How Effective Was the 2009 Stimulus Program?

July 7, 2011

The stimulus -- the so-called American Recovery and Reinvestment Act of 2009 or ARRA -- is starting to wind down.  What are the results?  Depends on whom you ask, of course, says Nick Schulz, the Dewitt Wallace fellow at the American Enterprise Institute.

But the debate over whether the stimulus worked or didn't is too abstract to be of much help.  It's a better use of time to look at some specific stimulus programs and projects and see how they did.  Take stimulus funds for broadband.  President Obama campaigned on expanding access to broadband Internet, and the stimulus afforded him an occasion for doling out federal dollars to that end.

In an important and eye-opening new paper, Jeffrey Eisenach and Kevin Caves of Navigant Economics, a consulting firm, recently examined ARRA's subsidization of rural broadband.  An explicit goal of the program was to extend broadband access to homes currently without it.

  • Eisenach and Caves looked at three areas in Southwestern Montana, Northwestern Kansas and Northeastern Minnesota that received stimulus funds to expand broadband access.
  • How much did it cost per unserved household to get them broadband access? A whopping $349,234.

It's actually worse than that.  Take the Montana project.  

  • As many as seven broadband providers, including wireless, operate in the area.
  • Only 1.5 percent of all households in the region had no wireless access.
  • If you include 3G wireless, there were only seven households in the Montana region that could be considered without access.
  • So the cost of extending access in the Montana case comes to about $7 million for each additional household served.

Source: Nick Schulz, "How Effective Was the 2009 Stimulus Program?" Forbes, July 5, 2011.

For text:

http://blogs.forbes.com/nickschulz/2011/07/05/how-effective-was-the-2009-stimulus-program/

For study:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1809002

 

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