Sunday, February 5, 2012

Firm At Center of Romney's Stimulus Critique Received Over $10.4M From Fed. Projects

ABC News (and other media) has reported that Mitt Romney recently held a campaign rally at Springs Fabrication, Inc., a manufacturing company located in Colorado. During the rally, Romney assailed the stimulus package that Congress passed in 2009. Conservatives and other opponents of the stimulus have repeatedly argued that the measure did not create any jobs. According to CBO analysis and reports from economists, however, the stimulus contributed to GDP, created new jobs, and prevented job losses.

Ironically, Springs Fabrication received $2.3 million in stimulus funds in November of 2009. The government hired Springs Fabrication to complete a plumbing project at the National Institute of Standards and Technology. Stimulus funds paid for the project. Despite winning this contract, Tom Neppl, the CEO of Springs Fabrication, says that the stimulus did not allow the company to create any jobs:
"I did not support the stimulus, I did not seek out stimulus funds, and the stimulus did not create or save a single job here,” said Neppl. “One of our best customers placed an order as they have in the past, for a government project like those we have done in the past.”
Neppl's statement reiterates the conservative line that government spending does not boost economic activity or lead to job growth. The recent history of Springs Fabrication, however, contradicts this assertion.

Springs Fabrication Has Hired Persons As A Result of Government Spending

Although Neppl portrays the stimulus as ineffective, the company he heads has benefited from federal spending. In his statement, Neppl himself acknowledges Spring Fabrication's participation in government projects "in the past."  One specific project began in December 2009 when Springs Fabrication entered into an $8.1 million contract to dispose of chemical weapons for the US Army at a location in Pueblo, Colorado. Springs Fabrication was a subcontractor for the $28.7 million government project. Due to the magnitude of this government-sponsored contract, Springs Fabrication was able to rehire 20 persons that it had previously fired due to lack of work.

Although Neppl portrays the stimulus as unsuccessful, he boasted about Springs Fabrication winning the contract. It was the largest contract Springs Fabrication had ever received, and it permitted the company to create jobs in the local community:
"This contract will absorb our existing staff, so we'll have to ramp up a bit," he said. "That's why it's good news - not just for us, but for Southern Colorado. These big contracts don't always keep the money in the area, but this time it will stay here."
Furthermore, Springs Fabrication won the contract at a time when it was experiencing a downturn in sales (well, there was a recession). Nonetheless, Neppl has given his voice to the bogus assertion that government spending and job creation are unrelated.

Neppl's position seems politically motivated. It contradicts the company's own history of job creation with government funds. Also, it is probably not a coincidence that John McCain held a campaign rally at the company in 2008.

Romney's Use of Springs Fabrication to Bash Stimulus Is Misleading As Well

Romney has promoted Springs Fabrication's experience in order to portray the stimulus as a waste of money. During his campaign rally at the company, Romney blasted the stimulus:
“That stimulus [Neppl] had, it did not do the job. I mean, I understand Tom said he was working on a project that got some stimulus money. . . .”
“I asked well were you able to hire more people because of that, he said no. Didn’t add any more people, just more money into the system, but no more people hired,” said Romney. “That stimulus did not create private sector jobs like it should have, like it could have, it instead protected government jobs.”
Romney's statement is intentionally misleading. The Colorado Springs Gazette interviewed Neppl. During the interview, Neppl said that the stimulus funding he received did not allow him to hire new people or make a profit. Neppl, however, explained that this was not due to an inherent defect in the stimulus. Instead, the company's costs were larger than expected; so it failed to make a profit (which probably explains why it could not hire additional workers). Cost overruns frequently occur on major manufacturing and construction projects. The stimulus did not cause this.

Moreover, although Neppl did not make a profit on the project, he says it could still benefit the company. He believes that it could lead to future contracts for the company.


Romney opposes the stimulus, but he needs to state legitimate reasons for doing so, rather than misrepresenting the experience of Springs Fabrication. The company failed to profit from the stimulus money it received because it underestimated the cost of the project. Furthermore, the company has profited previously from government spending and has used this money to hire workers.

In addition, economists argue that the stimulus created or saved jobs and contributed to GDP. Other than challenging this data, it is difficult to imagine a sound argument against the stimulus. Certainly, Romney has not offered one.

No comments:

Real Time Analytics