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Don't Call it "Stimulus"

How recovery might happen

About 20 years ago, a couple of economists assembled a software program that crunches numbers for economic development projects. The program is called Implan, and it has become something of a standard for creating extremely detailed economic models. If you want to calculate how much of an impact on the local economy a big project in Erie County, New York, could have, it’s a good idea to buy a copy of Implan. For $5,875 you get the 2009 data package, plus the newest version of the economic-modeling software itself, and everything you can reasonably expect to be able to find out about every sector of the economy—goods manufacturing, real estate, local government, food production, retail, you name it. The data are from the Census Bureau and from many other sources, and the program calculates how much flows to individual wage-earners, proprietors, managers, and enterprises based on real data from real places. That $5,875 gets you the stuff for New York State. The package for New Hampshire is a steal at $3,225.

We recently used the Implan software to compare what the impact would be from various kinds of public investments. The preliminary results are pretty revealing—mainly because the people in Western New York who call the shots for where public money goes seem fixated on constructing new institutional buildings rather than putting public money into other sorts of projects.

For example, a quick run of what $150 million would buy if put into a category called “commercial and institutional buildings” reveals that the total economic impact if that were all spent in one year would be $233,521,477 in direct, indirect, and induced spending. That $150 million would create 2,142 jobs in all the various categories of economic activity that happen in Erie County, New York, in 2011—not just construction, but retail, food services, all across the spectrum of more than 400 categories of activity.

Plugging that same $150 million figure into the category called “wastewater, sewage, pipeline,” the results are even better. Total economic impact across all sectors would be $246,462,086 and total employment for the project would be 2,938. A Washington-based coalition of civil engineers and others has pointed out that fixing wastewater systems gives one of the best economic bangs for the buck, and has used this software to go to many geographic areas to show how a relatively small public input creates lasting value.

The economists and Census-data crunchers and other experts who put their heads together to create the Implan software package don’t have perfect knowledge, of course. It takes work to make the program function so that the inputs more directly connect with the reality that some projects are staged over a period of years, and that some of what you get once you spend money is not only a good construction-period benefit but also a long-term cost or two, especially in the categories of maintenance and energy—which is why building new buildings produces less of a long-term economic benefit than building other things does. Implan cannot tell you that fixing the sewer system in Buffalo would involve getting matching federal dollars, or that building new buildings for UB or for a hospital would necessarily involve having to count up the money it will take to demolish, adapt, or re-use existing buildings. But the software has its uses, which is why the company that makes it continues to get business from all across the country. Local governments use it to figure out how they should use public money, and industry groups—especially engineering consultants—use it to demonstrate that public works projects have positive and measurable net economic benefits.

As the nation and the world await President Obama’s new plans to stimulate the American economy by doing some much-needed public spending on infrastructure, though, we all have to calculate the impact of something that the Implan specialists probably never even imagined—namely, the influence of Tea Partiers like Minnesota’s Michelle Bachman and other Congressional Republicans, who don’t believe anything that these economic model-makers say.

Business lobbyists and their messaging

The anti-tax, anti-government crowd, funded by the business lobby, is responsible for this mindset. Yet in a bitterly ironic turnaround, this week the US Chamber of Commerce purchased full-page ads in major newspapers the day after Labor Day with a message that could have been drafted by President Obama’s own staff. Point three of the Chamber’s six-point plan is about as anti-Tea Party as you can get: It’s all about the ”urgent” need for infrastructure spending and the “1.9 million jobs per year” that can be created if Washington would only act to get infrastructure projects going.

The Chamber did not use the S-word, nor did it address how the government should pay for creating these jobs by getting these projects going. Nevertheless, the nation’s foremost business lobbying organization signed on to a concept that used to be a consensus item for American elected officials since the 1930s—namely, that the government should invest public funds to put American workers back to work.

The Chamber’s problem, and President Obama’s, is the Tea Party. Congressional approval will be required for any stimulus spending, and the key voting bloc in the House of Representatives is this sub-group that right now is committed to a message of ideological purity that sounds rather more like a made-up quote from The Onion than like an actual political stand. In The Onion, a Congressman whose Texas district is suffering from drought-induced wildfires calls for emergency tax breaks to combat the flames. In reality, Tea Party Republicans call for emergency tax breaks to deal with the flame-out of the consumer economy. Which is the joke?

The people in charge today are Republican primary voters—a small fraction of the electorate, between 15 percent and 20 percent overall, who consist of white suburban voters who are poorly educated, who have incomes at or below the median, who self-identify as Christian, and who consistently tell pollsters that they oppose the concept that public spending is in any way related to their economic well-being.

The only effective response to such irrationality is for lobbyists for industry groups that actually want to get some more of what economists call “demand” back into the economy, i.e., consumer purchasing power, is to get to work picking off some Republican House members on specific public-works projects that even they can’t not vote for.

The best way to do so might be to do the kind of number-crunching that can prove to the few remaining rational Republican members of Congress that money in means money out—not only into their own campaign accounts but also into the pockets of voters in their districts.

A president for projects?

It would be a very large undertaking just to identify projects for individual counties all across the country, to plug numbers into an input-output model like Implan and then to write up a report on what should or could get funded—but if the president and the US Chamber of Commerce are actually interested in doing more than mouthing multi-point plans for economic growth, the model-making should get done pronto. For the cost of hiring an out-of-work PhD for a couple of months, the local Chamber of Commerce in each media market in a state could shell out a few grand to Implan, run the numbers on sewer projects, road and bridge projects, school construction or any number of the other customary public inputs, and then go, report in hand, before local TV reporters, Rotarians, and opinion leaders and say, “Let’s get this done and get people working again.” Public buy-in would be worth the half-million-dollar expense for making the case with local voters about local projects in local areas all across the country.

The trouble is, the public at large is already sold on the idea. Democratic pollster Celinda Lake and her colleagues report that 51 percent of all voters support federal spending to create jobs, with 40 percent strongly supporting such action, and only 21 percent opposing. More than 52 percent of all voters support raising taxes on the rich and closing corporate tax loopholes, too. These numbers still mean, as they have for most of this year, that Obama stands a good chance of being re-elected because not only do most people still like him but most people actually agree that public spending using more tax dollars from rich people is what we need.

The problem is, this president does not have the unilateral authority in hand to go forward with using public funds the way that Ronald Reagan used them, which is the way that Franklin Delano Roosevelt used them, which is to say, by borrowing money and spending it, because Obama doesn’t have the votes he needs in order to spend the money. How does he get the votes? Maybe by crunching some numbers, and then using the gentle art of persuasion, by reaching out to reasonable people of good will and saying, “Folks, let us reason together—the Implan people show how we all can benefit.”

On second thought, Professor Obama had better have a different plan than persuasion. As martial law is not an option for him, maybe he should ask his new friends from the US Chamber of Commerce how to get Republicans on board. The Chamber still sounds like old-style Republicans, which means that they love to spend public money though they rant about taxes. The new Republicans they helped create, however, are a different breed—anti-tax and anti-spending. What do you do with people who want the Rapture, Armageddon, and Dr. Bachmann’s gay “conversion” program?

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

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