http://www.signonsandiego.com/news/2011/feb/20/was-stimulus-worth-cost/
Was stimulus worth the cost?
President vowed to create jobs with $787 billion, but forestalling state and local jobs cuts may have been its biggest impact
SUNDAY, FEBRUARY 20, 2011 AT 12:01 A.M.
San Diego’s share of the funding
$973 million
Construction & road projects
Military and road projects slowed – but didn’t stop – construction layoffs.
$420 million
Education
Fed funds helped hundreds of teachers keep jobs, but state cuts may put the jobs at risk.
$387 million
Research & development
UCSD and Scripps won funding but spent most on equipment.
$96 million
Energy projects
Retrofits create some jobs but best hope is to build an industry for the future.
$48 million
Job training
Without enough jobs for trainees, some workers waited in school for better times.
During the two years sincePresident Barack Obama unveiled his $787 billion federal stimulus program, nearly $2.4 billion in stimulus funding has flowed intoSan Diego County, paying for military barracks, health care clinics, solar panels, teachers’ salaries, freeway extensions, road repairs and lab research.
Despite that funding, San Diego’s jobless rate has remained in the double digits for the past 19 months and the county has 74,400 fewer jobs than it had when the stimulus was created.
So was the funding worth it? It depends on who you ask.
No, says Rep. Darrell Issa, R-Vista, one of the administration’s most ardent critics on Capitol Hill. In a column in the Financial Times this month, Issa said it had “woefully failed to reach each of its self-imposed targets” and described it as “a mistake America must never allow to happen again.”
Hold on, says Josh Bivens, economist at the liberal Economic Policy Institute in Washington, D.C. If it weren’t for the stimulus, the jobless rate would certainly be higher than it is today, Bivens says. And the jobless rate will likely start rising again this year, if Capitol Hill allows stimulus programs to expire.
For Marney Cox, economist with the San Diego Association of Governments, the truth lies somewhere in between.
Yes, he says, the stimulus did create some jobs and helped get cash circulating through the economy again. But he adds that the package did not do nearly as well as it could have, since it was laden with programs that lacked the “multiplier effect” needed to stimulate the economy.
To be effective, Cox says, government funds have to create a ripple effect so that every dollar that is spent has more than a dollar’s worth of impact by encouraging more private spending or investment. But Cox says many stimulus programs had less than a dollar’s impact, especially in the short term.
Nationwide, $288 billion of the federal stimulus program was composed of tax cuts. But Cox says that even though those cuts may be good for long-term growth, in the short term it is doubtful that they created many jobs. During recessions, people tend to save their money or repay their debts rather than spend.
An additional $224 billion went to unemployment and poverty programs, led by an extension of jobless benefits from 26 weeks to 99 weeks. Some economists say the extension has acted as a stimulus by giving jobless workers enough money to pay their rent and buy goods and services that they otherwise couldn’t afford.
Cox disagrees. “It’s not that unemployment (insurance) is a bad thing,” he said, “but it’s not a stimulus program. With those payments, at best you’re creating a backstop to reduce the number of jobs that might be lost, but you’re not creating new jobs.”
So out of the entire stimulus package, only $275 billion was used for loans, grants and contracts that were specifically designed to create or preserve jobs. And because of the amount of time it takes to plan federal projects, only 7 percent of that money was spent in 2009 as employment soared. Once the funding kicked in early last year, the jobless rate began to come down, but even now $95 billion has not been allocated.
“Some of the disappointment with the stimulus comes from the reality that some of the infrastructure projects take a while, with environmental reviews, the procurement process, sending out requests for proposal and ensuring that everything meets government requirements,” Cox said. “It’s hard to call something a stimulus program if it takes two years to get off the ground.”
What follows is a look at how that money was spent locally.
Cushioning state cutbacks
Much of the stimulus spending in San Diego County was designed to make up for cutbacks in state and local funding, including $420 million that went to schools; $64 million to police and fire departments, courts and legal services; and $59 million to clinics and social service agencies.
Before the federal funds came in, schools were handing out pink slips to teachers throughout the county. It is estimated that the stimulus helped save the jobs of hundreds of teachers. But now that the federal funds have been spent and the state budget remains deep in the red, teachers are gearing up for the layoffs and cuts to begin in earnest.
“It’s really hard to imagine how things would have happened without the stimulus money, which was used for backfilling teachers,” said Candy Smiley, president of Poway Federation of Teachers. “Even with the stimulus, we’ve reduced our teaching staff, frozen spending and cut programs, and now have some of the highest class sizes in California. We’re very fortunate in Poway to have a real strong community of businesses and parents. And the parents have been donating money for programs they care about.”
Smiley said the Poway Unified School District, which received $15 million in stimulus funding, has been able to save enough money to stay relatively stable through next year. But after that, she warned, it could “fall off the ledge” without an increase in funding. “We’re just not going to be able to provide the kind of education and services we have in the past — and I think that’s true of schools throughout the state,” she said.
In a column in The New York Times last week, Nobel Prize-winning columnist Paul Krugman complained that the impact of the stimulus had been blunted because so much of it had been used to plug in state and local funding gaps. “The stimulus can’t have failed, because it never happened,” he wrote. “Once you take state and local cutbacks into account, there was no surge of government spending.”
Construction
Locally, $308 million was spent on road building and repair and roughly $665 million on construction and related costs. But those projects consisted largely of road-building and repair programs that had been stymied by budget cuts, as well as long-planned construction at military bases, including a hospital and new barracks at Camp Pendleton and child care centers in Point Loma and Coronado.
Ken Simonson, economist at the Associated General Contractors of America, says that without such infrastructure programs, the jobless rate in construction — currently at 22 percent nationwide — would be much worse than it is. “The stimulus propped up many construction jobs during the past two years,” he said.
Since the construction programs really began kicking into action in the late summer of 2009, construction layoffs have slowed sharply in San Diego. In the 16 months since September 2009, 3,000 construction jobs have been lost in San Diego County. But that’s an improvement over the 17,300 construction jobs lost during the previous 16 months.
Research and development
Nearly $387 million of stimulus funds was targeted at local research laboratories, led by $177 million to UC San Diego and $81 million to the Scripps Research Institute. The funding covers such diverse projects as studying stem cells, DNA, HIV and lung cancer. But the research is not labor-intensive, and the bulk of the money is spent on state-of-the-art equipment, blunting its impact on employment.
Energy
More than $96 million went to energy projects, mostly through block grants to help cities retrofit government buildings to be more energy-efficient. But despite a wide variety of tax breaks for solar paneling and energy-efficiency measures, retrofitting hasn’t caught on as much as hoped in the private sector, partly because recession-shocked businesses and consumers are still reluctant to spend money. And that means job creation is still slow.
“There’s some frustration that there wasn’t an immediate pick-me-up from the stimulus spending,” said Andrew McAllister, program director of the California Center for Sustainable Energy in San Diego. “For energy programs, I think the near-term impact has been good, but it hasn’t been really visible to the public. The biggest impact will be in the long term. We’re developing professional workers and infrastructure that can help position San Diego for future growth in this area.”
Small-business loans
San Diego’s CDC Small Business Finance Corp. received $1.1 million in stimulus funds to extend microloans — ranging between $20,000 and $50,000 — to small businesses throughout Southern California. In the fourth quarter, the CDC loaned out $180,000 to entities that included the Big Tree Little Preschool, Food Farm, The Transfer Answer and Herbs N’ Nutrition. CDC — one of the nation’s largest SBA lenders — estimates that the money helped create 12 jobs and preserve nine others, which is good news for those companies but does not have an effect on the jobless rate.
Job training
The stimulus program included $48 million in funding for job training programs. San Diego’s Workforce Partnership was one of the biggest recipients of training funds, with $10 million aimed at training and placement for teenagers for summer jobs and $13 million at training adults. But one problem that the agency faced was that until recently, there weren’t enough jobs available for graduates of the programs. Working with 21 local colleges and universities, the agency has been placing many of jobless workers into education programs so they will be well-trained once hiring begins to ramp up.
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