The Difficulties of Stimulus Policy
60 Minutes had a moving piece on Sunday about Wilmington, Ohio where thousands of people are losing their jobs due to the closure of the town's largest employer, DHL. Many people had worked at the air distribution center for decades and through no fault of their own were losing their jobs, their health insurance and in one of the hardest losses of all, their community. Barack Obama and John McCain both talked about Wilmington in their campaigns and yet for all their talk it's clear that neither monetary nor fiscal stimulus can do much for Wilmington.
Consider the situation, DHL employed 10,000 people and Wilmington is a city of 12,000 (not everyone lived in the city proper). When DHL leaves there will be no other employer to take up the slack and DHL is leaving. It's losing $6 million dollars a day.and closing all of its internal US operations. No amount of new road construction or school restoration will restore the jobs lost in Wilmington. Banks may lend and interest rates may fall but the airpark is unlikely to come back. Even when the rest of the economy recovers. will Wilmington? The sad truth is that the workers of Wilmington are unlikely to ever find new jobs in their old city.
I say this not to argue against a stimulus package, either fiscal or monetary, but to illustrate the limits of what we can expect. We can do something to ease the transition as workers relocate and retrain. To the extent that a stimulus works, it will make it easier for workers in Wilmington to get new jobs but these jobs will not be in Wilmington.