Has the Fed Decided to Fight Inflation Instead of Unemployment?

Published on Global Research.ca, by Washington’s Blog, April 30, 2011.

…     But very little of the stimulus funds are actually going to high-value stimulus projects.

Indeed, as the Los Angeles Times points out:

  • Critics say the [stimulus money reaching California] is being used for projects that would have been built anyway, instead of on ways to change how Californians live. Case in point: Army latrines, not high-speed rail.
  • ***
  • Critics say those aren’t the types of projects with lasting effects on the economy.  
  • “Whether it’s talking about building a new [military] hospital or bachelor’s quarters, there isn’t that return on investment that you’d find on something that increases efficiency like a road or transit project,” said Ellis of Taxpayers for Common Sense.
  • Job creation is another question. A recent survey by the Associated General Contractors of America found that slightly more than one-third of the companies awarded stimulus projects planned to hire new employees. But about one-third of the companies that weren’t awarded stimulus projects also planned to hire new employees.
  • “While the construction portion of the stimulus is having an impact, it is far from delivering its full promise and potential,” said Stephen E. Sandherr, chief executive of the contractors group.
  • It’s unclear how many jobs will be created through the Defense Department projects. Most of the construction jobs are awarded through multiple award contracts, in which the department guarantees a minimum amount of business to certain contractors, and lets only those contractors bid on projects.
  • That means many of the contractors working on stimulus projects already have been busy at work on government projects.even the stimulus money which is being spent

David Rosenberg writes:

  • Our advice to the Obama team would be to create and nurture a fiscal backdrop that tackles this jobs crisis with some permanent solutions rather than recurring populist short-term fiscal goodies that are only inducing households to add to their burdensome debt loads with no long-term multiplier impacts. The problem is not that we have an insufficient number of vehicles on the road or homes on the market; the problem is that we have insufficient labour demand.

Donald W. Riegle Jr. – former chair of the Senate Banking Committee from 1989 to 1994 – wrote (along with the former CEO of AT&T Broadband and the international president of the United Steelworkers union):

  • It’s almost as if the administration is opting for a rose-colored-glasses PR strategy rather than taking a hard-nose look at actual consumer and employment figures and their trends, and modifying its economic policies accordingly.

As I noted in 2008:

  • This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).
  • It is a question of focusing any government funding which is made to the majority of poker players – instead of the titans of finance – so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.

In reality, the entire debate regarding more-versus-less stimulus misses the mark. As painful as it is to think about, the Fed’s policies – like those of the Treasury, White House and Congress – have been geared towards redistributing wealth upwards … (full text).

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