TheLoop21.com

By: Alyssa Giachino (Add to your loop)
Wed, 01/20/2010 - 08:56

Federal stimulus money has gone toward infrastructure projects.

Also see our stories on jobs, health care and more ...

The $787 billion stimulus package has been trashed as a vehicle for political pork, and criticized for being either too big or too small. As it continues to roll out, there is a growing consensus that its impact has been positive, with plenty of room for criticism.

When the American Recovery and Reinvestment Act was enacted last February, pushed by the Obama administration, and purported to inject money immediately into the economy to counteract our plummet into the abyss.

Now that the program has been running for nearly a year, there’s enough data to assess the impact beyond the anecdotal -- and plenty of jockeying on the numbers.

Last week, the President’s Council of Economic advisors released its report on the impact, so far. The $263 billion in stimulus funds sent out so far have boosted employment by 1.5 million to 2 million jobs. It contributed to the growth of the Gross Domestic Product by 3 or 4 percent in the third quarter of 2009, and 1.5 to 3 points in the fourth quarter.

That means the official unemployment rate would have been worse without the stimulus, up to 11.2 percent instead of 10 percent, according to the Daily Kos.

The report was immediately criticized for excessive optimism, but the non-partisan Congressional Budget Office has also concluded a net positive impact from the stimulus.

The CBO calculated in November that the stimulus had boosted GDP up to 3.2 percent and the unemployment rate pushed down by up to 0.9 percentage points, keeping between 600,000 and 1.6 million people in the workforce who otherwise would have been out of luck.

Much of the funding has been directed toward tax cuts, extending unemployment insurance, and government food assistance programs. Although it’s a small piece, the most tangible part of the stimulus has been the money dedicated to infrastructure.

As soon as the program was announced, states piled on to declare their infrastructure projects the most “shovel ready,” where real people could be put to work within weeks or months. Of course, the reality proved more complex.

The government has been torn between expediting project approval to jump start the economy, and thoroughly vetting projects to weed out corruption and pork. It’s had mixed success.

ProPublica has found examples of multi-million dollar contracts awarded to contractors with a history of bribing public officials or companies under criminal investigation.

When there’s money to be had, some degree of corruption is inevitable. We must rely on the government’s internal mechanisms for reviewing and verifying contracts, which are not always efficient or timely. For more immediate exposures of corruption, we to count on the investigative work of journalists, like those at ProPublica, who have uncovered schemes.

While rooting out bad apples is essential, the degree of corruption probably isn’t enough to taint the entire stimulus package.

But an analysis by the Associated Press looked at the first $20 billion spent on infrastructure projects and found they had no effect on local employment rates, dampening enthusiasm about the stimulus.

Economists interviewed for the story saw little short-term impact, but said the country will enjoy long-term payoffs from improved infrastructure.

The stimulus itself is a lumbering beast, too large to easily track and cumbersome to direct. But our beastly economy dwarfs it in size, even in its current emaciated state. If the stimulus’s best efforts manage to blunt unemployment by a point or two, the millions of jobs saved are certainly better than no stimulus at all.

Alyssa Giachino is an economics writer for TheLoop21.com. She has worked as a reporter in New York, New Jersey, Mexico City and California covering stories on labor, the environment, immigration and politics.

Also see our stories on jobs, health care and more ...

Will Obama's $3.8 trillion budget work?

Yes, if we stick to it

No, it's unrealistic

I'm not sure

Maybe, but we'll give up a lot