Friday, February 20, 2009
Stimulus Part II: Fiscal Katrina on Its Way…Warren Buffett for Spending Czar?
Today, I signed the American Recovery and Reinvestment Act into law.
So begins an email we recently received from our new, internet-savvy President.
Now, what exactly is going to “Recover” thanks to the $787 billion combination of Fed spending and tax cuts, which our previous posting on this topic details, remains to be seen.
And as for the “Reinvestment” part, we likewise note that the money is going not so much for the kind of “bold” programs the President has been talking up. Rather, a good $300 billion is earmarked to be bulldozed into existing, failing, government money pits.
Quibbles with the Act's title aside, the money has been approved, and therefore it will be spent. And the email message from the President tries to be reassuring on this point:
It's a bold plan to address a huge problem, and it will require my vigilance and yours to make sure it's done right.
I've assigned a team of managers to oversee the implementation of the recovery act. We are committed to making sure no dollar is wasted.
Forgive our cynicism if we happen to think most of the dollars will in fact be wasted. After all, that’s what government does. Still, the “No Dollar Wasted” promise can be dismissed as a rhetorical flourish along the lines of the previous White House occupant’s “Mission Accomplished.”
More intriguing is the concrete promise that some sort of committee—“a team of managers”—will oversee the Fiscal Katrina about to hit our government institutions.
Unless, however, that “team of managers” consists of two people, Berkshire Hathaway Chairman Warren Buffett and his equally penurious Vice Chairman, Charlie Munger, well, good luck with that, as they say.
For all his two years in the U.S. Senate, Mr. Obama never apparently learned how this stuff actually works. Here’s how it works: the money gets appropriated by the appropriations committee, and the agency that receives the money spends it.
Period, end of story.
In fact we recently had dinner in Washington with a friend who works for a consulting firm that has been hired by just such a cash-flooded agency.
This agency had received a mandate to conduct certain things that will probably never see the light of day—not because those things are top secret, but because the goals were established under the previous administration.
No matter: the money was approved and allocated, and the cash is flooding in so fast the agency doesn’t know how to spend it.
So the agency did what many agencies do in the same circumstance: they hired a consulting firm to help spend the money. Several hundred million dollars' worth.
[Note to jobless MBA students: go to Washington; interview with consulting firms; get job].
The good news about the so-called "Recovery and Reinvestment Act," economy-wise, is that a half-trillion of our money and our children’s money is going to be spent in the next couple of years.
And that’s also the bad news, for it will be wasted in ways that make TARP, and TALF, and anything else we've seen since the housing boom burst, look positively rational.
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Posted by Jeff Matthews at 8:40 AM