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Obama Adviser Orszag: Stimulus Plan is 'Totally Impractical'

December 9, 2008 RSS Feed Print

This one is going to leave a welt. When Barack Obama's pick for budget chief, Peter Orszag, ran the Congressional Budget Office, here is what it had to say about a stimulus plan almost exactly like the one Obama is now proposing (bold is mine):

"Practically speaking, however, public works involve long start-up lags. Large-scale construction projects of any type require years of planning and preparation. Even those that are "on the shelf" generally cannot be undertaken quickly enough to provide timely stimulus to the economy. For major infrastructure projects supported by the federal government, such as highway construction and activities of the Army Corps of Engineers, initial outlays usually total less than 25 percent of the funding provided in a given year. For large projects, the initial rate of spending can be significantly lower than 25 percent.

Some of the candidates for public works, such as grant-funded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most of these projects could end up making the economic situation worse because they would stimulate the economy at the time that expansion was already well under way."

Me: The case for tax cuts grows. (Thanks to the Institute for Energy Research.)

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aporitic, I think you make a good argument, even if I would place more faith in Orszag's contention that even on-the-shelf projects cannot be started in time to stimulate. Projects that have been halted for lack of funds could be restarted, but I'm not sure that that would be stimulative to the degree that people want.
What I think Orszag is getting at, however, are the practical limits on how much work can be initiated in such a short time-frame. There isn't a large pool of unemployed laborers standing around, ready to be put behind the controls of heavy equipment. This isn't 1932, where most people were rough and ready types who worked with their hands. The labor pool is not as elastic. And there's only so much heavy equipment available for these projects.
It would be like trying to feed an apple whole to a garter snake. Can't be done. And if you fed it to the snake a small piece at a time, it might take forever, providing little if any stimulus.
What probably makes more sense to Orszag is to cut up the apple into small pieces and feed it to a million different snakes; ie. spread it throughout the economy rather than concentrate it in one sector. I don't necessarily agree with the overall spending-as-stimulus concept, but in this Orszag makes sense.
Cut Taxes, Cut Spending, Restart The Economy

Dean of MN 11:30AM December 10, 2008

Understanding How Things Are and How They Work
That is a "Rookie" mistake Mr. Obama made. Being a Conservative Democrat (like the the ones from the 50's), I am happy Mr. Obama is learning quickly on what is real and not. That is why advisors, even the right wing conservative ones he is surronding himself with, to teach him quickly.
Ever heard of the Davis Bacon Scale?
Hows this for a plan.. Economic Stimulus Common Sense Plan.
1. Take all the unemployment benefits, with welfare benefits, any other government handout benefits and pool that money. Kick in some additional funding for good measure.
2. Use this money to pay people for actually doing some kind of work that has value for the dollar paid.. WOW, How stupid is that!!!
3. Pay the Davis Bacon Scale to the folks performing work by skill and experience level.
4. Hand off the funds for projects to the States and all the way to the Cities (with no dippin in the funds from Feds or State level, let it go to the Municipal level). This makes the project for local infrastructure immediate or very close to that.
NOW, you have immediate stimulus starting at an area level. You can target areas that need it most, or areas that are in need of repair or new infrastructure the most.. etc..
City level decisions can be made in a one night meeting from the city council or even area council, very quickly.
Then Obama has time to start the larger projects planning, engineering, scheduling and execution phases.
The one thing big government does not understand is that helping blue collar people starts at the neighborhood level, not across a state or region of the US..
Keep going to the right Mr. Obama, you are doing pretty good right now, and you still need a few more steps right to be completely right..

COOYON The Cajun Cook and Storyteller of LA 11:18AM December 10, 2008

Bob Keyser: How dare you inject a dose of reality!
Of course, what a lot of people simply want is to cash a check, and that can be facilitated almost immediately, projects or no projects. The idea that work will actually be done is a secondary consideration for many.
Cut Taxes, Cut Spending, Restart The Economy

Dean of MN 11:09AM December 10, 2008

Obama Adviser Orszag: Stimulus Plan is 'Totally Impractical'

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