Federal stimulus is not as good as businesses doing their thing.
Planet Earth has traversed many, many orbits around its sun since I was
a college undergraduate majoring in English literature. Nonetheless, memory occasionally
flickers of various reading assignments that struck me as meaningful at the
time. One of those books that I have not read in almost four decades and have
scarcely thought of since came to mind while listening to Ken Simonson, chief
economist of the Associated General Contractors of America, speaking at a
recenteconomic conference sponsored by the Metals Service Center Institute.
The literature I refer to is “Waiting for Lefty,” a drama dating to the middle
of the Great Depression by the leftist playwright Clifford Odets. It’s still
performed now and then by community theater groups attracted to its simple
staging, casting and emotionalism.
The plot revolves around a group of workers debating whether to go on strike.
Their union’s leader warns them against it, the times being what they are. The
workers put off deciding what to do until their inspirational leader, the aptly
named “Lefty,” arrives and weighs in. He never does. The play ends with news
that Lefty has been killed, presumably by the evil forces of capitalism, which
inspires the workers to rise up in solidarity and strike.
Simple-minded agitprop to be sure, but a revealing portrait of its time. The
1930s were the heyday of both labor strife and the communist movement in the U.S. Although
some labor leaders were, like that play’s author, communist sympathizers if not
card-carrying party members, more sensible union bosses had to fight a
two-front battle against management on behalf of worker interests and far-left
ideologues for union control.
Simonson was discussing the logjam in federal stimulus funding when thoughts
drifted to “Waiting for Lefty.” Except Lefty, in this case, represents today’s
federal government, and the confused workers are all the businesses anxiously
waiting to be rescued by government largesse.
As of this writing more than a year and a half has passed since the Obama
administration allotted and Congress approved some $787 billion in fiscal
stimulus spending. According to Simonson, some $135 billion was directed at
construction projects spanning some 61 programs, especially for public
infrastructure such as highways, bridges, water and wastewater treatment, etc.
But only about a third of that infrastructure money had been allocated when the
AGC economist spoke. The rest was caught up in project planning limbo and a
briar patch of rules and regulations.
Much of the delay owes to the “buy American” requirement of the stimulus
legislation, which is supposed to favor U.S.-sourced material except where
unavailable or extraordinarily difficult to obtain. It’s up to general
contractors to certify where stuff comes from, but they don’t always know and
finding out is a time-consuming process. Products such as industrial valves
typically get assembled from components made around the world, in which case
determining the country of origin is like bailing water with a sieve. According
to Simonson, the EPA has issued 40 waivers for water/wastewater equipment but
you can bet none of those were snap judgment calls.
Even in cases where money flowed swiftly, it led to inefficiencies. Simonson
called attention to what he deemed “an embarrassment of riches” - $5.5 billion
of the stimulus money was allocated to the General Services Administration for
the immediate renovation of courthouses and other public buildings. “Our
members were swamped,” said Simonson, unable to ramp up projects fast enough to
make full use of the funds available.
A recurring theme of the MSCI Economic Summit was the role of tight credit in
prolonging our economy’s slump. Imagine that the federal government, instead of
controlling the funding stream, had directed that $787 billion in stimulus
money to go instead directly to private lenders (with strings attached, of
course), instructing them to get it into the business community as quickly as
possible, with provisions for taking it back if not turned into loans within a
specified time period. Think our economy might be humming at a far faster pace
Instead, businesses keep waiting for Lefty to show up. A nightmarish ending to
this play is that by the time federal bureaucrats finish allocating all of that
$787 billion in stimulus money, most of it will arrive just in time to fuel inflation
in an economy that likely will be chugging along quite nicely on its own.
Waiting For Lefty
November 1, 2010