tax cuts

via ProPublica: Stimulus Spending Fails to Follow Unemployment, Poverty.

ProPublica, Investigative Journalism

ProPublica, a non-profit investigative journalism newsroom, has brought to our attention an interesting situation involving the distribution of stimulus money. They say pay-outs to counties vary from one to the other for unclear reasons and do not follow unemployment numbers and poverty levels.

But analysis of the most comprehensive list of stimulus spending to date found no relationship between where the money is going and unemployment and poverty.

Stimulus spending is literally all over the map, according to ProPublica’s analysis, which examined nearly all the contracts, grants and loans the government has reported awarding. Some battered counties are hauling in large amounts, while others that are just as hard hit have received little.

One of the more curious things about this article is that it creates questions – ones that could be daggers in the heart of the Obama administration, then they turn around and answer their own questions, fearfully diluting the message that the title of the report states – that the stimulus fails somehow.

Overall, the stimulus program will pump $787 billion into the economy, including tax cuts.

What they omitted here is that a whopping one-third of the $787 billion is in the form of tax cuts for the middle class and small business. That’s $262 billion in tax cuts, leaving only $525 billion for everything else.

To assess what has happened so far, ProPublica combined all the data on the federal stimulus Web site, Recovery.gov, with reports from other government sources into a list totaling $120 billion worth of stimulus spending. Of that, ProPublica examined $55 billion that could be traced to the county level.

Getting a complete accounting of the stimulus is nearly impossible because some of its largest elements — tax cuts for individuals, increases in Medicaid and unemployment — aren’t being tracked to the local level or have yet to be distributed by the states.

So how can an honest investigative newsroom conjure up a story that they admit cannot account for or track at least a third of the stimulus money thereby causing the report to appear half-baked? They go on to admit that some comparisons between counties was insignificant, contradicting their original position.

Nationwide, the results showed no significant relationship across counties when spending was compared against unemployment, poverty, race and income. Looking within state boundaries, spending did have a relationship to unemployment in a few cases — but not always in the same direction.

However, it does appear that they are correct and there is some sort of illogical methodology behind the stimulus distribution. Looking in from the outside and seeing what may be a disparity doesn’t necessarily mean that the system is broken. Having to make penny-pinching allocation decisions in and of itself offers up the notion that the stimulus should have been much bigger. In other words ProPublica is unwittingly proving that there existed a dire need for federal spending and the reason that spending is not reaching further down into counties that are hardest hit is because there is just not enough money available. From an article by Josh Marshall, March 2009, in  Talking Points Memo:

In Washington over the last two months, the debate was over whether the Stimulus Bill was too large. But the math — that is to say, expected fall in aggregate demand compared with offsetting stimulus spending — suggested a completely different problem. Namely, that it was too small, probably offsetting a half or less than half of the demand sucked out of the economy by the collapse of the housing bubble. And as the Post reports on tomorrow’s front page, the verdict seems to be in: yep, it was too small.

ProPublica’s look at how the money has been spent supports the fact that the stimulus was too small. With money allocated for federal projects bottlenecked at the state level it is easy to see the cause of frustration why some counties get more money than others.

LaGrange County [Indiana] has several needed transportation and infrastructure projects, said Keith Gillenwater, the county’s economic development director. But so far, it has been shut out of any of the federal highway funding doled out by the state government.

“It’s frustrating,” he said. “To me there’s a lot of disparity that should be re-examined and taken into consideration.”

Not to oversimplify the situation, but doesn’t a rising tide lift all boats? More money to sates would mean, well, more money.

In conclusion, the article that purportedly finds some kind of fault with the administration’s handling of the stimulus allocation, actually winds up begging the question, “What if the stimulus had been much bigger?”

P.S. There is a cool interactive map of the U.S. showing money allocation by state right here. See where your state stands!