The American Recovery Act: A Foreign Stimulus Bonanza

The American Recovery and Reinvestment Act (ARRA) of 2009 and its $787 billion were supposed to stimulate the U.S. economy, revitalize manufacturing and create jobs throughout the country. Today, while unemployment still continues to hover around 10 percent, the Congressional Budget Office (CBO) reported the U.S. only got a slight reduction in the rate of 0.7 to 1.8 percent for its massive ARRA infusion into the economy. Based upon Capitol Hill’s historical level of 4.5 percent unemployment being a nation fully employed, the CBO said the required stimulus should have been $2.5 trillion on the low end and $4-5 trillion on the high to put an end to rampant unemployment. But the ARRA money was all that small American businesses were going to get as the Treasury was busy bailing out some of the largest companies in the country.

Meanwhile, the CBO expects the impact of ARRA on economic output and unemployment to gradually diminish throughout 2010 and beyond. In May 2010, the Labor Department reported nonfarm payrolls rose by 290,000 from the previous month. But subsequent reports showed the economy losing 125,000 jobs in June, 131,000 in July, and another 54,000 in August as the unemployment rate rose to 9.6 percent.

When the Administration sold its recovery package to the American people its goal was to create 3.5 million new jobs by the end of 2010. At the time, Labor Department statistics put employment at 134.3 million, which meant the target was 137.8 million. Unfortunately, by August, the jobs report showed U.S. employment stood at 130.3 million, meaning the cumulative job deficit was 7.5 million. Furthermore, the centerpiece of the Obama Administration’s ARRA endeavor was to create green jobs, which would ultimately provide a path to economic recovery. But only $20 million of the $75 million slated for green jobs has been spent, leaving environmentally sensitive jobs flat.

Where the Money Went

Meanwhile, the $2.3 billion spent on green manufacturing tax credits went to companies employing workers in China, South Korea and Spain. Of the eleven top wind farm companies receiving ARRA grants, over 70 percent of the monies for turbines and blades went to overseas manufacturers. It’s a sad commentary that ARRA monies have created over 6,000 new jobs overseas while U.S. workers got only a few hundred new jobs. But as the Obama Administration unfolded its recovery plan, foreign nations and companies stepped up lobbying efforts to gain access to the ARRA bonanza, and the stats show they clearly won the day.

However, lobbyists are quick to point out that their foreign clients, many with significant operations in the U.S., employ 5.3 million American workers while spending $336 billion on American payrolls. Foreign companies account for about 20 percent of U.S. exports. The lobbyists’ trade experts also point out that foreign firms receiving stimulus-related contracts kept most of the wages and product purchases in the U.S., while only about 40 percent of the monies left the country. It is abundantly clear the Administration had difficulty drawing boundaries around global commerce and American stimulus. And learning that the billions of dollars spent bailing AIG out ended up in foreign-owned banks is another chink in the armor of U.S. economic stability.

The Obama Administration and Congress dedicated more than $94.8 billion of ARRA money to build up the clean energy industry, but the American Wind Energy Association says domestic wind manufacturing jobs have dropped since the program began. In fact, the Department of Energy (DOE) stated 80 percent of the $2.3 billion for wind farms went to foreign firms. And check this out: The DOE also said that American renewable energy companies were simply not competitive against foreign companies that have been heavily subsidized in foreign countries for years.

A group of U.S. senators want to rewrite the grant program to ensure only projects utilizing “Buy American” procedures will be awarded stimulus funds. According to Senator Charles Schumer (D-NY), a West Texas wind project was awarded $450 million in stimulus funds for a $1.5 billion project that created 3,000 Chinese jobs while only creating about 300 jobs in the U.S. “The goal of the stimulus is to strengthen the American economy, and that means creating jobs here and not in China,” he said.

Maritime Implications Too

For Blaine Dempke of Markey Machinery, who lost a $3 million contract for specialized winches and handling systems on a 242-foot high-tech research vessel for the University of Alaska Fairbanks (UAF), rectifying the “Buy American” clause comes way too late. Section 1605 of ARRA specifically designates that all “iron, steel, and manufactured goods” must be produced in the U.S.

The National Science Foundation (NSF) awarded $148 million to UAF to build an Alaska Regional Research Vessel (ARRV). UAF awarded the shipbuilding to Marinette Marine Corp., which awarded the winch and handling systems portion to Finnish-based Rapp-Hydema, which has offices in the U.S. After much investigation, it appears that Rapp followed the procedures of the ARRA filings and got the project.

In terms of funding for the U.S. shipbuilding industry, 160 grant requests for $180 million went to the Maritime Administration, but the ARRA program only provided the industry with $14.7 million for 17 small yards. Stepping out in front of this marvelous infusion of cash into the maritime industry, Secretary of Transportation Ray LaHood said, “The grants will help modernize small shipyards and strengthen our economy by making sure we maintain the ability to build and repair ships in the United States.”

“Government can be a mysterious institution. Indeed, the pathway to understanding how your tax dollars are being spent can be a very difficult journey, much like trying to find your way out of the ancient catacombs,” said Earl E. Devaney, Chairman of the Recovery Board. And he’s right. Some industries, like U.S. shipbuilding industry and its .08 percent of the ARRA $787 billion, will never find their way out of the ancient catacombs of Capitol Hill thinking and procedures.