Fiscal Stimulus
November 22, 2008, 02:22 PM
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Everybody is talking about "fiscal stimulus" and "infrastructure projects" (i.e., public works, like FDR`s WPA). Larry Summers says that there is a "multiplier effect" and every dollar of government spending generates more dollars of overall economic activity in the American economy.

But nobody is talking about the obvious: Will the public works jobs be restricted to American citizens? To American citizens plus legal residents? Or will they just suck in more millions from south of the border as the Housing Bubble did, who will send tens of billions back home, depriving America of Larry`s promised Multiplier Effect?

The real economic collapse is happening in the four sand states, California, Nevada, Arizona, and Florida. Sending billions to them for infrastructure projects would mean a large fraction of the public works payroll would go to illegal and legal aliens.

The one sure way to keep the unemployment rate in California (now 8.2%) from growing so fast is to have illegal immigrants go home. It`s a lot cheaper for all concerned if ex-construction workers are unemployed in Mexico or Guatemala than if they are unemployed in California. But nobody is mentioning that.

Next, Obama`s big goal is to set off an Alternative Energy Bubble to inflate the economy in time for the 2012 election. But, those kind of infrastructure projects (e.g., erecting a massive number of ugly windmills that chop migratory birds to shreds) take forever to get off the ground in Blue States due to environmental restrictions. In Red States, it`s faster to get going. Will Obama want to send most of the money to Republican states? Or will he override the environmental dogmas of his base?

The kind of thing we can spend a lot of money on within 2009 are projects like freeway resurfacing—exactly the opposite of what all the Save the World types who voted for Obama want.