wealth, only shift it, and therefore no matter what and where government spends, it will always be zero-sum.

Think of what else could have been done locally with that $14.5 million. If local residents were given $14.5 million in tax breaks, that would have resulted in greater stimulus than government money.

What if every household in the same five zip codes (there are 36,000 of them) were given $400 in vouchers that had to be spent at a business in the same zip code in which they live? That would be $6 million in new consumer spending in 49120, $3.1 million in new consumer spending in 49047, $1.8 million in new consumer spending in 49107, $1.6 million in new consumer spending in 49031 and $1.7 million in new consumer spending in 49112. For the small businesses that employ most of the working people in the area, it would be a huge influx of cash, and the total bill for the federal government would be the same.

What if the same methodology were carried out on a national level? That would mean a total stimulus cost of roughly $46 billion, and it would all be in vouchers to be spent at local businesses.

If your household received $400 to be spent at any business in your zip code, what would you do with it? Even if you did something seemingly trivial, like throwing a huge birthday bash for your kids, it would benefit the overall economy. You’d have to buy a cake, hire a clown, buy presents and food for the party, thereby spending money with the bakery, the grocery store, the toy store and a self-employed clown for rent.

But I said government can’t effectively stimulate the economy, right?
That’s still true – after all, it is consumers making perfectly natural, organic decisions as to where to spend the money. I also don’t agree that government should do anything to stimulate the economy to begin with; if anything, in order to help the economy, the government should take fewer tax dollars and do less overall, not more. But if we must use taxpayer money for stimulus, doesn’t it make more sense to do it in the way that most closely mimics naturally occurring consumer habits?

If you asked a panel of government experts how to bake a bigger loaf of bread, they would tell you to first buy a bigger bowl, then buy a bigger oven, then build a bigger kitchen, and then buy a bigger bread knife. If you asked a panel of business professionals the same question, they’d just tell you to double the ingredients in the recipe. And they’d be right.

The true recipe for a stronger economy is not to stimulate it indirectly with expensive and needless construction projects just to get people to work, it’s to do more of what we already know works: the free market functioning on an exchange of value (I want the donut you’re selling more than I want the dollar bill in my pocket, so we trade) and employees producing those products.