Dick Morris and  Eileen McGann

The economic stimulus plans unveiled by President-elect Obama over the weekend won't do much to help the economy. But they will vindicate all the dreams of liberal Democrats for higher government spending.

Of course, the basic choice facing any politician seeking to stimulate a moribund economy is whether to catalyze the supply side with tax cuts on business or the demand side by way of spending increases. Obama obviously made that choice years ago: He will work the demand side.

But once a leader makes that decision, he faces another: Will he emphasize important and valuable public works projects or will he just try to pass out the largest amount of money possible? By announcing that he is not "going to throw money" at the economy in the hopes of getting a pulse, Obama signals that he will stress the former approach and fund important public works such as school reconstruction, fiber optic cables, alternative energy generation and the like.

The problem is that such projects take a long time to plan and longer to build. Their immediate economic impact is highly attenuated.

In all federal capital projects, only about one-quarter of the funds appropriated are actually spent in the fiscal year. It just takes that long to plan, engineer and begin construction. And for every $6 spent in the last stimulus package, only $1 actually got spent on goods or services. Five dollars out of every six in the Bush stimulus package of 2008 went to pay down debt, mortgage or credit card or student loan or home equity, and not into the acquisition of new products or services.

So, do the math. If only 25 cents out of every dollar actually is spent in the fiscal year, and only one-sixth of that sum actually gets spent by the workers who get paid on new goods and services, only about 4 cents from every dollar actually stimulates the economy. And who says those 4 cents will be spent on domestically produced products? A lot of the stimulus will just feed Chinese imports, particularly with their low prices.

FDR faced just this problem in combating the Great Depression. In the National Recovery Act (NRA), Roosevelt set up the Public Works Administration (PWA) headed by Interior Secretary Harold Ickes (the original one). Ickes was a stickler for making sure nothing was wasted and in keeping the costs down. He managed a spectacularly successful public works program and built, without scandal or corruption, some of our most important national infrastructure. But he took his sweet time doing so. The economic stimulation was slow in coming.


Dick Morris and Eileen McGann

Dick Morris, a former political adviser to Sen. Trent Lott (R-Miss.) and President Bill Clinton, is the author of 2010: Take Back America. To get all of Dick Morris’s and Eileen McGann’s columns for free by email, go to www.dickmorris.com