The Campaign Spot

Stimulus Money Stuck in Government Accounts Isn’t All That Stimulative

In response to yesterday’s post, pointing out that in two months, only $12 billion in stimulus funds have been paid out, one of my liberal readers writes in:

So you are upset now that the money isn’t  going out fast enough? I thought you didn’t want the bill in the first place. Neither did Jindal or Palin or Sanford and they ended up taking it. Is this a gripe about Obama being too slow to hand out the money? Or just a gripe Obama in general? As far as I can tell he can do no right in your eyes.

First of all, flat-out not true; Republican governors did not argue that they didn’t want any stimulus bill, and not even South Carolina’s Mark Sanford is saying he doesn’t want any stimulus funds. He’s saying he wants to use a portion of it to pay down the state’s debt (and improve the state’s budgetary outlook for the long haul). The other governors are saying that they only want part of the stimulus funding allocated to their states; they want to turn down the portions that create unfunded mandates a few years down the road.

Second of all, if you’re going to pass a stimulus, make it stimulative. This is why I liked the idea of a one-year payroll-tax suspension. Certain Republican lawmakers wanted a plan to offer fixed-rate, 4 percent mortgages to any creditworthy borrower. There was pretty broad bipartisan agreement on infrastructure spending; I’d love to see an extra lane added to the Beltway (and 395, and 66, and a bunch of others), as it would certainly enhance the economic productivity of the region.

But Obama wanted to stimulate the economy mostly through a massive increase of government spending, and said that time was of the essence. This was so important, we were told, that the bill had to be passed with most members having not even read it cover to cover. But the federal government’s bureaucracy doesn’t do much quickly, even spend money. If the money’s been allocated, it might as well get out there, funding projects, putting people to work, buying materials, and having all of those “stimulative” impacts. Instead, it’s sitting in government accounts.

Beyond that, I read this fascinating message from a reader at a large and prominent medical institution:

I am in charge of several large construction projects that are already budgeted and ready to go . . . in effect they are “shovel ready” . . . however, as soon as the stimulus bill was signed into law they all came to a screeching halt.  They’ve been put on hold in hopes that the Federal Government will pay for them.
Unfortunately no one knows how much money our institution will be allotted, and how exactly we’re supposed to apply for said money. Meanwhile, these projects will just sit and wait, just in case.  My fear is that we won’t find out if they’ll be government funded until sometime in the fall, which will be in the next financial year, and then there will no longer be funds in our budget for these projects.

I suspect that this thinking is not unique to my employer.  I’m sure that other institutions plus state and local governments are all putting projects on hold in hopes that they can get someone else to pay the bills.  So, from what I have seen; the “Stimulus” has resulted in a slowdown in the economy.

Yeah, this is all way better than a payroll-tax suspension.