The Failed Stimulus Package Reveals What Economy Really Needs
A failure can make for a valuable learning experience, and the stimulus package is no exception. Clearly the stimulus has not worked, and from its inception many economists doubted the wisdom of the federal government trying to spend our way into prosperity. But putting aside questions about the merits of spending as means of sparking an economic recovery, it appears that the feds were not even able to dole out the money in a timely manner. The culprit — regulatory red tape.
Several studies conducted by the Department of Energy’s Office of the Inspector General (here , here , and here) have concluded that many of the stimulus-funded projects related to energy were very slow to get off the ground. For example, DOE’s investigation of one program dealing with block grants for energy conservation projects concluded that “as of August 2010, more than one year after the Recovery Act was passed, grant recipients had expended only about 8.4 percent of the $3.2 billion authorized for the Program.” Not exactly the “shovel ready” boost to the economy we were promised.
Regulatory delays were the reason. In its most recent report, DOE’s Inspector General concluded that “various regulatory requirements had slowed spending,” including “the Davis-Bacon Act, National Historic Preservation Act, Buy American provisions of the Recovery Act, and National Environmental Policy Act (NEPA).”
Granted, the programs funded by the stimulus are a big waste of taxpayer dollars, and it is a good thing that the feds can’t squander our money more quickly. But the point is that even the big government proponents of the stimulus package are finding out what it is like to get tripped up by — big government. Whilst hoisted on their own petard, one can hope that the legislators who supported the stimulus might figure this out.
Perhaps they will learn the critical lesson that can lead to real economic growth. Just as stimulus spending faces a regulatory gauntlet, so does private investment. Efforts by large and small businesses to expand — the real source of an economic recovery and job growth — are hampered by the regulatory state at least as much as are the government projects highlighted in the DOE reports. Streamlining or eliminating these regulatory hurdles would do far more to help the economy than all the stimulus spending in the world.