Monday, April 20, 2009

Federal Fiscal Stimulus

I was chatting the other day with a friend who works in a federal agency that is in line to get a bunch of federal stimulus money. He made a couple of interesting points. First, he said that federal agencies are not set up to deal with windfalls of cash. They are structured to operate within a budget and so it is not that easy to just 'ramp up.' His, like other agencies, has a prioritized list of projects, but the ones that did not make it on to the actual 'to do' list with the normal budget were shelved and not ready to turn on like a switch. Second, he said that they basically have not received any money yet and initial monies will be small to see how well agencies do at spending it quickly and effectively and future allocations will depend on this evaluation.

That all speaks to two points. First, when asked about bright spots, I mention that the federal stimulus hasn't really gotten started yet and so we can expect that the stimulating effects of this spending to be on the horizon. Second, given the terrible shape of state budgets, I still can't believe that a big part of federal stimulus was not block grants to the states. Every $1 states cut back in spending counteracts a $1 of federal stimulus money. If you want quick and effective stimulus, block grants are the way to go. Is it too late to shift some money to this purpose? I don't think so and I can't understand why it is not part of the discussion (but then I am not a particularly savvy political observer).


Jeff said...

Great post. State revenues are plunging, while demand for state services are rising. Both are due in large part to unemployment, it would seem.

It would have made sense to give Fed. stimulous money to the states.

Dennis said...

In a word..... Republicans.

In two words..... Republicans and Democrats - though usually the more moderate/conservative ones.

For example:

I think many federal politicians have an aversion to money with no strings attached. Well, giving it that is. Receiving is a different story.

Brian said...

Is a dollar borrowed to replace lost revenue to state programs the same as a dollar borrowed to accelerate economic recovery through job creation? I don't know the answer to that, but Patrick indicates that they are the same.

On the other hand, here in Oregon we love our kicker checks, I mean we just love love love them. Rainy day fund? That sounded like so much nonsense every time it was debated. We have known this day was coming, and we have consistently refused to prepare for it, so I'm kind of inclined to let the state, and our state legislators, enjoy the kicker in the pants this year.