Stimulus funds on the slow track
When Democratic senators and representatives voted to approve the $787 billion stimulus package nearly two years ago, the ones who came from swing states and districts knew they were taking a political risk. What they didn't know was that the economic benefits of the stimulus would become so entangled in red tape that even today, much of that money remains unspent.
A story that ran Sunday in the Los Angeles Times estimated that only a quarter of the $630 million in federal funds allotted to the city of Los Angeles had been spent. Los Angeles is in no way exceptional. California Inspector General Laura Chick, who was appointed by Gov. Arnold Schwarzenegger to monitor the state's stimulus spending, estimates that only about half of California's federal funds have been spent.
Some parts of the stimulus - those that go to defray the states' Medicaid costs, for example, or for extended unemployment insurance - get disbursed immediately. Funds devoted to preserving ongoing governmental operations have been spent at a steady clip as well. By the end of September, according to numbers I crunched from the California, Texas and New York City Web sites, these places had spent 63, 58 and 61 percent, respectively, of the federal funds targeted toward public schools - and each is on track to use up what was designed as a two-year allocation by the end of this school year.
The funds that went to existing government services and benefits, in short, were spent as intended. Their effect on the larger economy was to keep things from getting worse by preserving the status quo - just as this month's tax deal, by forestalling tax increases, avoided diminishing the level of money in circulation. But much of the money devoted to boosting private-sector hiring, above all in construction, remains stubbornly unspent, nearly two years after President Obama signed the stimulus into law.
At September's end, just one-third of the $4.5 billion allocated to California for transportation projects had been spent, the state's Web site shows. In Texas, just 5 percent of the funds allocated to the largest energy project had been expended, while in New York City, only 27 percent of the funds allocated for infrastructure and 3 percent of those targeted for improving energy efficiency had been spent. Some of this money is for long-term projects, but most of it isn't.
When it comes to building things, the stimulus, as Lincoln said of Gen. George McClellan, has the slows. Ironically, when we think of our iconic stimulus programs - the Works Progress Administration (WPA) and other New Deal public employment programs - we think of the things they built: the Bonneville and Boulder (now Hoover) dams; the Triborough and San-Francisco-Oakland Bay bridges; the aircraft carriers Enterprise and Yorktown; LaGuardia and National (now Reagan) airports; and thousands of schools, post offices and roads.
What's more, the New Deal built them at a pace that seems almost incomprehensible today. When the winter of 1933-34 loomed, President Franklin Roosevelt wanted to forestall a wave of starvation in a nation that didn't yet have unemployment insurance or food stamps. He authorized Harry Hopkins, his jobs-wizard, to create a four-month-long project (the Civil Works Administration) that would employ 4 million people. Beginning operations on Nov. 9, Hopkins had 2.6 million Americans on the job by Christmas and 4.3 million by February - this in a nation of 125 million. In their four months on the jobs, they built or improved 40,000 schools and 998 airports.
So what happened? How have we gone from a nation that could put millions productively to work in two months to a nation that still struggles to restart our construction sector two years after the stimulus passed?
Part of the answer is technological: Most WPA and CWA workers were employed on pick-and-shovel jobs long since replaced by labor-saving (and job-reducing) machines. Part of the answer is that big government (the stimulus) was slowed by good-government requirements (environmental impact reports, competitive bidding and the like) that didn't exist in the '30s. Also, strapped state and local governments laid off many of the workers needed to approve the stimulus projects. Layoffs and furloughs in California's Office of Historic Preservation, the state's inspector general told me this summer, created a 60-day bottleneck for even routine structural improvements.
Infrastructure projects remain among the most stimulative forms of anti-recessionary activity - so long as the projects actually happen. That's one reason liberals like me have enthusiastically supported them. It's now clear, however, that unless presidents, governors and mayors appoint their own Harry Hopkinses and create fast-track procedures for construction, stimulus projects will be no more than a pale ghost of their 1930s' predecessors, unemployment will remain outrageously high and the politicians who backed the stimulus will be left scrambling for explanations. These are among the grim lessons of our mega-recession, as many of those swing-district Democrats can sadly attest.