When President Obama signed the American Recovery and Reinvestment Act, he promised that the $787 billion stimulus package would create or save 3.5 million jobs over two years. He claimed that most of these jobs would go to the private sector. The Obama administration argued for the stimulus, saying that without the bill the unemployment rate would reach 8.6 percent. But the current official unemployment rate stands at 9.6 percent. So, what happened?

$790 billion is a considerable amount of money, but we cannot just throw money around and hope it makes everything better. Only about one third of the stimulus money went to projects that would reduce unemployment. $275 billion was allocated to grants and contracts for shovel-ready projects directed at America’s infrastructure. According to government figures, just under 70 percent of this money has already been spent. With so much being spent on projects that should reduce unemployment (at least in the short term), why does it remain so high?

Veronique de Rugy for Bloomberg News compiled a chart depicting the destination of the stimulus funds. The results show, with few exceptions, that the states with the highest unemployment levels received the lowest amount of funds.

Here are two charts that compare the five states with the highest and lowest unemployment rates and the amount of stimulus money per capita:

Click here for Chart

Why is Nevada, the state with the highest unemployment level, receiving approximately half of what states like North and South Dakota are?

Rugy ran a regression analysis in order to find what forces motivated the decision to spend. She found no correlation between unemployment levels and stimulus spending. (The data and regressions can be downloaded at mercatus.org.)

Despite all the talk from this administration about saving jobs, it seems the stimulus was designed for something entirely different. In February of 2009, most Americans were still concerned with the overall condition of the economy rather than unemployment itself. On the 31st of December, 2008, GDP was at -6.8 percent. The government’s immediate goal was to restore GDP to higher levels, giving the illusion of a healthy economy. The theory goes, if Americans believe the economy is healthy, they will consume more which will restore the economy. At the time, all you heard was concerns over a lack of consumer confidence. With that in mind, the government passed the American Recovery and Reinvestment Act. Their goal was to increase GDP by increasing government spending (government spending being a factor of GDP).

“To achieve [the quick release of money], the stimulus bill distributed money among the states through existing channels — such as the federal Departments of Education and Transportation — whose main functions aren’t to address unemployment levels,” Rugy writes. “The Obama administration was wildly successful if its objective was to spend a lot of money in a short amount of time.”

A new plan put forth by Obama seeks to spend a mere $50 billion on infrastructure, including 150,000 miles of roads, 4,000 miles of rail and 150 miles of airport runways. But it should work this time, right? They will, after all, be directed at actual projects and not just government posturing to inflate GDP.

There are several problems with this approach. First, if $190 billion was unable to curb unemployment, why should $50 billion be enough? Furthermore, the government is putting too much focus on fixing the symptoms rather than the causes of our economic crisis. Finally, even if this project does work, the jobs created would be temporary and negligible in the context of the overall economy.

We need to fix our tax system so manufacturers will be encouraged to return to our shores. We need to be able to counter the backdoor protectionism of other countries if we ever hope to compete on an equal plane. To do this, we must change NAFTA and take a temporary leave of absence from WTO. In short, we need to restore production capabilities and investment to the United States. Without a job, all the cheap imports in the world would mean nothing if the consumer cannot afford them.

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