Tuesday, April 21, 2009

Where is the Stimulus Money Going?

The economic stimulus plan that was rushed through was sold as a plan to "rebuild America" if I remember correctly. Infrastructure was a buzz word, and many people agreed we needed to rebuild and repair things like roads and bridges. But is the stimulus targeted in the right areas?

Caterpillar Says Obama Stimulus Plan ‘Missed an Opportunity’

Caterpillar Inc., the bulldozer manufacturer President Barack Obama used to help push his $787 billion stimulus plan, called the program disappointing and less effective than measures approved by China.

“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure,” Caterpillar said in economic commentary with today’s first-quarter earnings report.

Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board. Obama visited the Peoria, Illinois, headquarters on Feb. 12, the final day of his campaign to press for Congressional passage. Caterpillar today reported its first net loss in 16 years as a global credit crunch and recession reduced demand from builders and miners.

In fact, Caterpillar likes what China is doing, and says it will be more effective.

Caterpillar said it does expect some benefit this year from China, which enacted a stimulus package and cut its central bank interest rates to match the 2004 low, accelerating money growth, the statement said. The actions will let China’s economy grow at a rate of more than 7.5 percent this year.

“China, with an economy one-third the size of the United States, is allocating over three times as much for infrastructure,” Caterpillar said in today’s analysis. “Initial results from this package look promising.”

Obviously it will take more time to know if our own stimulus package will work, but for now its seems maybe it wasn't directed in the right areas.

“You can measure America’s bottom line by looking at Caterpillar’s bottom line,” Obama said during the February visit. “What’s happening at this company tells us a larger story about what’s happening in the American economy.”

After today's weak earnings result by Caterpillar, maybe there is more reason to be worried. It makes me wonder, where is all that money going?

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