A Waste of Stimulus Money

In the year 2007, a liquidity shortfall in the U.S. banking system triggered one of the worst financial disasters to ever hit the United States and the world. It was considered as the worst financial crisis since the Great Depression in 1930. The results were staggering as large financial institutions and banks collapsed. The stock markets of various countries experienced downturns. Also, the U.S. housing market suffered huge losses resulting in foreclosures and evictions. Just as Barack Obama was stepping in to replace George Bush as President of the most powerful nation in the world, he already had the serious task of bringing back stability in the American economy and elevating the already deteriorating quality of life of Americans.

One of the most destructive effects of the financial crisis was the rise of unemployment levels. The American working sector was the most seriously affected sector since the crisis started. Because large institutions were faltering, thousands of employees were removed and jobs were beginning to be scarce. Washington was very concerned that job scarcity will result in less consumer spending and a possibility of a double dip recession. Congress immediately passed a stimulus package amounting to over $800 billion. The goal was to borrow and spend more money in order to offset the reduced demand from the private sector brought by the crisis.

More than a year later since the stimulus package was announced, Los Angeles city controller has released a 40-page report on how the city spent its share of the package. The results were horrible and disappointing as improvements were very minimal. Los Angeles city controller Wendy Greuel, stated that with a local unemployment rate of 12 percent which is higher than the national average of 9 percent, Los Angeles was only able to create or retain 55 jobs out of the $111 million allocated for the city.

The Los Angeles Department of Public Works was only able to create seven private sector jobs and saved seven more while spending $70 million in stimulus. In a staggering display of stimulus usage, the department was spending $1.5 million for ever job it saved or created. If you think that was worst already, wait till you here the audit of the Lost Angeles Department of Transportation. While they spent $40 million of the allocated stimulus, they were only able to create 9 jobs in total. It solely means that the department spent $4.4 million in taxpayer’s money for every job it created.

There were numerous factors cited by Greuel as reasons for such unlikable results. First, he mentioned about four highway projects that didn’t undergo bidding until seven months after they were authorized. Second, instead of going through a competitive bidding process in the private sector, projects went to city workers instead. The third reason was that stimulus money was not properly accounted for in various departments. Stimulus money was continuously spent without undergoing evaluation. And lastly, the departments mentioned were not able to consistently report about their job trends. Stimulus controllers were only able to find out about the problem when the stimulus money was already spent.

With weeks to go before the November midterm elections, Washington has been very busy working on a master plan that will create more jobs and please more people. Democrats, in particular, are weighing in on their options to support Obama’s plans. The result of this stimulus plan will most certainly influence the votes come November.