Very Little Stimulus Spending So Far

The New York Times is reporting that three months since passing the stimulus bill only 6% of it has been spent so far. Another way to look at is that only $46 billion has been spent so far.

The intent of the stimulus program was to pump money into the economy quickly, and many members of Congress said at the time of its passage that speed was of the essence. But the huge program has been a challenge to administer for both a new administration and for states and local governments grappling with their own fiscal problems.

I think this criticism was pointed out well before the bill was passed and was cited as one of the reasons why the stimulus wouldn’t provide much stimulus when needed, and it is the reason why up until recently many economists did not favor this kind of policy response to a recession.

Vice President Joseph R. Biden Jr., who writes in a report on the stimulus bill to be released this week that it remains “ahead of schedule in most programs,” said in a telephone interview Tuesday that the bill was helping people grapple with the recession, getting money to the states and into the economy, and laying a foundation for long-term aspirations like high-speed rail.

“We’re 85 days into a two-year program here — we’re trying to get the money out as quickly as we can, but not too quickly, so we don’t end up really screwing up here,” Mr. Biden said. “Because we’re talking about big dollars here, these are big numbers, this is unprecedented. And in 85 days we’ve gotten tens of billions of dollars out the door, and so far — knock on wood — no real big problems, no real big glitches.”

No big glitches other than the fact that the recession will likely be over well before all the money is spent. I think this should be kept in mind the next time President Obama or his supporters talk about inherited budget deficits. Sure, some of the budget deficit is inherited, but Senator Obama voted for some of the spending programs that lead to these deficits. President Obama pushed through a nearly $800 billion dollar stimulus package. A significant part of the current and future deficits are his responsibility.

Nonetheless, to the frustration of some local governments, the federal spigot has been more trickle than flood, and states are facing such fiscal pressure that many are cutting jobs anyway.

This is indeed the case in California. And this isn’t how you use federal spending for counter-cyclical policy. In the post WWII period increases to spending would have to rather sudden and we aren’t seeing this.

Photo by Flickr user Joan Thewlis, used under the Creative Commons license.

FILED UNDER: Economics and Business, Government, Politicians, US Politics, , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Drew says:

    “Nonetheless, to the frustration of some local governments, the federal spigot has been more trickle than flood, and states are facing such fiscal pressure that many are cutting jobs anyway.”

    The private bank that handles some of my money put out a piece that made this very point. The federal stimulus may be offset by state and local retraction.

    Fascinating.

  2. PD Shaw says:

    only $46 billion has been spent so far.

    No. According to the Vice President’s report only $28.5 billion has been spent, $15.9 billion of which has was medical assistance payments to states. The NY Times apparantly adds the tax credits to that number to reach $45.6 billion.

    VP Report

  3. spencer says:

    Can you provide me data comparing the speed of spending to other examples of fiscal stimulous.

    Perhaps the Ford stimulous program in 1974 would make a good example.

    For all I know getting out 6% of the spending in three months after the legislation is an amazingly fast rate by historic standards.

  4. PD Shaw says:

    The Bush stimulus package of 2008 was signed February 13, 2008, and the checks began being mailed at the end of March. It took a few months as I recall.

    I’m really curious as to what tax credits the NYTimes is counting as stimulus. Most tax credits aren’t realized until you file your tax return next year.

  5. Steve Plunk says:

    A tax cut would have been immediate and would have bolstered consumer and business confidence. Heck, if we’re borrowing to fund the stimulus why not borrow for tax cuts? The idea is to get money into the economy. Tax cuts just remove the Feds as middle man.

    Neither stimulus spending or tax cuts are prudent moves but one is better than the other.

  6. Steve Verdon says:

    For all I know getting out 6% of the spending in three months after the legislation is an amazingly fast rate by historic standards.

    Still not fast enough. Unless you really think the economy will be in recession for 2 more years.

  7. JKB says:

    It was a given that government spending would be slow. All those contracting laws and such. Not to mention, the press to investigate corruption which will cause the procurement and grant officers to dot the i’s and cross the t’s.

    A tax cut on the otherhand would have happened almost instantaneously barring uncertainty caused by repeal rhetoric. Instantaneously because millions of business decisions would be made relying on the the rule of law. Lots of little decisions with risk of corruption dispersed and impacting individuals instead of a few really big decisions with corruption diverting enormous amounts of money from lots of people. On the otherhand, tax cuts are hard to direct the corruption to the politicians favorite supporters.

  8. Drew says:

    JKB –

    Correct. Which of course is why it wasn’t the preferred policy. Money in the hands of private enterprise? Egad??!!

    Money in the hands of govt buros???? Now yer talkin………..

    As we hurtle toward a wall…………..

  9. sam says:

    BTW, let me commend the following blog for all those interested in things economic: The Epicurean Dealmaker. Especially delicious is Monday’s lead story: “More of a Kickin’ Sitcheyation”.

    Enjoy.

  10. G.A.Phillips says:

    The slower they flush money down the drain the better, but it’s still swirling.

  11. Rick DeMent says:

    Still not fast enough. Unless you really think the economy will be in recession for 2 more years.

    I think that 2 years is kind of optimistic?

  12. Bithead says:

    All of this reduces to irrelevancy all the deficit spending going on… at least insofar as the stated goals are concerned. The questions that should be getting automatically asked at this point, then is what WERE the original goals, and what did tossing all that taxpayer finding around actually DO?

    I have a feeling we’re going to find out when the tax bill comes due.

  13. DL says:

    We don’t want the economy to peak until Nov. 2010, do we?