Stimulus Package Update – Sort Of
I went to the recovery.gov site today to get the latest news on the stimulus package and how much has been rolled
out in an attempt to save the woefully unemployed from forming a long winding line outside every homeless shelter in the country. I had ambitious goals of giving a well organized description of how much money has been dolled and to whom those dollars have been so graciously distributed.
The bottom line was that I didn’t really get a full scoop about what was going on by the information that was displayed on the site. I’ll be the first to admit that I’m no Marilyn Vos Savant when it comes to interpreting tabulated information, but even to the most sharp witted web surfer, I think it may be difficult to drill down exactly what was going on.
However, I can tell you that according to recovery.gov, 640,329 jobs have been created/saved as a result of the recovery act. I still can’t decide if that is good or bad, or how they can even come up with that number. I was also able to brilliantly ascertain that about $160 billion of the $275 billion set aside for contracts, grants, and loans have been awarded, however only about $64 billion of that money has been paid out.
This is all fantastic about what is going on with the stimulus and everything, but my question is this: why is unemployment still at 10% for the country and a whopping 20% for the construction industry, which is as high (for both) as they have been since this whole mess began way back in 2008. This is especially concerning when about $150 billion of this is being pumped directly into the construction industry and the unemployment has remained the same.
I think Ben Bernanke would have to explain the reason for the refusal of the US unemployment rate to decline, but I think I have an idea as to why the construction industry may still be stagnant. Well, actually two reasons. 1. Commercial banks continue to hoard their money like misers. 2. Construction projects that have been shelved for years are slower than molasses when trying to resurrect.
We need to realize that there is no such thing as a shovel ready project. I really think the politicians missed this whole concept when they started pouring money into it. Not that it’s bad, but it just doesn’t happen over night. Trying to get public construction projects to move is like trying to push a refrigerator up a hill. There’s just a lot of paper work and red tape, not to mention the verification required of the plans, specs, and existing conditions.
I won’t even go into the commercial banks now, but I think they should be forced to lend money very soon. They were given bailout funds for a problem that they caused in an effort to stimulate lending, and now they refuse to lend it and continue to give themselves huge bonuses. It’s honestly the biggest crock I think I’ve ever seen.
Tags: Construction blog, Construction Economics, Federal Recovery, John Poole, Stimulus Package
You should check out http://www.recovery.org. They have a more realistic take on employment numbers with the projects that are currently under contract and out to bid.
Commercial real estate was over-built, leaving a huge surplus of commercial and office space on the market. The key infrastructure projects: roads, rail, bridges, sewer, water etc., are, like you say, slow to move, with one exception: ther seems to be a lot of road paving going on.
Ok fair enough about projects taking a long time to get started.I have experienced that before. My question is now how someone get a job helping do all the administrative work to get the project started. It sure beats long lines outside homeless shelters.
The job created/save formula is a farce. It assumes “beneficiaries” of the spending. Ex: If I spend $2M on an office renovation, it calculates the # of people that will fit in the office (existing or new), a % of construction workers, and then ASSUMES that the “new” office staff, and the construction workers will spend their salaries at local retail & service outlets therefore “creating or saving” X# of service positions. All of these assumptions are included in the formula. I’m no math genius, but as an engineer I can spot an exponentially effected formula that creates exaggerated results.
Let’s see, $64 billion to create OR SAVE 640,000 jobs. That equates to around $100,000 per job. Economic development professionals will tell you that $20,000 to $25,000 is typical, and that’s usually for newly created jobs.
The Administration is hiding behind the smokescreen of jobs that have been “saved”, because there’s no accurate way to determine whether those jobs would have actually been lost. That’s why unemployment continues to increase – because new jobs aren’t actually being created by all this spending.
“I won’t even go into the commercial banks now, but I think they should be forced to lend money very soon.”
This is absolutely absurd.
Banks should be “forced” to enter into potentially foolhardy business arrangements just because they have moeny on hand ?
I can understand motivating them somehow to be perhaps less risk averse than they currently are – taking chances on new business proposals, but isn’t it assumption of unnecessary risk that put them where they are now ? If everyone had actually repaid their loans, we wouldn’t be having this conversation.
Doesn’t it stand to reason that if they are presented with a solid business proposal by a reputable potential customer that it makes good business sense to enter into a partnership ? And doesn’t the corrolary hold true as well, that they should not enter into risky transactions merely to get the money flowing again ?
Banks that sit on their cash will flounder, those that spuriously loan money to all comers regardless of merit will fail, and those that actively make loans to those with genuine prospects to repay them will flourish. It’s pretty simple, really.
To lay the current global economic crisis solely at the feet of the banking system is selling short the dangerous influences of the regulatory system (i.e., government intervention), the insurance industry, the real estate industry (incl, mortgage brokers, assesors, and the agents themselves) and purveyors of financial products outside the banking industry (e.g., brokerage firms).
Fat-cat bankers bonuses are unpalatable to most of us, but their recipients were but one leg of the wobbly stool that was the financial bubble.