Photo: me, taken with HTC Droid Incredible
I snapped the photo to the right on my way to the bank earlier (click to enlarge), a scene of a small park in the Eastern Market district southeast of the U.S. Capitol building. I dryly tweeted, “Notice: nobody is working.” But all kidding aside (even though I’m not kidding — absolutely nobody was working), it struck me that it’s worth using this as a case study to understand who really reaps some of the benefits of the Bush/Obama so-called stimulus.
I haven’t spent nearly as much time with the primary texts of John Maynard Keynes as I have with Adam Smith, Milton Friedman, Friedrich Hayek, etc. (none at all, actually), but Keynesian economics and theories of counter-cyclical spending should be taken seriously, insofar as we should use econometric analysis to scrutinize its theoretical claims. The idea that spending on public infrastructure to hire unemployed people (again — in my photo of the sign touting my “Recovery Dollars at Work,” nobody was working), thus putting an income in their pockets that they in turn spend on consumption goods that must be provided to the market by firms who must also hire people as labor inputs in production, people who also in turn earn incomes and spend them on consumption goods, etc. (a.k.a. the “multiplier effect” — the CBO estimated that for every dollar spent by the American Recovery and Reinvestment Act, two dollars of economic activity would be generated) is at least intuitive and easy to grasp. And the spending is on public works projects, from which everyone benefits, rather than spending on the private sector, which no smart politician would ever do transparently in an era of heightened awareness about cronyism. Whether or not demand-side economics actually play out in real time is a question for economists and statisticians, and proponents of this kind of public spending neatly evade the question of what market distortions will arise from either a) increased levels of taxation to fund the spending, or b) increased levels of debt to fund the spending. (I don’t include deficit spending here, because deficit spending too must eventually be funded by either tax revenues or debt.)
So the government decides to spend stimulus money on (absent) workers for the upkeep of a park in a nice residential area of DC. We can apply the tools of social science to determine the stimulative multiplier effect of spending on park maintenance wages. It would be worth noting that, in what Dave Ramsey would call the era in which “the home mortgage has taken the place of the BMW as the status symbol of choice,” whatever wages park maintenance workers earned as a result of stimulus spending probably didn’t/wouldn’t go toward consumption goods; rather it would go toward home mortgage and credit card debt, or medical bills, etc. Anyone, including entrepreneurial cell phone photographers like yours truly, can visit and enjoy the manicured open space for the cost of traveling to it. The point is that, on its face, the effect of stimulus spending can be tested empirically, and it’s possible that, in some way, the American Recovery and Reinvestment Act generated a little bit of positive economic activity. I don’t have the time or resources to conduct my own study, so you’re stuck with my speculation that it probably wasn’t much, and not worth the taxes/debt required to pay for it.
What piqued my interest far more than anything on my walk to the bank today is where I found this sign. This park is a couple of blocks away from my workplace, in a nice residential area of Southeast Capitol Hill. Believe me when I say it’s nice; I’ve been scanning this area for residential openings for awhile now because Emily and I both work in DC, and we settled on living in Virginia when I still worked on Virginia. The housing and rental prices in this part of town are not trivial. So here’s my question: how much stimulus spending went to the upkeep of public parks? This is an important question because, while some may consider recreational areas vital pieces of public infrastructure, to me it seems that policy efforts to preserve open spaces also necessarily preserve artificially inflated housing and rental prices. If you restrict the supply of available land, then available land becomes more expensive to buy and develop. In effect, stimulus spending on municipal parks is nothing more than a bailout of wealthy land owners. Another empirically-testable alternative would have been to finance existing debt and deficits with the sale of public land to private developers, who would need to hire workers to build homes, restaurants, and stores, which in turn would need to hire people, and all those workers would receive incomes which they could spend on consumption goods and/or private debt obligations. Those private debt obligations may also offset the stimulative multiplier, but at least taxpayers wouldn’t be on the hook for the bill. Additionally, putting previously public land to private use could lower real estate prices for everyone else in the meantime. So to what extent has stimulus spending been a form of soft zoning restriction?
This breakout of spending highlights $735,000,000 in aid to national park initiatives, and over $53 billion for a “State Fiscal Stabilization Fund,” 82% of which must go to education, but 18% of which can be spent on “other government services.” Again, if I had the time and resources to do my own study, I would — so consider this a trail of bread crumbs, Internet. Surely someone wants to look into this?
