"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, July 7, 2011

I Have Broadband Already, Can I Just Have the $7 Million in Cash?

Here is an article that encapsulates everything you need to know about Obama's stimulus plan:
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. The ARRA stimulus funds for broadband constitute “the largest Federal subsidies ever provided for broadband construction in the U.S.” An explicit goal of the program was to extend broadband access to homes currently without it.

Eisenach and Caves looked at three areas that received stimulus funds, in the form of loans and direct grants, to expand broadband access in Southwestern Montana, Northwestern Kansas, and Northeastern Minnesota. The median household income in these areas is between $40,100 and $50,900.  The median home prices are between $94,400 and $189,000.

So how much did it cost per unserved household to get them broadband access?  A whopping $349,234, or many multiples of household income, and significantly more than the cost of a home itself.

Sadly, it’s actually worse than that. Take the Montana project. The area is not in any meaningful sense unserved or even underserved. As many as seven broadband providers, including wireless, operate in the area. Only 1.5% of all households in the region had no wireline access. And 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.
That's $7 million of our money wasted so that some rube up in rural Montana who probably went there to get away from things like the Internet can now have wireless Internet in his outhouse.  

But, but, but, the Keynesians will cry, injecting money into the economy is a good thing, no matter what we do with it!   That's why they call it stimulus, not because we buy anything useful with it, but because, when we waste it, the money goes out into the economy and starts circulating!  

Well, maybe, but consider:   wouldn't the money still be circulating if the government had purchased something useful with it?  Wouldn't the money still be circulating if the government had left it in the hands of taxpayers and let them spend it on things that they thought were useful?   For that matter, wouldn't the money still be circulating in the form of loans (to job creating entrepreneurs and small businssmen?) if, instead of the government borrowing it, the money had stayed with banks who could then make loans for real enterprises?

This is the myth of the Keynesians:  that money only circulates if the government spends it, and doesn't circulate if individuals make their own choices on how to spend it.

The stimulus was never about stimulating consumption by injecting money into the economy.   It was about stimulating government to grow ever more powerful as the dispenser of favors to favored constituencies.  

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