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A Stimulus is a Terrible Thing to Waste

Academics discover that the stimulus bill didn't stimulate the economy, but the politicians want to try again.

12:00 AM, Sep 9, 2010 • By GARY ANDRES
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Earlier this week, President Obama proposed another round of stimulus spending, aiming to boost the sagging economy and—he vainly hopes—his party’s slumping political fortunes.

A Stimulus is a Terrible Thing to Waste

The $50 billion ‘little brother’ of the $787 billion enacted two years ago is more of a campaign talking point for hemorrhaging Democratic candidates than a serious economic stimulus plan—and with good reason.

If the Democratic controlled Congress spreads the proceeds around the same way it did with the first spending plan, the results will benefit powerful legislative leaders and savvy Washington insiders more than people who really need it. 

At least that was the outcome of the first stimulus bill, according to some new research unveiled last week.  And there is no reason to believe this smaller sibling would produce different results.

Three political scientists, James G. Gimpel and Frances E. Lee of the University of Maryland, and Rebecca U. Thorpe of the University of Washington, presented a devastating critique of the first stimulus bill at the annual meeting of the American Political Science Association in Washington, D.C. last week.

Their paper, titled “The Distributive Politics of the Federal Stimulus: The Geography of the American Recovery and Reinvestment Act (ARRA) of 2009,” finds that the funding allocated under last year’s massive spending measure was poorly targeted based on economic need.

Additionally, the way the funds were allocated fits with a lot of Americans’  negative preconceptions of how Washington really works.

Gimpel and his colleagues ask an important question.  Did the stimulus money flow disproportionately to the areas with high unemployment and large numbers of mortgage foreclosures?  The simple answer: No.

To the contrary, the study reveals the severity of the recession had little bearing on allocation of the dollars.

Yet distribution decisions were far from random.  Gimpel and his colleagues write: “Clearly the ARRA did target federal resources to particular locations, just the wrong ones from a need standpoint.”

So how did the money get targeted?  The research supports two other explanations.  The first is known in political science circles as “distributive theory.”

This approach posits that members of Congress in key institutional positions – such as legislative leaders or lawmakers seated on committees of jurisdiction – steered resources disproportionately in their own direction. Why?  Because they had the ability to do so.

In other words, instead of allocating stimulus dollars where people need it most, distributive theory maintains politicians apportion it in ways that helps themselves, their political party, or their own electoral constituencies.

Call it the “pork barrel” approach to politics.

The second explanation concerns how policymakers exploit “windows of opportunity” during policy debates. Based on research, the windows rationale received even stronger support.

In colloquial terms, this explanation is a manifestation of the saying, “a crisis is a terrible thing to waste.”

Gimpel and his colleagues show that circumstances like an economic emergency create a wave like effect that pull a lot of unrelated—and even ineffective—ideas along.

The logic of these “policy windows” can be summed up like this, according to the paper: “Rather than public policy being the product of decisions rationally designed to solve problems, it is a ‘garbage can’ shaped by chance and contingency, depending on which participants are present, which later alternatives are available, and even what catches people’s eyes.”

Policy ideas advanced by the Obama administration, such as promoting clean energy, fostering medical and scientific research, and subsidizing state and local government services, are examples of policy alternatives that rode the wave created by the stimulus bill.

The policy window thesis maintains that lawmakers and administration officials – acting like entrepreneurs—attach their ideas to legislative vehicles like the stimulus, even if these proposals had little to do with creating jobs or addressing economic hardship.

The paper finds support for both theories, but more for the “policy windows” argument. “We find some support for both theories,” Gimpel and his co-authors write, “but policy window effects were more important than 'pork barrel politics' in explaining why funds were mismatched to need.”

Could this happen again when it comes to the new $50 billion stimulus bill?  You bet. Especially because the policy window appears open again as Democrats face a mounting economic and political turmoil and may need to move some legislative vehicle.

Using the ARRA as a template, Democrats in Congress might use their institutional positions to direct pork barrel spending—and the stubborn economy as a “policy window"—but will once again probably miss the mark of growing the economy and creating jobs.  As the political scientists conclude, “Rather than a uniquely egregious exercise in pork barreling, the ARRA brightly illuminates the politics of making the most of a crisis.”  After all, from the Democrats’ perspective, more stimulus is a terrible thing to waste.

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