How’s the Stimulus Working? In One Area at Least, Precisely as Intended

cross-posted and expanded on Congress Matters

Remember the stimulus package? Yeah, that seems like ancient history to me too. But even with that said, the $787 billion economic lifeline is still in the rather early stages of filtering through to the economy. As of August 21st, $208 billion (or 26.4% of the total) was available overall and $84 billion of that had actually been spent. While the so-called “shovel ready” projects most typically associated with economic stimulus have been slow to get those shovels in the ground due to the inherently slow timeframe for the approval and funding of any contracting project, other income support and direct payment programs have been quick to move. Hence, the leading department in funds disbursed so far is Health & Human Services, followed by Labor, Education and the Social Security Administration.

Of all the various programs and functions of stimulus money, I would argue none have been so immediately successful in achieving their intended purpose as the $140 billion of state fiscal relief monies. This chunk of funds was not one of the most prominent areas of the multifaceted legislation among the general public or even the activist community, and its positive effects are not generally felt in the cocktail party circuit so it doesn’t get much press coverage. In fact, you probably heard it described as healthcare and education aid. But that money has undoubtedly served to directly avert thousands of layoffs and prevent harmful cuts to programs serving vulnerable populations around the country. See, the targeted increases in federal aid allowed states to either reverse cuts to those areas or shift excess monies to other budget areas such as public safety or programs serving the elderly and disabled.

So state fiscal relief has been crucial to help states bridge the worst of the economic storm without slashing services or workforce too deeply; it’s filled about 40% of overall gaps over the time period it covers. And not only is the aid smart policy, it is very easy to administer compared to many of the other stimulus provisions. Immediately upon passage of ARRA, governors and state budget writers were able to craft their FY2010 budgets and fill midyear FY09 gaps with the full expectation that this money would be on its way. Therefore, with a few notable exceptions (ahem Mr. Sanford), most state leaders happily accepted the help on the premise that not making painful cuts is better than, ya know, making painful cuts. And the evidence of such avoided cuts in many states is quite clear.

I haven’t heard any other examples of stimulus money working quite as effectively in achieving its intended purpose so quickly. That is why I consider the $140 billion of state fiscal relief to be the most effective piece of the Recovery Act.

(Disclaimer: Until recently I was a Research Assistant at the Center on Budget and Policy Priorities and worked on this issue extensively. While my views on state budget and tax matters generally align with those of CBPP, the views expressed here do not necessarily reflect the official position of the Center.)

-Jeremy

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