Just because the government spends a lot of money on something doesn’t mean a lot of new jobs are being created. In fact, long-delayed, poorly executed projects can end up destroying jobs. And I happen to know of just such a project.

Loeb’s NY Deli is an institution of sorts in downtown Washington, D.C. The restaurant opened in the 1950s and today is run by the children of its founder, Walter Loeb. For the past 32 years it operated on the corner of 15th and I Streets, NW, on the ground floor of a government building that housed the U.S. Export-Import bank, along with a handful of other retail businesses.

Last summer the General Services Administration told the Loebs that they would have to vacate the space in September to accommodate a planned renovation. With so many years invested in building their business at that location, they were reluctant to close and asked how long construction would last. Approximately six years, they were told, give or take a year or two. (As government buildings go, the Export-Import bank is relatively small, occupying less than half of a slender city block that is bisected by Vermont Avenue. So we’re not talking about the Pentagon.) When they complained that they couldn’t hold out for that long and still return to their old spot, they were blithely informed that they were not going to be given that option anyway: The remodeled building would not have room for any of the ground-floor retail establishments, which were being sacrificed to make way for a larger lobby and a new stairwell. So much for economic growth.

With their eviction date less than three months away, the Loeb family frantically began looking for a new locale, ultimately finding one a few blocks west of the old restaurant. It wasn’t ideal—the new digs were a bit smaller and did not come with the nice patio space Loeb’s diners had long enjoyed—but it would have to do. A bigger issue was that the space would not be ready until February—over four months after they were being booted from their existing location. They went back to the GSA and asked if they might be able to stay until the end of the year, given that construction plans were not yet in place. No dice, they were told.

They then hired a lawyer to assist them with negotiations, offering to pay a premium for a month-to-month lease with the proviso that they would vacate the moment construction was about to begin. Again they were rebuffed. Undeterred, they sent their lawyer back with an offer to pay an even higher premium to the government to operate for just one month more, in order to keep their -employees on the payroll for a little longer and also avoid the loss of income for four months.

The GSA finally set them straight. We don’t care about money, they were told: We’re the government. And we don’t particularly care about your business—it’s a bit of a hassle to us for the restaurant to be there, so we don’t want you there. End of negotiation. Loeb’s closed on schedule last September 17.

On February 3, I trudged across town to attend the grand opening of Loeb’s at its new location (on I Street between 17th and 18th). En route I took a slight detour to walk past their previous location for old time’s sake. Construction had not yet begun.

The fate of Loeb’s in these last few months is a cautionary tale for proponents of the federal stimulus program: Over two years after the legislation passed, the government finally got around to this project, which cost the 50 or so employees at Loeb’s and the other ground-floor businesses in the building their jobs. The government couldn’t be bothered to make token accommodations to soften or delay the effect of the job loss, even when that move would have brought the government more money. And by doing away with all retail spaces on the ground floor the project actually destroys some jobs in the long term and belies another administration principle of promoting the amorphous tenets of New Urbanism, among which are the joys of a thriving small retail sector.

Maybe the building needed to be remodeled, and there’s no doubt that there will be a few construction workers hired once the project finally gets going—but the fate of Loeb’s Deli is worth bearing in mind whenever someone tries to sell you on the supposed benefits of stimulus spending.

Ike Brannon is director of economic policy at the American Action Forum.

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