More Stimulus = More Waste

AllenMore Stimulus = More Waste

By Allen Wilson

A 50 billion dollar infrastructure stimulus package looks like a good way to get the economy moving. Or so says Obama. Of course there is still money left unspent in the original stimulus for “shovel ready” projects that aren’t shovel ready. Then there is the reality that many of the infrastructure projects the administration is touting as “an immediate jobs generator” can’t go forward until land use and legal challenges are resolved. If you want to count the number of lawyers involved in clearing those hurdles you might be able to claim some jobs benefits.

In addition to the relatively small 50 billion dollars spent on a ditch to keep America out of the ditch there are two other programs that are headed our way. One, a 100 billion dollar tax credit for companies to write off research and development costs. The other a 200 billion dollar corporate tax break that would allow corporations to write off 100% of capital expenditures for plants and equipment made before the end of 2011.

Here’s why these won’t work. The administration dangled huge grants in front of corporations (the part of the business sector that has the cash to spend) last year at about this time. The requirement was a matching funds approach. That is, the corporation had to put up some of the money the government put up the rest. The sticking point was that the grants had a deadline that would prevent the corporations from conducting a proper risk benefit evaluation and structure a program from their already strapped resources. The result was that the money was not spent by the government. Why? Because unlike the government, the corporations have to answer to their stockholders who will not tolerate risky programs that haven’t been researched.

As for corporations spending frantically to capitalize on accelerated depreciation of assets, that is just a joke. Most corporations live by an annual budget and forecast. Whether they are in debt or flush with cash, they get compensated for how well they perform to that budget, which is set in advance. To think a board of directors is going to approve a CEO’s rush to spend is beyond the realm of make believe. Some might take the risk, most won’t.

So let’s recap. If it was shovel ready it is already underway. Only lawyers will benefit from a quickie infrastructure stimulus. Corporations evaluate before they spend and that takes time. They also appropriate in their budgets which may already be set for the current year. Those that do rush usually plan poorly and suffer the consequences with inefficiency and what we call in the business world NON-CONFORMANCE. You know it by another name – WASTE.

So what does Obama hope to accomplish with this $350 billion dollar stimulus package of smoke and mirrors? He hopes to prove that Americans will believe just about anything if you say it right. Well saying it don’t make it so Mr. President. The first stimulus didn’t work. This wouldn’t either. Read our lips, “No new stimulus.” I sure hope the republican minority in congress stands up to the majority and just says “NO”. $350 billion would go a lot further in the form of extension of the Bush Tax Cuts across the board.

Oh, I almost forgot. Obama said one other thing this weekend that was totally wrong. I do not believe he is treated like a dog. We love our dogs. They are noble beasts. They listen to us, are loyal, obedient, and give us great comfort. Act like a dog Mr. President and then maybe, just maybe we will treat you like one.


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