Stimulate Milwaukee

I don’t often post anything other than the Red Plan nowadays. But this post from Megan McCardle that was sent to me reminded me of my thoughts, perhaps brought about by lightheadedness, after donating blood this morning.

Meagan says that the National Trillion dollar stimulus equals roughly $3,000 per family. She’s skeptical that it will boost the economy. I don’t know which brings me to my morning thoughts.

First, some quick math. There are 40,000 households in Duluth (I know because we just finished mailing a fundraising letter to all of them Tuesday) The Red Plan will cost 450 million including interest. Divided by 40,000 households that equals $11,250 per household. The Red Plan puts the Federal Bailout to shame locally. If the School District gets a teeny bit of the Federal bail out money – big deal!

So, economists say the “multiplier effect” is 1.5. In other words, for every $1 of spending you get $1.50 of money circulating through your economy. If that’s true…..IF. Then Milwaukee will be the real beneficiary of the Red Plan. How come, you ask?

The Red Plan will mean dollars taken away from people on fixed incomes in Duluth. Where will it go? It will go mostly as a money transfer from property owners to Krause Anderson, Johnson Controls and construction workers. That will leave $300 million circulating through the local economy because $150 million of it will go to the banks and bond companies as interest. (Don’t expect much of that to be spent locally.)

Of the money going to the builders Johnson Controls will get the lion’s share, perhaps as much as $90 million. But that money will be spent in Milwaukee where JCI is headquartered. That means out of $450 million taken out of tax payers pockets in Duluth about $210 million will stay circulating to boost the economy. This is probably why the Red Plan was never sold to Duluth as an economic stimulus. That’s just happy talk to placate angry taxpayers.

Even if our schools improve noticeably it will end up being a net drain on our local economy. If our schools don’t improve and bring back all the kids who are open enrolling into neighboring districts Dr. Dixon will be remembered as the next Jay Cooke of Duluth. Only it may take Duluth more than 14 years to recover. The Red Plan’s bills last for twenty years.