Archive for Sunday, August 8, 2010

Stimulus spending unevenly distributed, difficult to track

August 8, 2010


— In February 2009, the United States had fallen into what many economists called the deepest economic slowdown since the Great Depression. The housing bubble had burst, unemployment was nearing its highest level in almost three decades and the once-freewheeling banking sector had turned tightfisted.

At the urging of President Barack Obama, Congress passed a $787 billion economic stimulus bill on Feb. 10, 2009, to get federal dollars flowing into the U.S. economy.

Eighteen months later, the administration estimates that about 85 percent of the jobs it expected to create or save in the first two years have indeed been created or saved. The economy is rebounding slowly, and the worst effects of the recession have softened. Unemployment, while still high, is better than it otherwise would have been.

For the most part, mainstream economists such as those at the Congressional Budget Office agree with those conclusions, but an examination by McClatchy Newspapers and the Medill News Service has found that some parts of the country have benefited far more from the American Recovery and Reinvestment Act than others have, that some sectors of the economy are benefiting far more than others are, and that it’s difficult to detail exactly where all the money has gone.

Among the findings:

• The jobless rates in the states had little to do with where major portions of the stimulus package were distributed. Some states with the lowest unemployment rates received some of the highest per-capita spending for stimulus projects.

• Job creation on the local level has been uneven. By the White House’s numbers, for example, Nebraska created 74 percent of the expected jobs, while North Dakota and Massachusetts created 100 percent.

• The Obama administration won’t be able to fulfill its vow to track every stimulus dollar. The mechanism that’s used to account for the expenditures is complicated, flawed and at times inaccurate.

“I know it’s political rhetoric to say we have to know where every penny is spent,” said Raymond Yee, a lecturer at the University of California Berkeley’s School of Information. “But it’s difficult to even understand where every billion dollars is spent.”

• Much of the stimulus money has yet to go out the door. As of July, $127 billion in contracts, grants and loans had been awarded, but that’s less than half the $275 billion allocated for those projects.

That’s partly by design and partly because it was difficult to get systems in place to spend money quickly for the array of new programs that the stimulus bill funded.

Job creation

The White House projected creating or saving about 3.5 million jobs in the first two years after the stimulus bill passed. In a July report, the administration estimated that it’s created or saved approximately 3 million of them, about 85 percent of the expected total.

(Using different economic models, the administration calculates the added-jobs tally at either 2.5 million or 3.6 million and averages them out to 3.1 million.)

While they agree that the stimulus package has created jobs, other economists are less optimistic than the White House is. The CBO says the job boost could be as low as 1.4 million or as high as 3.4 million. Three other economic organizations — all of which the White House cited in its July report — put the jobs tally at 1.8 million, 2.1 million or 2.2 million.

States benefiting more

It’s clear from the McClatchy-Medill analysis of stimulus spending and unemployment, however, that some states have fared much better than others have.

North Dakota has had one of the nation’s lowest unemployment rates for the past year. In June, it hit 3.6 percent. Yet the analysis found that it’s scheduled to receive more stimulus spending, per capita, than is Nevada, where the unemployment rate climbed to 14.2 percent in June.

Economists who’ve studied the stimulus package say there’s little connection between which states have the worst unemployment and where the stimulus dollars have been spent. Edward Glaeser, a Harvard University economist, wrote in March: “Stimulus aid was not particularly well matched with need.”

Veronique de Rugy of George Mason University testified before the House of Representatives Committee on Transportation and Infrastructure in March that she and other researchers were unable to find any relationship between unemployment in a given area and the amount of stimulus dollars spent there.

“No matter how we measure unemployment, we find no correlation,” she said.

Though other economists recognize de Rugy’s findings, some disagree with Glaeser and her that funding stimulus programs without regard for local unemployment or economic conditions is a problem.

“If you say, ‘Let’s target states that are doing worse, places that saw the property crash in the worst way,’” said Timothy Taylor, the managing editor of the Journal of Economic Perspectives, “is that really the right goal here? This wasn’t just inflicted on them like a lightning bolt. Rewarding failure is never the best plan.”

“I think giving (money) to the state governments was probably about as targeted as one could reasonably do,” he said. “It was no more unfair than other possibilities could have been. To have the federal government try to fix things county by county seems insane, especially if you take timely as an important task.”

‘It’s working’

Administration officials also disagree that targeting communities with high jobless rates would have been a better approach.

“Economic need isn’t bound by county or state lines and, fortunately, neither are the economic benefit of recovery act programs and projects,” said Elizabeth Oxhorn, the recovery act spokeswoman for Vice President Joe Biden. “And when it comes to supporting the hardest-hit among us, assistance like unemployment benefits, tax relief and health care are directly targeted to those who need it most, regardless of where they live.”

“Bottom line: It’s working,” Oxhorn said. “Before the recovery act, our economy was losing an average of 750,000 jobs each month. In the first five months of this year, the economy has created nearly half a million new private-sector jobs.”


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