At Democracy in America, Matt Steinglass says that I'm wrong: that alternative energy loan guarantee programs do, in fact, make good stimulus. As evidence, he cites CBO estimates of the multipliers for various ARRA initiatives, which show the loan guarantees on the relatively high side.
I wrote about this problem two years ago:
It is a commonplace among conservatives that liberals just want to spend government money, as much as possible on almost anything they can find. This is, of course, not true. Liberals want to spend money on projects that they think will be more valuable than the equivalent usage in the private sector.As it turns out, I may have been wrong; the administration may have chosen to sacrifice "good" instead of "fast", at least in this case. Matt's arguments about why this made good stimulus strike me as all wrong if you control for quality:
This is presenting some problems now that the actual aim should, by the theory of Keynesian stimulus, to spend money as fast as possible on almost anything you can find.
It is very obvious, now that we have the stimulus plans, that the Democrats are using stimulus as an excuse to spend money on things they want to spend money on. Their demand for things like alternative energy programs is inelastic; it's just that it happens, right now, to be convenient to bill them as stimulus.
The problem is, that contra the Republicans, Democrats do care that money spent on these important projects is spent well. And spending a lot of money well takes time. It's an inversion of the old engineering aphorism: good. fast. expensive. You can only have two of the three.
There's no mystery as to why Democrats wanted the DOE loan guarantees in the ARRA. These were "shovel-ready" projects; the corporations involved were ready to spend the money quickly. Unlike tax cuts, there was no chance, for obvious reasons, that the loans would simply be pocketed as savings by the recipients.
The whole question is whether this project was "shovel ready" or indeed ready for anything but the circular file. It's true that we should be ready to accept projects with a lower multiplier if it moves the money quickly, but we should aim to avoid projects which simply incinerate hundreds of millions of dollars.