The Many Faces of the Stimulus Package

There is nothing that focuses the mind like the ability to spend close to $1 trillion. The stimulus package now has an official name and it is the American Recovery and Investment Act of 2009. It is moving through the various committees of the House at a pretty rapid clip and is expected to be hitting the floor for a vote within a matter of a week or so. The assessments of this plan have been as intense as can be expected given that most of the details are only now coming to light and for the most part there are elements that please everybody and elements that have engendered some sharp criticism.

Most economists have taken a safe position on either side of the issue with one cadre asserting that it isn’t nearly large enough to accomplish the task and the other camp asserting that it is so massive that the mere attempt will distort and damage the US economy for generations. The average person is perplexed by the complexity but simply hopes that it will work and that the recession will come to an end.

There are some important caveats that have been sounded by those close to the process. The first is to recognize that talk of a quick allocation of funds is a relative thing. The outlay of funds may indeed be much faster than is the norm in the US but that still means towards the end of the summer at the earliest. Caveat number two is this outlay is a one time deal. The budgets for next year and the year after will be back to normal levels and that means the same vicious competition for scarce funds that have taken place in the past.

Analysis: At this juncture this is how the money is supposed to be allocated. The largest number is destined for tax cuts - $275 billion. After that it becomes highly fragmented. $87 billion for a temporary increase in the Medicaid matching rate, $79 billion for state fiscal relief, $43 billion for increased unemployment benefits and job training,$41 billion for local school districts, $39 billion for healthcare for the newly unemployed (extensions of Cobra), $32 billion for transforming the nation’s energy transmission, distribution and production systems, $31 billion to modernize federal and other public infrastructure, $30 billion for highway construction, $20 billion for health information technology, $20 billion for food stamps, $19 billion for clean water, flood control and environmental restoration investments, $16 billion to repair public housing and make key energy efficiency retrofits, $5.6 billion in Pell grants for college students, $10 billion for science facilities, research and instrumentation, $6 billion for higher education modernization, $6 billion to weatherize modest income homes, $6 billion to expand broadband internet access, $4.1 billion to expand preventative care and $4 billion for state and local law enforcement. That leaves at least about $32 billion unspoken for at the moment.