17 September 2010

Stimulus Money was Misspent

Associated Press

When President Barack Obama signed the American Recovery and Reinvestment Act, he promised that the $787 billion stimulus package would create or save 3.5 million jobs over two years, mostly in the private sector.

Without the spending called for in the law, the administration predicted, the unemployment rate would reach 8.6 percent. Today, the U.S. unemployment rate is 9.6 percent. What happened?

We spent a great of money. But if we wanted to spend it to benefit the states with the highest unemployment rates, we failed. Out of the total $787 billion, the federal government so far has allocated one-third, or $275 billion, in grants and contracts to shovel-ready projects. So far $190 billion of that amount has been spent, according to government figures.

With a few exceptions, the data show little correlation between the level of unemployment and stimulus spending. In fact, the opposite is true. The federal government has given far fewer stimulus dollars to states with high unemployment than it has to states with low unemployment.

Does it make sense that the state with the highest unemployment rate, Nevada (14.3 percent), is getting roughly half the per-capita amount ($561.55) of the state with the lowest, North Dakota ($1,059.95)? Michigan is getting $648.91 per capita.

What's going on here? For one thing, these are raw numbers that reflect only the amount of stimulus money spent.

What they don't do is tell us anything about the reasons it was spent.

After running a series of analyses, I found no correlation between unemployment levels and stimulus spending.

So if state unemployment levels weren't the basis on which the federal government allocated these funds, what was? To me, it looks like it was just one: speed.

Back in February 2009, for all the talk about creating jobs, the administration wasn't focused on distributing money to high-unemployment states, which, in theory, were the ones hurting the most. It was just trying to spend a massive amount of money as quickly as possible.

To achieve that, the stimulus bill distributed money among the states through existing channels -- such as the federal Departments of Education and Transportation -- whose main functions aren't to address unemployment levels.

The Obama administration was wildly successful if its objective was to spend a lot of money in a short amount of time.

Whether that money has done or will do anything for the people that need it most has proven far more elusive. As the saying goes: You can have it fast, you can have it good, or you can have it cheap -- pick two.

Sadly, we only got one.

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