Stimulus: $16 Billion in Federal Funds Begin Arriving
Source: Northeast Pennsylvania Business Journal – June 2009
By: Dave Gardner
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Pennsylvania stands ready to be stimulated. The state is currently scheduled to receive approximately $16 billion from the $787 billion American Recovery and Reinvestment Act. Through competitive grants and formula-driven funding, public arenas such as health care, education, infrastructure, job training and economic development are due for a hefty financial boost.
Lackawanna County alone has prepared more than $300 million of ready-to-go projects and is actively looking for ways to obtain funding from the Recovery Act for these wherever possible. PennDOT’s Region Four is scheduled to receive $72 million for highway updates in NEPA.
Predictably, analysis of the Recovery Act and predictions for its long-term consequences are varied.
Vasiliki Anastasakos, Ph.D., assistant professor of political science at the Monroe Campus at Northampton Community College, says that the United States is weathering an unprecedented financial crisis surpassed only by the Great Depression. She states that Washington was obligated to make a grand attempt at economic stimulation, despite the fact that the funds will eventually have to be repaid to international lenders.
“The stimulus package is one method that should be tried, but it’s not the only possibility to help the ailing economy,” says Dr. Anastasakos. “The funding will help the credit liquidity crisis and give the public confidence that the government is focused and trying to fix the economy, resulting in a vital increase to consumer confidence. However, this stimulation is not a long-term fix, which President Obama has emphasized, and we need other types of solutions for effective change.”
Dr. Anastasakos expects the Recovery Act to achieve a varied report card when the success of the program is eventually assessed.
The larger structural problems within the national economy that caused the downturn are of a greater concern to Dr. Anastasakos. She says that public demand for an outdated standard of living actually caused the crisis.
“Our problems actually can be traced back to the 1970s with growing oil imports and the spikes in crude oil prices,” explains Dr. Anastasakos. “We also began to suffer from a growing loss of American industrial competitiveness in the global economy. These problems all kept building, but we maintained the prosperous lifestyle of the post World War II boom by borrowing. The politicians avoided tough decisions with these growing deficits . . . but now we’re paying the price.”
Dr. Anastasakos believes the crisis will force changes in living and spending habits, and family savings will once again be in vogue. “This mass cultural change with less personal spending must precede any government spending cutbacks,” she says.
Overdue assistance
Rich Overmoyer, principal with PSP Consulting Corporation, says that the United States had no choice but to borrow billions of dollars to try to jump-start the economy. He also comments that many technological areas have suffered from limited funding, such as the National Science Foundation and National Institute of Health, and these organizations are now receiving dollars that will extend America’s global competitiveness in science and renewable energy.
“The stimulus program favors long-term projects, and the process has been complex but remarkably transparent,” says Overmoyer. “Most of the money has not yet been spent, and this is creating a tidal wave of opportunity across the country. The downside is that the totals are staggering, and some government agency funding will go from $10 million to $10 billion. The question is how to get the money effectively dispersed with the same funding mechanisms in place.”
Another piece of news delivered by Overmoyer is that no international condemnation has occurred regarding the Recovery Act’s borrowing. He says nations around the world are hoping that the flow of money will revive the global economy, with virtually all governments now borrowing as necessary.
Vital areas of the Recovery Act identified by Overmoyer include renewable energy, the infrastructure, plus healthcare and education. He states that school revenue losses are overdue to be fixed, with existing mandates such as No Child Left Behind seriously taxing the budgets of America’s schools.
The global implications with poor investments and huge debt are staggering if the Recovery Act fails to stimulate the American economy, according to Overmoyer. “This failure would change life’s dynamics for our children regarding their work, educations and standard of living,” he warns.
Complex legislation
Richard W. Evans, CEO of the Community Greenhouse Foundation, describes how the Recovery Act is more than 1,000 pages long and extremely complicated. He says some new spending provisions are included in the legislation, while others tie together segments of spending that have been in place for 10 years. Evans warns that government has historically been inefficient at channeling money to the American street.
“Release of many of the stimulus funds is still an unknown, and regionally the politicians must fight for the dollars that run through the state governments,” says Evans. “Some entitlements or formulas are being used for cities, but other dollars are available through a competitive grant process. The written grants needed to obtain this money can be complex, and therefore regions must utilize the cooperation of the cities, counties and the private sector.”
Evans says more than 99 percent of American cities and counties don’t have the manpower or expertise to write the applicable stimulus grants. However, bigger cities do have the resources, and he cites the example of Fort Lauderdale, where 10 grant writers are at work.
Another key to grabbing stimulus dollars, according to Evans, is for public and private partnerships to leave their egos “at the door” and then create win-win situations for everyone involved. Funds must spread out among many targets, and link new jobs to funding. “The Stimulus Act can have a use-it-or-lose-it clause,” adds Evans. “Municipalities must move quickly, but I’m afraid that most cities and counties are not geared for a quick response.”
Unknowns
Ron Wince, CEO of Guidon Performance Solutions, voices concerns that no one really knows where many facets of the huge stimulus package are being spent. He says that, like the federal bank bailout before it, the legislation is filled with compounded unknowns because governments are not designed for huge influxes of money.
“I have concerns about the rush to judgment to spend the funds,” says Wince. “Government agencies will have to make up the processes as they go along, and these actions should attack value-added priorities. This is where the act’s transparency will be important to expose gluts of money.”
In the event the public judges the Stimulus Act to be a failure, Wince says a backlash is inevitable. He believes the electronic media will amplify the anger, while a reality check will indicate a track record of successes and setbacks, with a variety of gray areas.
Pork laden
Nate Benefield, director of policy research with the Commonwealth Foundation, calls the legislation a big pork-laden program that will channel funding to special interest groups.
“During the credit crisis in the fall of 2008, we advocated some economic relief with tax cuts, particularly with capital gains and dividends,” says Benefield. “That would be real stimulus for the economy.”
He also describes how China has been hard-hit by the global recession, creating questions about whether there is enough money left in Asia to keep supporting America’s deficit spending.
“The argument will be that things would be worse if we didn’t borrow the money for the stimulus, and the payments will add to our massive federal debt,” says Benefield. “Washington’s answer will be to just print more money.”
All contents © 2009 Northeast Pennsylvania Business Journal. All Rights Reserved.
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