Phil Hauck's TEC Blog

Sunday, January 25, 2015

Stimulus Spending and “Value Creation”

There is lots of justified criticism of the various stimulus spending efforts designed to pump spendable dollars into the economy.  There are too, too many examples where the dollars spent haven’t resulted in the gains predicted.
Recently, I read of using the metric of Projected Value Creation to analyze what would be the additional value in dollars that would result from spending on the project.  So, think “Value Creation.”
And projects should be separated into at least two categories:
1.  Infrastructure … like capital expenditures in private industry terms … investments.  What will be the dollar returns each year into the future, discounted to the present.  To what degree are these “gifts that keep on giving”?
2.  Direct payments to people (to buy “clunkers,” or just to give away $300/person, to cite prior examples) … which are effectively welfare.  They may be justified as a short term stimulus to let disadvantaged people buy some more, but should be characterized as such.  They are effectively one-time spends that don’t really create jobs.  If not, what is the dollar value of the “Value Created.”
Good metric.

1 comment:

  1. Phil, Well said! Spend the money where there is a long range ROI. We certainly need to get off the dime and heavily invest in our infrastructure. It's deteriorating condition is already weighing down the economy... Take Care, Big Daddy Dave