Did The Stimulus Stimulate?


According to an investigative story on the front page of last Sunday’s Oshkosh Northwestern, the answer is most definitely “yes”: although it operated invisibly to most taxpayers, the stimulus was key to getting many Wisconsin businesses through the Great Recession. In keeping with their penchant for appearing politically “balanced”, the paper “buried the lead” as best it could by using the headline “Stimulus loans oversight lacking” and by citing a number of minor gripes, including the fact that the stimulus money funneled needed credit to low-wage small businesses in addition to high-wage small businesses (isn’t it the Republicans who are constantly defending low wage jobs as being better than no jobs at all?)-

The Small Business Administration-backed loans ranged from a low of $5,000 to a high of $5 million — the most allowed under the program. In all, more than 6,000 loans were made in Wisconsin, for a total of $1.8 billion, including $260 million lent to retailers.

SBA officials say the loan program is accomplishing what it set out to do: making cash available to businesses when bank loans have been hard to come by. That did help an aluminum company in Manitowoc and a pet food factory outside Madison, for example, to create new manufacturing jobs.

But the money also was borrowed by businesses and industries with some of the lowest wages in the state.

“The SBA program was huge,” Chaudoir said. “If government didn’t do this, who knows what would have happened. People who are still debating whether the program was a success have to put themselves back to how they felt at the beginning of 2009, how afraid they were about the future.”

Some loans without question helped create jobs and trigger spending, particularly in manufacturing, the business sector that received the greatest proportion of SBA money.

Skana Aluminum Co. bought a Mirro plant in Manitowoc out of receivership and turned it into a thriving business that expects to ship 30 tons of metal this year. Skana borrowed $5 million of the $438 million lent to Wisconsin manufacturers, growing from zero to 75 employees in nine months and prompting Obama to praise the results in a 2011 visit. Skana in March employed 108 workers and was operating two shifts.

“The people of the community appreciate hearing stories like ours,” said Steve Gallimore, a Skana spokesman. “Things are looking good for us and for Manitowoc.”

Mequon-based Fromm Family Foods, recipients of $2.7 million in loans, took a dormant feed mill northeast of Madison and converted it to a facility that creates 600 tons of gourmet pet food each week. In Howard, near Green Bay, Centerline Machining & Grinding Inc. expanded into a new plant in 2010 after borrowing $817,000.

Adjustments to the loan program under the stimulus made more money available and made it easier for businesses to get loans, said the SBA’s Ness. Some fees were eliminated, and struggling businesses that met certain standards were given longer to pay.

“The stimulus was the first time we broke the $500 million mark (in one year) for loans in Wisconsin,” he said. “We clearly helped some companies stay in business, and we helped others to grow.”

Was the stimulus perfect? Of course not. Was it in some ways wasteful and inefficient? Seems likely. But when you’re trying to put out a dangerous fire, you probably shouldn’t worry too much about wasting some of the water you’re spraying on the flames.

UPDATE 4/17/12-

In an editorial in today’s paper, the Northwestern clarifies why it sees the glass as half-empty. The basic complaint seems to be that the SBA has failed to collect certain key data that would allow the paper (and taxpayers) to evaluate the overall success or failure of the stimulus-

…the devil’s not always in the multiplicity of details, but the one’s that are missing. The story in Sunday’s Oshkosh Northwestern examined federal loan money authorized in the stimulus and administered through the Small Business Administration.

The SBA … maintains an impressive amount of information about the loan program in Wisconsin. For example, we know the total value is about $1 billion for more than 6,000 loans ranging from $5,000 to $5 million for companies of widely divergent sizes and specialties. Some of the businesses expanded and created jobs; others refinanced and saved money and jobs, while some folded. We produced an equally impressive database and map that can tell you all kinds of spiffy things about loans, but the report failed to answer one very fundamental question: “Is it working?”

The failure wasn’t for the lack of asking. It was for the lack of tracking and oversight by the government for the facts that matter. To be sure, no conclusive answers can be drawn over such a short time frame. The goal of keeping capital flowing when banks were not lending money is a sound one. For all the facts and figures, basic information is missing. Facts that would allow citizens to make informed judgments on how their tax money was being spent, such as loan default rates, the number of jobs saved or created and businesses behind on payments.

In short, information that delivers on pledges of transparency and draw conclusions deeper than the government borrowed, loaned and declared mission accomplished.

Transparency is a good thing, as is full information. But notice that the sort of transparency the Northwestern is seeking would necessarily involve the sort of “government intrusion” into business that Republicans usually decry. Note also that news organizations as large as Gannett should not have to make do with the graphs and tables found on government web sites! Whatever happened to the days when large news organizations would collect the missing data for themselves, even if only by polling a sample of businesses that received stimulus loans?