Friday, August 27, 2010

The difficulty the federal government can have spending money

Remember when the stimulus was being discussed and some conservatives like Lawrence Lindsey suggested a suspension of payroll taxes as a way to get stimulus money into the financial bloodstream a whole lot faster than appropriating money for the multitude of spending projects that the Democrats chose. Critics argued that it would take too long to get those funds circulating and that all the talk of the money going to "shovel-ready" projects was mostly a myth. Less than half of the stimulus that was geared for investments in infrastructure, health care, and other areas has been spent. As the Washington Post reported a couple of weeks ago,
At the end of July, nearly 18 months after the stimulus passed, more than half of the $275 billion in investments had yet to be spent.
To take one part of those stimulus funds, the Associated Press fact-checked Vice President Biden's claims this week about the program for weatherization that was supposed to both stimulate the economy and save energy.
Vice President Joe Biden said this week that the Obama administration "hit the accelerator" toward spending $5 billion under the economic stimulus law to weatherize people's homes, create thousands of jobs, help consumers save money and put the nation on track for energy independence.

Yet the weatherization program the vice president highlighted in his visit Thursday to New Hampshire is widely considered among the least organized spending projects under the $814 billion economic stimulus law and has regularly been targeted for criticism of its slow progress by auditors and outsiders. Biden didn't hint much at its troubles.

Nearly 18 months since it started, the stimulus weatherization program has experienced spending delays, inefficiencies and mismanagement. In Biden's home state of Delaware, the entire program has been suspended since May, and last month federal auditors identified possible fraud.
Critics of the original stimulus predicted that this would happen. And it's no surprise. We still haven't spent all the money that was supposedly "emergency spending" to help the Gulf area recover from Katrina. Five years later, more than a quarter of that $20 billion has yet to be spent.
More than a quarter of the $20 billion in Housing and Urban Development relief funds that were earmarked for Gulf Coast states after Hurricane Katrina remains unspent five years after the storm, a fact noticed by at least one congressional leader who's eager to spend it elsewhere.

In June, U.S. Sen. Tom Coburn of Oklahoma, the top Republican on the Permanent Subcommittee on Investigations, ordered data from the Department of Housing and Urban Development on how much remains unspent from the Community Development Block Grants that were earmarked in hurricane relief funds for Gulf Coast states after the 2005 storms. The answer: about $5.4 billion, comprising $3 billion of the $13 billion earmarked for Louisiana and $2 billion of the $5.5 billion for Mississippi.
There may be very good reasons why construction projects have not yet begun or it may be that more money was allocated than needed to be. I'm sure that Gulf residents would claim that they need every cent of those funds. But these two stories are a salutary lesson about the difficulties the federal government has in getting money out the door with any sort of stimulating speed when it comes to major spending on infrastructure. That is why that approach to speeding money into the economy was not the way to go for this economic crisis. I just wish that we could have any confidence that our nation's solons had learned that lesson.

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