The first wave of ARRA (stimulus) spending was just dollars out the door – tax cuts and saving state and local services. It served the purpose of stopping the free fall and keeping us out of a depression, but otherwise didn’t contribute much to the future. And I’m not sure what good the “cash for clunkers” or $8,000 down payment money for first-time home buyers did, although they probably didn’t hurt anybody.
Now we’re moving into investments. The money for highway repairs you saw starting this summer, and for mass transit, are 20 years overdue and vital if we’re to stay a first-world nation.
But the real impact will be from funds spread through various federal agencies that have worked through the bureaucracy and have started to emerge as RFPs that will have longer-lasting effects. These will probably be awarded this fall and may be spent over the next one to three years. I’m currently working on two stimulus grants. One is part of $1 billion from National Institutes for Health to modernize laboratories and research facilities. If our grant is funded, it will leapfrog the small agency I’m working with 10 years ahead of where they could get on their own. The other is Department of Labor training grants which have a major component for training nurses and medical support personnel. Health care is being hampered by, among other things, the nursing shortage, so this fits into a larger picture.
I’m not tracking all of the ARRA RFPs by any means, but from what I understand the agencies are on one hand making long-overdue investments and on the other are overwhelmed by the sheer volume of programs and proposals.
What are you seeing in your fields?
September 17th, 2009 at 8:15 pm
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September 18th, 2009 at 7:50 am
Weren’t they supposed to get this stuff out in 90 days? Instead, it’s taken them 9 months.
September 18th, 2009 at 9:12 am
I agree with your observations, Michael. However, the process of getting these investments from the RFP stage to the “pipeline” is being slowed by a couple of factors.
One, federal agencies (those I’m working with) had seen extraordinary cuts over the past 8 years and had not received their fy09 appropriations. So while they may have received ARRA funds, their diminished organizational capacity has increased the time frame for processing and appropriating funds (let alone their normal programmatic funding!)
Two, state agencies and the organizations set to implement the state level allocations have been squeezed by state budgetary issues and those pesky balanced budget constitutional amendments. Budgets have been slashed- executive orders requiring 5%+ budgetary reductions have hampered the fiscal and organizational capacity of those organizations which have typically lead the initiatives (often leading to organizations cutting staff and consultant/contracting funds) which begs the questions “Who is going to do the work?” I’m seeing quite a few of the stalwart organizations in my region revert to “Mad Max” measures to ensure their own revenue streams, though they are no longer capable of executing.
Furthermore, some of the NPO’s set to receive substantial ARRA funds just don’t have the capacity to handle such large sums- how can we expect an organization with yearly revenue’s of 250K be expected to handle several million this year without support?
While it is great to see the long overdue investments, the on-the-ground dynamic is very frustrating. I work in economic development in a state hard hit by this recession. There are bold and innovative plans which are being stymied by the contentiousness wrought by mid-level bureaucrats jockeying for political position and attempting to maintain their organizational relevance.
September 18th, 2009 at 9:44 am
From my perspective in the federal hierarchy, I would say it is true that we are beginning to see the investment side of the ARRA funding start to come through… so with respect to at least the one fed agency I have knowledge of, Michael is correct. Furthermore, I think he is also correct in implying that capital investments (particularly human) will likely have longer lasting and larger impacts than propping up consumer spending, although the jury is still out there.
sm2… you’re right as well. A lot is expected of state-level agencies without adequate staff given the budget situation. So all in all, most states are performing quite well (while admittedly some are performing not so well).
That said, the agency I have knowledge of has expended about 217 million ARRA dollars on various initiative through June, with actual on the ground expenditures beginning in the Jan-Mar quarter, which is actually less than the 90 days. So buzzcut’s comment is rather inaccurate, especially given the fact that ARRA was passed in February, about 7 months ago, not 9.
So, what I gather thus far sort of confirms the arguments presented at the beginning of the debate over how to stimulate the economy. That being… the federal expenditure rout would take longer but the money would be spent for certain. With tax cuts, while they may get out there faster (that is even debatable), there was no way to ensure they would be spent into the economy rather than saved or used to pay down some sort of debt.
Finally, I don’t think we yet know for certain which type of stimulus works better. Additionally, I think it’s still to early to gauge the impact of the “investment” side of the ARRA expenditures because the ball is only just now starting to roll.
September 18th, 2009 at 10:18 am
RS- very good points, especially related to the time frame of ARRA investments. I believe the Romer paper stated implicitly that the time frame for potential impacts from ARRA funding would more likely be seen closer to the 18 month mark, especially related to the ubiquitous employment measures.
It takes a great deal of time to get these types of federal investments rolling. To argue that ARRA investments aren’t working- especially at this juncture and with any level of fiscal accountabilty included- is disingenuous and naive at best.
September 18th, 2009 at 2:36 pm
So buzzcut’s comment is rather inaccurate, especially given the fact that ARRA was passed in February, about 7 months ago, not 9.
Micheal said that, in his example, the grants were going to be awared this fall. That’s 9 months.
Regarding your other example, good for them. Care to do a histogram showing the timing of these grants? Care to bet how many hit the 90 day mark that was in the law?
Now, you can make all kinds of excuses for why they didn’t hit their benchmarks (oh, woe is the lonely, underappreciated bureacrat). But the whole point of stimulus is to be quick.
There is no question that the tax rebates in ‘01 and ‘03 had a much quicker impact than this stimulus. Now, you can argue that the rebates were a flash in the pan, and the stimulus will be more long lasting, which I agree to be true.
But the slow ramp up is such that I’m questioning the need for all this spending moving forward. At least, the need from a stimulus perspective. The economy seems to be recovering without much, if any, additional stimulus (keep in mind that, with progressive taxation and various relief programs, we automatically got a HUGE stimulus this year, that’s why the deficit is so frighteningly large).
As for the effacacy of rebates, rebuilding balance sheets is exactly what consumers are doing, so why is it a bad thing to help them? Once the balance sheets are rebuilt, the spending restarts. In some small way, that’s already happening. Rebates may have helped it happen sooner.
September 18th, 2009 at 6:37 pm
I was talking to a neighbor who’s a Oregon health Sciences University researcher and so is his wife (she was just inducted into the National Academy of Science). They’re both grant reviewers for the National Institutes for Health (NIH) and he says NIH is overwhelmed and having a hard time recruiting enough reviewers.
This spring I wrote three grants to SAMHSA (Substance Abuse & Mental Health Administration) for different agencies. The first one had an April deadline. None have gotten responses and when one agency called to inquire they were told SAMHSA is way behind schedule.
I imagine this is the same story for most federal agencies. The game changed last November and everyone is still adjusting.
My understanding is that the 90 day mark Buzzcut refers to was for the first money — the tax cuts ($62 billion so far) and direct payments to states, which I think began well within the 90 days. But I think the ARRA act planned for the entire process to take a couple of years. True, some of it has been slower than Congress anticipated because of agency bureaucracy.
What I’m more interested in is the longer term impacts. Nothing wrong with people using their tax cuts to pay off debt, and longer term saving is essential. But the infrastructure, new research labs, new energy sources like wind & solar, people trained for tomorrow’s jobs, these are where the payoff will be.
From a stimulus standpoint, getting money into construction jobs when unemployment is over 10% and banks still aren’t lending is still necessary. If the construction is things that help the country like transit or university labs, rather than bubble-fueled condo towers, its a better use of money. Not just stimulus for its own sake, but building a better nation.
September 19th, 2009 at 8:55 pm
This week’s Portland Business Journal reports the City is getting ready to spend $58 million of stimulus funds on streets, police, etc. The same story says that Oregon received $17 million for forest restoration and fire prevention. The story says “cities must file reams of federal paperwork before they can receive stimulus money” and must establish separate financial reporting systems for the funds.
This is either cumbersome federal bureaucracy or safeguarding taxpayers money, depending on who you ask. But the money is getting out the door.
September 20th, 2009 at 7:37 pm
sm2,
Regarding your comment on nonprofits “some of the NPO’s set to receive substantial ARRA funds just don’t have the capacity to handle such large sums- how can we expect an organization with yearly revenue’s of 250K be expected to handle several million this year without support?”
Absolutely right. Most small organizations shouldn’t consider entering the bureaucratic meatgrinder of federal grants. I wouldn’t advise any group that’s not large enough to have a professional CFO with experience managing restricted funds, plus good systems for tracking program performance, to get into government funded programs. This usually requires a threshold of at least a couple million annual budget and a decade of history.
This was my objection to the “Faith-Based Initiative”. While many social services are provided by faith-based groups (Catholic Charities, Volunteers of America, Salvation Army, etc.) they’re large and sophisticated enough to handle contract compliance. But most of the smaller church groups I’ve worked with are used to unrestricted donations and minimal oversight, and would be eaten alive by federal grant requirements.
I hope the ARRA doesn’t open the floodgates to lots of smaller organizations and sink them.
September 21st, 2009 at 12:41 pm
It is truly American, in that we view everything by the standards of the market, when the rest of the world tends to look at everything with a more complicated manner. When we look at something like the stimulus in the same way Wall Street looks at things, we are going to end comparing apples with oranges. The stimulus will look like a failure because its goal is limited to immediate results. Actors in the private sector operate on a time frame that is much shorter, and have goals that are totally different than the public sector. Companies are evaluated on a quarter to quarter basis, sometimes even on a shorter basis, and is their priority is to maximize efficiency.
Government does not run on that basis, because the government has obligations to a wider constituency than the market. Also it works on a much different time frame. Sure politicians think ahead only 2-6 years. However, most government agencies are operated with people who have long term goals. Especially in scientific research, researchers can explore different ideas for as much as 30-40 years. There is more to the federal government than the stereotypical paper shuffler.
The stimulus have several objectives, not only to create immediate jobs. But also restructure the economy in order to make it more adaptive in the future.