WaPo Editorial On Stimulus Dollars

Stimulus Dollars. WaPo Editoral
Starting to trickle ever so slowly into the economy
WaPo, Friday, May 15, 2009

YOU MAY RECALL President Obama urging Congress to pass the stimulus bill immediately because the economy so desperately needed money. The massive recovery bill was passed, and, recently, a few "green shoots" have been popping up -- indicating that, perhaps, the worst may be over. Is it a result of the stimulus? Tough to say, but, given the amount of money that has actually gone out the door, probably not.

Government agencies have thus far spent $29 billion of the $787 billion stimulus package, and less than that has gone out in tax cuts. What has been spent has mostly gone to Medicaid and unemployment insurance -- real "shovel-ready" programs in that they are already in place. It is true that just knowing that money has been authorized ($88 billion so far) can allow projects to get started and jobs to be created. Nonetheless, of the $20 billion approved for spending so far for the Education Department, for instance, 97.2 percent remains unspent. Of the $10 billion approved for the Transportation Department, a full 99.7 percent is still left to be spent.

The challenge of getting government money out the door fast is one reason that some economists challenge the value of Keynesian stimulus policies. By the time checks are being written, they argue, an economic recovery is often underway. The result can be an inflationary waste of money.

That risk was heightened in this case because the administration decided against a traditional package, one based on the three Ts: timely, temporary and targeted. Instead, it opted for a more ambitious, long-lasting package; one quarter of the funds are not even slated to be spent until 2011 or beyond. That decision had both economic and political rationales. Because the recession looked likely to be a long one, a longer-lasting package seemed sensible. It also provided Mr. Obama an opportunity to get started on many of his campaign promises, from improving health information technology to advancing alternative energy. The administration argued that this spending, even if not so stimulative, would help the economy grow in a healthier way once growth did resume.

Economics being what it is, we'll never know with certainty whether this package was optimal. The administration is ramping up arguments that millions of jobs are being saved or created, but it is impossible to gauge what would have happened without the stimulus package or with a more targeted one. The Federal Reserve Board has found that money for the most part is going to states with the greatest need. However, an Associated Press study found that within states, stimulus dollars are more likely to be misdirected to localities with better employment situations. A "transformational" investment stimulus package may turn out to be a good fit for this deep recession, and we hope most of the dollars will be spent productively. But as the economy limps along, it would be nice to get the money out a bit faster.