July 10, 2010
Squandering the StimulusBy Sam Foster
Appalling amounts of money are being wasted on projects dependant on subsidies for their survival, while the Commander in Chief gives speeches pretending it is all working splendidly.
Obama's "Summer of Recovery" tour struts through the US in full swagger, despite calls that we are on the precipice of a third depression, a stunningly poor jobs report in June, and the IMF complaining that there may be a double-dip in the housing market, bank lending remains troubled and Obama's dysfunctional spending habits are creating fiscal tumult. The strategy behind Obama's latest stimulus sales pitch goes like this; a large portion of the stimulus funding is about to be spent this summer and Obama, like Superman, plans on swooping down upon various stimulus funded projects to declare, as only a President as arrogant as Obama can, that his policies have saved the day.
In truth, the "Summer of Recovery" is nothing more than a political ploy that was built in to the stimulus with the hope that it will lift Democrats' prospects in the mid-term elections. Still, even this analysis of Obama's latest PR tour is somewhat rose-colored when faced with the reality of the stimulus projects Obama demagogues in his speeches.
One needs to do a minimal amount of fact checking on Smith Electric Vehicles, one of Obama's stops on his tour in Kansas City, to see that Obama's stimulus policies live in the land of failure while his rhetoric soars into the land of the absurd.
Obama used the occasion to take credit for the employment at Smith Electric and go on the attack by daring stimulus naysayers to criticize his policies in the face of supposed "tangible successes."
"For example, right here at Smith Electric, you've recently passed a milestone -- hiring a fiftieth employee -- and I know you're on your way to hiring fifty more. And we're seeing similar things all across America, with investments and incentives that are fostering growth in wind power and solar power, in energy efficient appliances and home building materials, and in advanced battery technologies and clean energy vehicles.
There are those who argue that we ought to abandon our efforts -- and others who have made the political calculation that it's better to obstruct than lend a hand. But my answer is that they ought to come here to Kansas City. They ought to tell the workers of Smith Electric that we'd be better off if your jobs didn't exist..."
A look into the company's press releases reveals that government stimulus dollars had nothing to do with the company's employment levels. According to the local newsprint in March of 2009, 5 months before the company ever received an award of stimulus funds, the plant had already planned on hiring a total of 200 employees over 3 years.
Upon receiving its first stimulus grant in August of 2009, Smith Electric's CEO revealed that the company "already planned to hire 50 people by the end of the year." Now with SEV planning on doubling their workforce from 50 to 100, what's the government's score with creating jobs at the plant? The answer is that the Obama administration is still 100 jobs away from the pre-stimulus goals of the company.
Absurd? Not half as absurd as Obama's rhetoric with regard to the real economic benefits that these investments are proposed to create. In his speech at SEV, Obama heralds stimulus investments in the plant and other similar investments, boasting that:
"...this is how we take charge of our destiny. This is how we create jobs and lasting growth. This is how we ensure that America not only recovers, but prospers - that this nation leads in the industries of the future."
Well if this is true, let's look at stimulus investment in SEV and see how taxpayer money is being put to work.
SEV received their first stimulus grant in August 2009 for $10 million. The funds were used to lower production costs so that their vehicle's massive sticker price of $150,000 could be reduced. I suppose $10 million would go a long way in boosting sales when your sales price is 3 to 4 times that of normal combustion engine trucks. So the question remains, how will the company sell its vehicles once the funds are exhausted? It appears that they won't have to worry about that problem for a little while, because the government expanded SEV's grant to $32 million in March of 2010.
So after $32 million, the President boasts that his stimulus created a massive 50 jobs at Smith Electric Vehicles and those 50 jobs. Wouldn't it have been more impressive to grandstand the company's success in selling it's vehicles to large companies? After all, such companies as PG&E, Frito-Lay, and Compass Group N.A. are all looking to purchase products from SEV, thanks to massive price subsidies with federal dollars. The Obama administration is subsidizing purchasers to the tune of 40-60 percent of the sale price with a single truck averaging about $130,000. The money adds up quickly. For example, Compass Group plans to buy 30 trucks, which roughly equates to $6.5 million in additional taxpayer subsidies.
If SEV's federal subsidy sticker prices seem egregious, it is only a drop in the bucket compared to two other projects Obama announces in his Missouri visit:
"Just last week, Abound Manufacturing in Colorado received backing for two plants to produce solar panels - creating 2,000 construction jobs and 1,500 permanent jobs. One of the plants will actually take over what is now an empty Chrysler supplier factory. Another company, Abengoa Solar, is now planning to build one the largest solar plants in the world right here in the United States. When it's finished, this facility will be the first large-scale solar plant in the U.S. to actually store the energy it generates for later use - even at night."
The addition of 2,000 temporary and 1,500 permanent jobs sounds impressive until you learn how much these two deals cost; $2 billion.
The Obama Administration insists that the SEV story is the very poster child of Obama's recovery vision:
"The story of Smith's factory shows the direct and measurable impact of the Recovery Act. Smith's factory is re-purposing an 80,000 sq. ft. jet engine overhaul facility at the Kansas City International Airport, a space that was not being utilized or creating jobs is now a fully operational plant."
By the Obama Administration's own standards detailed above, there can be no doubt that Obamanomics is a miserable failure for the economy. If the Obama Administration is willing to drastically exceed $32 million to keep a single 80,000 sq. ft. factory in business, then we soon will find ourselves in the same situation as Greece.
Obama believes that America's future is in a green economy; behold the green economy sputtering to life as it drowns in the excesses of its own red ink.