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What Makes for “Worthy” Stimulus Spending?

December 30th, 2008 . by economistmom

Today I spoke with a reporter about the “Christmas wish list” of “ready-to-go” state and local spending projects presented by the U.S. Conference of Mayors.  She pointed to some projects on the list that have received lots of criticism from policymakers, for their seemingly dubious qualifications as “good stimulus”–such as a particular project in an Ohio city to get prostitutes off the streets.  But the reporter was asking me if the criticism of these projects was warranted from an economic standpoint.  What makes the prostitutes’ program or the polar bear exhibit a bad idea, economically, compared with other projects that sound more reasonable (justified, substantial, serious, and moral?)–such as, for example, mass transit, highway, and ”green infrastructure” projects?

My quick response was that there’s not necessarily a strong correlation between what seems “worthy” from a moral or “smell test” (or “first blush“) perspective, and what is really “worthy” (i.e., worth it) from an economic perspective.  For example, in the case of the prostitutes project, I flippantly responded that the economic worthiness of the project depends on whether they might hire any laid off autoworkers to chase those prostitutes!  (Hmmm….)

But seriously (I went on), a key question for all of this state and local spending billed as “stimulus” is whether and how quickly these initiatives can create or save jobs.  Is there a good matchup between the weakness in the local job market and the new labor demand that would be associated with the spending project?  And better yet, in the process of creating these new jobs (quickly), is there also good on-the-job training that would be provided, so that even after some of these jobs might go away, workers would be left in a better position in terms of their longer-term employment prospects? 

For example, I have been wondering about what the Detroit area might come up with for their laid off autoworkers. Would it be possible to come up with “stimulus” spending that helps Detroit with both short-term jobs and longer-term “transformation” toward producing green (more sustainable) technologies?  As I look on the list of Detroit-area projects submitted by the mayors, I’m not sure I see very much of that longer-term vision, but I think in evaluating the worthiness of these projects we have to at least pay attention to the “bang per buck” measures–such as the (inverse of the) cost of the projects per job created (and the quality of the jobs and who would get those jobs)–and hope that the jobs claims in the report aren’t wildly exaggerated (although I worry why wouldn’t they be?).

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