Stimulus programs hobbled by regulations

Wednesday, August 18, 2010; A14

THE AMERICAN Recovery and Reinvestment Act -- also known as the stimulus -- was supposed to be timely, targeted and temporary. A year and a half since its passing, much of the money devoted to tax cuts and aid to states and social benefits has been paid out. But some of the act's more ambitious programs have failed on the first score. The latest example comes from the Energy Department's inspector general, who last week reported that a $3.2 billion program to fund energy-efficiency improvements in state and local government buildings has spent just over 8 percent of its cash.

"The slow rate of spending block grant funds has neither met initial departmental targets nor achieved the desired stimulative effect on the nation's economy," Inspector General Gregory H. Friedman wrote.

That's partially because the Energy Department didn't have the staff to manage applications to the energy-efficiency program. It's also because state or local proposals had to comply with regulations such as the Recovery Act's Buy American provision and historical preservation rules, which require approvals for physical changes to buildings possessing "historical significance."

This story is hardly unique. The Post's Alec MacGillis wrote Saturday that more than half of the $275 billion in stimulus cash set aside for investment in things such as energy infrastructure had yet to be spent.

In February, Mr. Friedman reported that a stimulus scheme designed to fund home weatherization had also seen delays. That was in part because of staffing problems and in part because of certain federal regulations, such as a requirement that those employed be paid a "prevailing wage." Wage data weren't available for weatherization jobs; compiling the information took time.

At the least, these stories offer a warning to policymakers attempting to manage future crises. Unless lawmakers or the executive branch can make approval processes more efficient, some seemingly desirable uses of federal money may not quickly jolt the economy. Congress might take more care to rely on federal units that have the capacity to handle new and large flows of cash. And lawmakers could carefully exempt projects in any future stimulus from burdensome regulatory requirements, even if those requirements make more sense in calmer times.

As Mr. Friedman put it to the New York Times last week, "Before we reauthorize this program or develop additional programs for stimulative effects, we need to consider these situations so the money gets to the streets and people get hired."

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