Monday, July 20, 2009

The Leaky Bucket

Today, Matt Drudge sent the USDA into a fervor after a line item on implied that the Stimulus Bill paid $1.19 million for a 2-lb ham. Of course, the government was guilty of poor descriptions and not of buying an overpriced ham. Tom Vilsack, the agriculture secretary, issued a statement in response to the Drudge Report headline.
Press reports suggesting that the Recovery Act spent $1.19 million to buy ‘2 pounds of ham’ are wrong. In fact, the contract in question purchased 760,000 pounds of ham for $1.191m, at a cost of approximately $1.50 per pound.
To wit, the Drudge Report promptly found an advertisement at Food Lion for frozen ham at less than $1 per pound.

And, thus, the leaky bucket is dragged across the economy of America once again. For those unfamiliar, Dr. Arther Okun coined the phrase ‘leaky bucket’ many years ago in describing wealth transfers by taxation.
The money must be carried from the rich to the poor in a leaky bucket. Some of it will simply disappear in transit, so the poor will not receive all the money that is taken from the rich.
Imagine if Uncle Sam called up Wal-Mart and placed an order for 760,000 lbs of frozen ham. I am sure they could beat the $1.91 million price tag. In fact, my bet is that they could beat it by 40 percent … and throw in free delivery! If the government put rational thought behind these contracts and saved the American people five percent of the Stimulus Bill, that is a stunning $39.35 billion (yes, with a ‘b’). You could employ lots folks to scrub those contracts for that amount of money.

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