Signs of the Stimulus

Posted by Andrew Price

Have you noticed those signs—they usually appear along the freeway—indicating that some infrastructure repair or upgrade has been paid for by the American Recovery and Reinvestment Act, also known as the stimulus bill?

An ABC News story reports on the money being spent on the signs, and asks if it's a waste. While the Department of Transportation estimates that a relatively small $5 million has been spent on the signs, there are a few cases that seem extreme. Pennsylvania has spent $157,000 on 70 signs. That's about $2,200 each. Because of the high cost—and, probably, because the signs seem almost like a political ad for Obama's stimulus spending—some people are raising a stink about them.

Some Republicans are crying foul. Congressman Darrell Issa, Chairman of the House Committee on Oversight and Government Reform, sent a letter to Earl Devaney, Chairman of the Recovery Act and Transparency and Accountability Board, requesting an investigation to "determine the scope and impact of the Obama administration's guidance" regarding signs to stimulus recipients.

Rep. Issa writes that the passage of the Stimulus Bill, "has provided an opportunity for the Obama administration to claim political credit for the various projects around the country that have been funded by this redistribution of taxpayer dollars."

So Issa's arguing that the Obama administration doesn't deserve credit for the projects because they were funded by taxes? What else would they be funded by? Royalty checks from Dreams From My Father? Of course these projects are funded by taxpayer dollars.

That said, maybe we're spending too much on them. Is that a problem? Matt Yglesias doesn't think so:

For one thing, the quantity of funds involved here is tiny so it’s not clear why anyone’s even bothering. For another thing, stimulus works in part through expectations, so informing people about its existence is important. And last, government purchases of paint and metal have a legitimate stimulative impact. As Alec MacGillis wrote last spring it’s totally unclear that “wasting” money is a real problem as long as the “waste” mobilizes otherwise unmobilized economic resources.

I think Matt is mostly right. If the primary purpose of stimulus spending is just to mobilize slack economic resources, then buying a bunch of paint and metal for signs may well do the job. But Matt's take is an oversimplification. Stimulus spending needs to be well targeted. Some kinds of spending mobilize economic resources more efficiently, and create things of lasting value in the process. If the signs are expensive because we're overpaying for paint, and that extra money is just being funneled to some paint company CEO who uses it to buy a boat rather than hiring more employees, and the signs are junked in eight months, then that's a less-than-optimal use of stimulus funds. If we buy signs at better prices, the CEO goes without his boat, and we use the leftover money to subsidize rural wi-fi access, that might be much better.

So it's fair to question whether we're spending stimulus money in a smart way. But all of us, Issa included, should support the signs in theory. They inform people that certain projects they encounter are the result of that hotly debated bill from a while back, and that's a public service. Voters should understand the effects of legislation. That's especially true when it comes to the stimulus bill because the amount of money being spent is large and it would be easy for people to overlook its effects.

Image: Poniendo a trabajar a América, a Creative Commons Attribution (2.0) image from daquellamanera's photostream