Dems Push to Create New Stimulus for Construction Trades

(Geoffrey Lawrence/NPRI) – The first meeting of the Senate Select Committee on Economic Growth and Employment has just begun with Chairman Kihuen declaring that “The #1 job of this legislature is to create jobs.” That’s not a good sign to kick off a committee on economic development, given that governments don’t create jobs, they can only lay the foundations for an economic environment capable of creating jobs on its own. However, government “stimulus” policies can destroy jobs across the economy in order to channel resources into a highly concentrated and visible industry – like construction.

That’s what is at the heart of this committee’s purpose. The committee today will consider a proposal developed by the construction lobby to issue new public debt in order to finance massive new public construction projects across the state in a government make-work effort. Details are available at the “Building Jobs Coalition” website.

The construction lobby has packed today’s hearing with union members bused in from around the state to put pressure on lawmakers to burden the public with new debt for the benefit of this specific interest group.

Lobbyists are throughout the legislative building are saying that there are already enough votes in the Assembly to approve legislation implementing the massive make-work “stimulus” project, and that supporters are only two votes short in the Senate. And that’s before the hearings and union-pressure machine began. Governor Sandoval has wisely indicated that he does not support the proposal.

If approved, this plan would be a scaled version of the failed federal ARRA stimulus package. The plan calls for the creation of 100,000 new construction, engineering and architecture jobs to be created across the state. However, the model does not appear to account for supply-side constraints. It also accounts for a “multiplier effect” resulting from new dollars circulating in the economy, but fails to account for the off-setting negative multiplier that will result from the higher taxes that would be required to service debt levels. It further ignores all distortions in the capital structure and associated opportunity costs that would result if the plan is implemented.

These, among other major analytical weaknesses, will ensure that this state-stimulus plan will fail to achieve its objectives just as the federal stimulus plan has done.

(Geoffrey Lawrence is a fiscal policy analyst at the Nevada Policy Research Institute. For more visit http://npri.org)