Tuesday, August 16, 2011

Ah, That Stimulating Cup of Seattle Juice, Leaking Out of the Bucket All Over The Pavement.

According to KOMO News in Seattle, on Earth Day "last year" (so I'm assuming that's April 22, 2010) Seattle received a $20 federal million weatherization("cash for caulkers") grant that was supposed to retrofit 2,000 homes and create 2,000 "green jobs." Sixteen months later, a grand total of 3 homes have been retrofitted and 14 (mostly administrative, not construction) jobs have been "created" --- I put that in quotes because it assumes no job loss from the taxes and borrowing that funded the $20 million. Now that's a "leaky bucket."

As President Obama says, he was shocked to discover that there is no longer any such thing as a "shovel ready" project. This is a serious macroeconomic problem, because it calls into question a most basic, practical level the usefulness of macroeconomic counter-cyclical (Keynesian) stimulus programs. In other words, even if Keynes was correct in his underlying formal theory, if the environmental impact statements and labor and wage studies and so forth make it impossible to time counter-cyclical stimulus correctly, then it doesn't matter how correct Keynes' theory is/was, it's not going to work in practice. That's why I was in favor of the idea that if the Administration was going to try a Keynesian stimulus, it should have addressed this problem head on, by a decree of an economic emergency that would have suspended many barriers to shovel-readiness.

Hap Tip to Drudge.

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