The slow-mo­tion stim­u­lus

Los Angeles Times - - Opinion -

With the econ­omy still sput­ter­ing more than a year af­ter the of­fi­cial end of the re­ces­sion, some econ­o­mists are ques­tion­ing not only the size and com­po­si­tion of the $787-bil­lion stim­u­lus pack­age that Congress ap­proved in 2009, but the eco­nomic the­ory be­hind it. New re­ports by two Cal­i­for­nia watchdogs, how­ever, sug­gest an­other fac­tor in the mea­sure’s limited ef­fec­tive­ness: bureau­cratic quick­sand that stops lo­cal gov­ern­ments from do­ing any­thing with alacrity.

Two re­ports is­sued last week by Los An­ge­les City Con­troller Wendy Greuel found that the de­part­ments of Pub­lic Works and Trans­porta­tion moved so slowly to spend $111mil­lion in fed­eral grant money that they had cre­ated or saved only 55 jobs — most of them on pub­lic pay­rolls. The con­struc­tion projects and bus pur­chases fi­nanced by the grants should even­tu­ally sup­port more than 200 ad­di­tional jobs, Greuel said, but the red tape the city rou­tinely im­poses pre­vented the de­part­ments from act­ing quickly.

The re­sponse City Ad­min­is­tra­tive Of­fi­cer Miguel San­tana gave The Times was telling. The city had cre­ated 936 jobs in June with the grants re­ceived by mul­ti­ple agen­cies, San­tana claimed, adding: “And we’ve only spent 13% of what we’ve re­ceived.” In other words, seven out of eight dol­lars sent to Los An­ge­les to stim­u­late the lo­cal econ­omy are sit­ting idle, stim­u­lat­ing noth­ing.

The city has a long his­tory of stum­bling at op­por­tu­nity’s door­way — wit­ness, as just one ex­am­ple, how of­fi­cials botched their bid for hun­dreds of mil­lions of dol­lars in fed­eral sub­si­dies for ur­ban re­newal in 1994. But Los An­ge­les is hardly unique in its in­abil­ity to take max­i­mum ad­van­tage of the stim­u­lus.

On Mon­day, state In­spec­tor Gen­eral Laura Chick re­leased her 22nd re­port on how stim­u­lus funds are be­ing spent through­out Cal­i­for­nia, ex­am­in­ing what San Bernardino County had done with nearly $3.6 bil­lion in fed­eral aid to help put poor res­i­dents to work. Chick found that the county had spent lit­tle more than one­fourth of the money by the end of March, de­spite the risk that any un­spent funds would have to be re­turned at the end of this month. The pro­gram’s di­rec­tor blamed pa­per­work de­lays in Sacra­mento and Washington, as well as a lack of de­mand by pri­vate em­ploy­ers for work­ers even if their wages were sub­si­dized by the county. But those ex­cuses rang hol­low with Chick, who said the county had all the tools needed to max­i­mize the use of the fed­eral dol­lars rapidly. And with 14.3% un­em­ploy­ment in the county, there was no ex­cuse to hold back.

Sim­i­lar bureau­cratic tan­gles have held up bil­lions of dol­lars in stim­u­lus projects across the coun­try, in­clud­ing grants for build­ing high-speed rail lines and mak­ing build­ings more en­ergy ef­fi­cient. Ac­cord­ing to the Obama ad­min­is­tra­tion, of the $202 bil­lion in stim­u­lus dol­l­lars awarded by March 31, only $61 bil­lion had made it into the hands of grant re­cip­i­ents. In Cal­i­for­nia the ra­tio was a bit bet­ter, with $23.4 bil­lion awarded but only $10.8 bil­lion re­ceived.

The de­lays in spend­ing de­feat the pur­pose of the stim­u­lus. The point of the Amer­i­can Re­cov­ery and Rein­vest­ment Act of 2009 was to coun­ter­act dwin­dling spend­ing by con­sumers and busi­nesses with a surge of spend­ing by govern­ment, with the money flow­ing to state and lo­cal grantees over three years. The­o­ret­i­cally, the grants would keep more peo­ple work­ing while the econ­omy re­bounded. But it’s vi­tal that the money be spent soon af­ter it’s awarded; oth­er­wise, the surge be­comes a trickle that has lit­tle im­pact.

Ad­mit­tedly, there is a con­flict be­tween mov­ing quickly and pro­tect­ing against waste and fraud. But the re­sults here and in San Bernardino County il­lus­trate what hap­pens when the or­di­nary mech­a­nisms of lo­cal govern­ment are ap­plied to a pro­gram de­signed for ex­tra­or­di­nary cir­cum­stances. Greuel notes that the Trans­porta­tion Depart­ment waited to seek bids on four high­way projects seven months or more af­ter they were au­tho­rized by state and fed­eral au­thor­i­ties. As she del­i­cately put it, “The depart­ment’s typ­i­cal con­tract­ing pro­cesses, which fol­low a stan­dard frame­work to com­ply with es­tab­lished fed­eral, state and city poli­cies, may not be the best ap­proach to en­sure that ARRA projects have an im­me­di­ate im­pact on lo­cal econ­omy.”

An­a­lysts prob­a­bly will de­bate for years how much of a spark, if any, the Re­cov­ery Act gave the econ­omy. As the re­ports by Greuel and Chick make clear, though, the ben­e­fits have been di­min­ished in some com­mu­ni­ties by a lack of ur­gency on the part of lo­cal of­fi­cials. There’s not much point in giv­ing city agen­cies ex­tra re­sources dur­ing a down­turn if they don’t have the re­source­ful­ness to put them swiftly to work.

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