Waiting for Stimulation

By   /   January 10, 2011  /   No Comments

Andrew Henson

John W. Pope Civitas Institute

Reflecting on the economic reality in North Carolina throughout the recently-completed year of 2010 reveals some grim truths about the so-called stimulus, which should have by now long since rescued us from the depths of recession. The “recovery summer” that the president promised extended into a recovery autumn, and even now in the middle of winter we’re still waiting for that economic stimulation.

It has been nearly two years since the $800 billion American Recovery and Reinvestment Act (ARRA) took effect and the employment data still reflects how ineffective this pricey promulgation really was. While it masqueraded as a panacea, ARRA delivered short of a placebo.

The number one stated goal of ARRA, according to the stimulus’s accountability website Recovery.gov, was to create jobs. Yet unemployment in North Carolina is higher now than it was a month before the stimulus legislation passed congress in February of 2009. Recent data produced by the North Carolina Fiscal Research Division further indicates that the so-called stimulus produced no private sector job growth throughout the duration of the recession.

The only pulse in an otherwise flat-lining economic trend came in early 2010 as a temporary explosion of Census spending gave an artificial boost to government employment before dissolving again in September. In 2010 alone, North Carolina saw 938 businesses close, the overwhelming majority concentrated in manufacturing and construction industries. Nearly two years and hundreds of billions of dollars later, America should be wondering where its money went.

The stimulus’s accountability website, Recovery.org, reports that North Carolina received substantial sums of money as a result of ARRA, including: $6.5 billion in grants, $452 million in contracts, and $390 million in loans, reaching 5,807 different recipients of stimulus funds across the state. However, the immaterial influence on job growth and massive indebtedness incurred to finance this bill indicate that this program missed its mark.  This fiscal fiasco may even bring into question the entire body of thought of government as an economic stimulator, which serves as the ARRA’s conceptual roots.

What the federal stimulus did accomplish in our state, according to North Carolina’s recovery website, was to pay greater sums of Medicaid as well as dump money into a vast variety of programs such as Unemployment Insurance ($660 million), Social Security ($412 million), Food Stamps ($173 million), child care services ($56 million), and public housing ($84 million). It remains dubious how it was determined that saturating these welfare programs could result in creating new jobs. The stimulus even gave $344,000 for the promotion of the arts.

Another troubling aspect of the stimulus is the lack of accountability over the hundreds of billions of tax- payer dollars spent on sundry projects across the nation. One of the key selling points that Washington pitched to ensure ARRA passed Congress was to protect against waste and abuse by providing transparency and accountability over stimulus funds in the form of the Recovery website.  However, this website reveals a variety of instances in which recipients of ARRA funds have failed to comply with the terms in which they received their funding. Additionally, many instances exist in which the agents of enforcing compliance with ARRA conditions have shown deficiencies in internal controls that could compromise their ability to ensure total compliance among stimulus recipients. The recovery website, cites 18 cases of noncompliance in North Carolina through the third quarter of 2010.

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