Saturday, April 3, 2010

Stimulus Money Allocated Disproportionately to Democratic Controlled Districts.

If this is true, and if this is by design and not some random unlikely coincidence, it would go to show that that stimulus/bailout was more about saving politicians then saving the economy.

"First: The idea behind the $787 billion stimulus bill is that, if the government spends money where it is the most needed, it will create jobs and trigger economic growth. Hence, we should expect the government to invest more money in districts with higher unemployment rates.

Controlling for the percentage of the district employed in the construction industry, a proxy for the vulnerability to recession of a district, I find no statistical correlation for all relevant unemployment indicators and the allocation of funds. This suggests that unemployment is not the factor leading the awards. Also, I found no correlation between other economic indicators, such as income, and stimulus funding.

Second: On average, Democratic districts received one-and-a-half times as many awards as Republican ones. Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts ($122,127,186,509 vs. $46,139,592,268). Republican districts also received smaller awards on average. (The average dollars awarded per Republican district is $260,675,663, while the average dollars awarded per Democratic district is $471,533,539.)

Of course, there are more Democratic districts than Republican districts in the Congress. So I checked for the correlation between political indicators and stimulus funding. I found that with the exception of the district’s party affiliation (whether the district’s representation was Republican or Democratic), political variables had no effect on stimulus funds allocation.

So how much did party affiliation matter? Well, while the effect was significant, because of the specifications of the model more confidence should be placed in the relationship between the two variables than on the quantification of that relationship. In other words, while we know that whether the district is represented by R or D mattered for funding, I can’t tell you how much this factor mattered compare to other factors.


  1. you know, I would love to be the first one to jump on evidence demonstrating how terrible our system is, but I think nate silver (i'm sure you know who that is) pretty much shows how flawed this study is, which isn't surprising if you'll remember Veronica De Rugby also works for that group behind the hilarious swedish economics video you posted:

    stimulus reporting is done in such a way that all grants to state government are coded as grants that are “in” the state capitals even though in reality the beneficiaries of state fiscal aid (people who don’t have their sales and property taxes raised) are distributed throughout the state.

    Silver has shown both that the eighteen largest recipient districts include state capitals, and also that the very largest recipients are specifically the capitals of the states with the largest population. . Also though these are largely Democratic districts, they’re largely not districts represented by the most senior Democrats. Representatives from Sacramento and Albany and Tallahassee and Austin aren’t in the leadership and don’t chair important committees.

    she gave a pretty long reply in the national review in which she doesn't really acknowledge any of this except to say she doesn't think this is "clear"

    seems pretty clear to me that she is indifferent to the truth. Unfortunatly this episode looks more like a good example of the kind of yellow journalism magazines like the weekly standard and national review traffic in

  2. @Ian Spencer Dubrowsky - That is an interesting point, the actual recipients are not the people who are recorded as getting the money. Have you come across any second level studies that try to follow the money further and see if the results are the same or if they even out?

  3. Yes, and predictably the problems with the stimulus are

    1) it focuses too much on output and not enough on employment

    2) it wasn't big enough, not targeted enough.

    otherwise, it worked. but don't take it from me here's the CBO, whom the national review is happy to cite when its forecasts suit them:

    since you fanatically hate the public sector, here's an analysis of private sector forcasters:

    Who overwhelmingly think it worked. They say that emergency monetary expansions also boosted growth which is what you would expect becauase fiscal action ( no matter how needed for the welfare of our people and long term health of our economy) is politically constrained. For defense contractors its not constrained, but for the unemployed it is....

    with these private sector forecasts it isn’t that they’re flawless, but that they’re offered by people who don’t have political axes to grind. They make a living by selling macroeconomic analysis to for-profit business enterprises, and thus are mainly concerned with trying to bolster their reputation for handing out good advice. Its like on wall street there is a saying about the Wall Street Journal, who have a hardline right-wing opinion page, but all there reporting is done by left-of center journalists- the opinion page tells you what you want to here, the reporters tell you that you need to hear. Its generally the case that the right will tell you what you want to hear, the left will tell you what you need to know

    Here's also the NYtimes from november on this:

    again there is a legitimate serious debate going on about the effectiveness of the stimulus, but this debate concerns fixing a crisis of demand, not a crisis of productivity. I think it would be a shame to let a shyster like De Rugby distract you from what's serious.

  4. As long as where talking about unserious arguments or assertions like what De Rugby trades in, also flying around the right-wing thought cocoon is the contention that the stimulus is crowding out private investment.

    In the early nineties, high government interest rates—the legacy of Ronald Reagan’s massive deficits—plausibly were crowding out private investment. This is why at the time there was a lot of focus on deficit reduction from sensible policymakers. Given that the government is borrowing a lot of money right now, and also that the baby boomers’ retirement and continued growth in health care costs are going to put a lot of stress on future government spending, it’s very plausible that at some point in the not-too-distant future we’ll be in that situation again. But right now we are not in that situation. Many resources are laying idle throughout the country. In principle, private investors could engage in the spending that would mobilize those resources. But they’re showing very little inclination to do so. So the government both can and should engage in deficit spending to try to ensure that the resources are mobilized.

    I suspect that conservatives would see the logic of this very clearly if, faced with a giant recession, a conservative president enacted a gigantic, deficit-financed temporary tax cut. In normal times this would be bad policy (though conservative think tanks would defend it anyway, as they did in 2001) since the extra borrowing involved would crowd-out private activity. But in a major downturn, it would be helpful policy (though by no means optimal) since it would encourage idle resources to be put to use.

  5. @Ian Spencer Dubrowsky - Successful?!? I forget; what did Obama promise the unemployment would be without the stimulus and with the stimulus, and what is it now? Oh thats right; we are above what they said it would be if we did nothing, meaning by their own admission it was a failure.

  6. Oh a politician lied or exaggerated, boo hoo. the betrayl! grown ups should be able to talk seriously about policy. Not everyone believes all the propaganda that is fed to them.

    most of what he was saying anyway it that it would save jobs from being lost/ at the same time create jobs- resulting in less unemployment then we would have anyway. If you even want to bother looking at the links i posted here, you'll find that's just not an opinon, but a fact. No one but economists farthest down the looking glass and ideologues like you are saying that. which if you want to look at empirical evidence (which you tend not to like to do) it turns out he was probably vindicated, and were better off then we would otherwise be.

  7. @Ian Spencer Dubrowsky - 'Fact' how many times have they revised the number of 'saved or created jobs' and how many times have they changed the definition to try and prevent it from being considered an abject failure? Well, they failed at that except for the few who if unemployment hit 70% would say without the Obama's intervention it would have been 71%. Intervention is not by default beneficial, as was the case here.

  8. Again, this kind of argument only has salience for you because you don't understand what the defects of the stimulus were. I'm not even sure you understand economic principles unless they have "supply-side" attached to them. You like to hold beliefs that you cannot justify rationally.

    "Obama's intervention", nor is it by default harmful. This is pretty intellectually dishonest of you anyway- whether the government does "nothing" or does "something" it is in fact doing something which will effect the economy. The government is the largest consumer in the economy- it underwrites the most dynamic innovative sectors like in technology to finance. Singapore has a succesful economy because they have a competent agreesive government sector that regulates there markets, In the U.S. we have a right-wing that at once idealizes these types of economies while denigrating public sector functions or advocating for things they don't understand.


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