The gift horse

One of the problems with voting against a stimulus package is that nobody wants to be seen as saying no to “free” money. The Atlanta Journal-Constitution describes the agony of Georgia Republicans who are struggling to articulate a reason to oppose a stimulus package.

In Georgia, more than $5.6 billion in stimulus money would go to K-12 education, transportation and infrastructure projects, Medicaid and public safety. Mark Zandi, an economist from Moodys.com who served as an adviser to Republican Sen. John McCain’s presidential campaign, said last week the country will have 4 million more jobs by the end of 2010 if the plan is approved, 143,000 of them in Georgia.

“It’s a very broad-based package,” said Alan Essig, a former state budget analyst who runs the Georgia Budget and Policy Institute, which bills itself as an independent think tank in Atlanta. “It should help lessen the need for state budget cuts, increase jobs and employment, help solidify the safety net when we really need one.”

Georgia is facing $2 billion in budget cuts, affecting teachers, police and firefighters. The state’s Medicaid program is short by $208 million.

The unemployment rate has risen above 8 percent. Zandi, the Moodys.com economist, estimates that the stimulus plan could lower it by 1.8 percent by the end of 2010.

“I don’t think anybody wants to hear you’re voting against it or that the money’s not going to be coming,” said Rep. Lynn Westmoreland, a Republican from Grantville. If the bill dealt only with roads, infrastructure and job creation, he said, he would vote for it — but not as it’s written now.

Rep. Jack Kingston, a south Georgia Republican who sits on the House Appropriations Committee, faulted the package for spending too much on “left-leaning” social programs. He took particular aim at money earmarked for arts and health programs, including a national wellness program he characterized as creating something akin to a “national fat farm.”

Of course it’s not really “free money”. But it’s hard to think about that when the pile is sitting right there in front of you. Go ahead, just stretch our your hand and take it.

“Everybody likes to get gifts,” said U.S. Rep. John Linder, a Republican from Duluth. “Somebody has to pay for them.” … Rep. Tom Price, a Roswell Republican, is pushing for more tax cuts and credits, too.

“We’re going to take money from Georgians, wash it through Washington, take off some of the money Georgians sent to Washington and then allow Georgians to have some of that money back,” Price said. “It absolutely makes no sense.”

It makes perfect sense when you remember that the more fingers money passes through the better it is for the fingers. But the pile still sits there, and what would you rather have? Eighty five cents on the dollar or nothing on the dollar? Oh wait … it’s your dollar you say? Don’t worry. You’ll pay for it in the future when you have more money. Because the more sophisticated version of letting other people spend your money is that they are doing it for your future good.

There’s only one hitch to that argument: it depends on how wisely the money they are IOU’ing in your name is spent. Whether a future income stream actually eventuates critically depends on where the money recirculating today is spent; it also depends on whether the institutions being built today are laying the basis for productivity tomorrow. The old time management theorist Peter Drucker observed in 1959 that the most important thing to remember about the future was that it depended on getting things right today. He said it was important to understand what you were getting into now, and to feel your way forward every step of the way as things progressed. Otherwise, enthusiasms would simply lead to walking off a cliff. Drucker wrote:

Strategic planning does not deal with future decisions. It deals with the futurity of present decisions. Decisions exist only in the present. The question that faces the strategic decision-maker is not what his organization should do tomorrow. It is, “What do we have to do today to be ready for an uncertain tomorrow?” The question is not what will happen in the future. It is, “What futurity do we have to build into our present thinking and doing, what time spans do we have to consider, and how do we use tihs information to make a rational decision now?” …

Strategic planning is not an attempt to eliminate risk. It is not even an attempt to minimize risk. Such an attempt can lead only to irrational and unlimited risks and to certain disaster.

Economic activity, by definition, commits present resources to the future, i.e., to highly uncertain expectations … While it is futile to try to eliminate risk, and questionable to try to minimize it, it is essential that the risks taken be the right risks … We must be able to choose rationally among risk-taking courses of action rather than plunge into uncertainty on the basis of hunch, hearsay, or experience, no matter how meticulously quantified.  … As such, planning, whether long range or short range, is nothing new. It is the organized performance of an old task. But we have learned that the task will rately get done unless organized. Above all, it will rarely become achievement unless done purposefully.

I’m a little disappointed in President Obama’s exhortation that people ought to stop listening to Rush Limbaugh’s reservations about the stimulus package. There’s every reason to look a gift horse in the mouth. First of all to decide whether it’s a gift; and second to decide whether it’s a horse.

Update: The saga of Barney Frank continues. Frank is now accused of using TARP to funnel money to funnel money to “the troubled OneUnited Bank in Boston – a bank that had already been accused of ‘unsafe and unsound banking practices.’ Its CEO, Kevin Cohee had also been criticized by regulators for ‘excessive’ pay that included a Porsche.” (Be sure to read the public comments at the bottom of the article.) Glenn Reynolds remarks that one of the risks of stimulus packages in hard times is they run the risk of becoming ” a massive transfer of wealth from the politically unconnected to the politically connected” under other color. That’s not necessarily the case right now. But it’s something to worry about.