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Your perspective on the relative success or failure thus far of the American Recovery and Reinvestment Act of 2009 aka “The Stimulus Plan”, probably depends, in part, on your political persuasion. Republicans have called it a failure and Democrats remain hopeful that the benefits will start to tangibly kick in. I would like to look at the $787 billion  (which equates to about 5.5% of GDP while the New Deal was only about 2% of GDP) the government has appropriated from the perspective of neither a Republican nor a Democrat, but rather from the perspective of a real estate guy or what I will call a Realestatarian.In February, we were told that the Stimulus plan had to be approved by Congress “to avoid economic armageddon” because “we are approaching a financial catastrophe unlike anything this country has seen since the depression.” The President told us that, “A new wave of innovation, activity and construction will be unleashed all across America” and that it would, “create up to 4 million new jobs” (“create or save” was the modification months later when it was clear that the projection was a fantasy). The Vice-President said that the spending plan would “drop kick” the economy out of the recession. The National Economic Director said, “You’ll see the effects begin almost immediately”.These statements sounded very positive. The Realestatarian in me told me that it sounded too good to be true. When has the government, under any party, efficiently implemented a program like this? And by the way, How were we going to pay for this spending plan?Another major concern has been the unprecedented shift in economic power from the private sector to Washington D.C.  Moreover, notwithstanding the party affiliation of the resident in the White House, programs like this have typically been riddled with waste, fraud, abuse, inefficiency, incompetency and corruption. With a unified government the potential for these outcomes is unavoidable.From the Realestatarian’s perspective, what matters most? JOBS, that’s what. Employment is the single most important indicator affecting the fundamentals of our real estate markets. If people are out of work they are not spending money and if people are not spending, our retail tenants are not leasing new stores, let alone paying the rent on their present locations ( 70% of GDP is the result of consumer spending ). If people are not working they are not likely to be moving to a bigger apartment, or moving from a rental unit into a newly purchased home. If companies are reducing the size of their workforce, they don’t need to lease more office space and may even be disposing of excess space caused by contraction. We need jobs to stimulate growth and the Stimulus Plan has not produced new ones. Whether jobs have been saved is difficult to prove, hence a wonderful political thesis.Today, the Bureau of Labor Statistics tells us that the unemployment rate is 9.5%. This is, however, just the tip of the iceberg. This is based upon a June number of 467,000 jobs lost. These numbers are typically revised and the revisions rarely are downward. 7.2 million people have lost jobs since the start of the recession wiping out the total net gains of the prior nine years making this the only recession since the Depression during which all of the job growth from the previous expansion has evaporated.Additionally, the unemployment rate does not take into consideration all of the people who have given up looking for a job or workers taking part time jobs who would would like to work full time or workers who have been asked to take unpaid leave. If these groups were included, the unemployment rate reaches 16.5% leaving about 25 million people involuntarily idle. Projections from most economists now indicate that unemployment will peak between 10% and 11% and rates over 9% are likely to be with us throughout 2010. To say this is not good for real estate is an understatement.The Stimulus Plan was supposed to yield $1.50 of economic activity for every dollar spent. Thus far, less than 20% of the money has actually been spent and the benefits have been difficult to see. Unfortunately, the Stimulus Plan is loaded with pork and too much of the money has gone towards tranfer payments such as Medicaid and unemployment benefits, neither of which do anything to create jobs or stimulate economic growth. Jobs would be created by spending on  infrastructure but only about 10% of the $787 billion is slated for this purpose.Benefits to small businesses would stimulate job growth and are needed. Small business entrepreneurs have led America out of the last seven post-World War II recessions. They also create about 2 of every 3 new jobs during a recovery. Rather than providing tax savings to these businesses (which can be implemented quickly and efficiently), all indications are that small businesses will face rapidly increasing taxes whether it is because of a need to pay for a government run healthcare system, a need to plug budget gaps created by all of the spending the government has initiated or simply because inevitable inflation (caused by a doubling of the money supply in just 9 months) will increase the cost of borrowing. This is a major concern as the money supply has grown by more in the last 9 months than in the last 50 years in aggregate.Unfortunately, the economic downturn has been used as an excuse to greatly expand the size of government. The Stimulus, and how the money has been allocated, clearly reveals that, presently, income redistribution is prized above all else, including job creation and economic growth. As Realestatarians, we can’t be feeling too good right now. We need to see a reversal in the direction of unemployment before a real estate recovery can occur.

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