This Associated Press story picks up on what I’ve been warning about for about a year:
Ten months into President Barack Obama’s first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found.
Spend a lot or spend nothing at all, it didn’t matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama’s argument that more road money would address an “urgent need to accelerate job growth.”
I’ve blogged countless times about how government can not “create jobs.” Moreover, back in October I discussed some numbers here in North Carolina showing that stimulus funds, even though they were targeted at construction jobs, could not even improve construction job numbers.
A look at construction employment in N.C. from February (when the ARRA was passed) to August (latest data available) shows that the state has in fact lost 13,600 construction jobs, or a contraction of 6.5%.
To its credit, the AP article mentions in passing a major reason why government stimulus schemes don’t create jobs.
Construction contractors like Zimmerle would seem to be in line to benefit from the stimulus spending. But money for road construction offers little relief to most contractors who don’t work on transportation projects, a niche that requires expensive, heavy equipment that most residential and commercial builders don’t own. Residential and commercial building make up the bulk of the nation’s construction industry.
I elaborated more on this topic in May in this Chapel Hill News article:
Keynesian-inspired economists and politicians, rather, view idle capital and labor only in the aggregate. Such simplistic assumptions overlook the complexity of the myriad structures of production within our economy and the very specific location, attributes and combinations of capital required to produce goods and services demanded by consumers.
As economic historian Robert Higgs described, “If someone, whatever his skills, preferences, or location, is unemployed, then, in this framework of thought, we may expect to put him back to work by increasing aggregate demand, regardless of what we happen to spend the money for, whether it be cosmetics or computers.”
The billions of dollars worth of public works projects, for instance, will mostly draw from labor and capital actively engaged in the private sector. Say, for instance, Chapel Hill will receive millions to build a new road. Can anyone honestly say for certain that the road construction will only employ workers and other inputs sitting idle in the Chapel Hill area due to the housing bust? Unemployed bankers and carpenters won’t be of much help laying pavement. Rather, the road project will undoubtedly draw from labor and machinery actively engaged in private sector projects in the region. In the end, fewer resources will be available for productive, private sector use.
How many more millions billions trillions of debt will pile up before politicians realize that their centralized control over economic resources does more harm than good?