March 10, 2010 -- What started as a trickle of money into the private sector could soon be a gusher, an analysis of the status of President Obama's $787 billion stimulus plan reveals.
A roughly $200 billion chunk of stimulus money – much of it earmarked specifically for projects ranging from highway repairs to alternative energy initiatives – is only just now beginning to wind its way from government agency coffers and into the economy, and will continue to do so over the next year. Warmer weather approaching in many parts of the country, meanwhile, brings the onset of construction season, another leading factor in what appears to be a looming deluge of federal outlay.
"The stimulus did not really impact the private sector economy during its first year," said Michael Balsam, chief strategy officer for Onvia, Inc., a Seattle-based database company which operates the Recovery.org Web site that tracks the flow of stimulus dollars. "We're now, at last, seeing the money start to hit local economies," Balsam added. "The good news is, this phase has only just begun."
However, critics of the stimulus remain steadfast that the spending measures, while perhaps well intentioned, still amount to little more than a glancing blow in the steel-cage match that is America's ongoing economic struggle.
"Sure, spending a trillion dollars won't hurt the economy," said Rep. Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform. "But even if you accept that a million jobs will result, that's still a drop in the bucket compared to the tens of millions of jobs that could have been created had we employed targeted investment tax breaks for the industries that most needed it. We could have, for example, completely retooled our auto industry. It's not too late to take that approach."
Passed last February, the American Recovery and Reinvestment Act, more commonly known as the Obama stimulus package, involved three distinct categories of spending measures: tax relief ($288 billion); entitlements, such as Medicaid and Medicare, ($224 billion); and a third, catch-all category – contracts, grants and loans ($275 billion).
Private Sector Spree
It's this third category, Balsam stressed, which can most tangibly impact local economies because the money will, finally, flow from local government entities directly into private sector industries, such as construction and information technology. So far, while around 60 percent of the entire $787 billion stimulus has been spent, only about one-fourth of that $275 billion catch-all bucket had been spent as of the end of 2009.
Actual cash outlays, however, should not be confused with stimulus obligations which set up a chain of reimbursement, allowing for government contracts to be put to bid, and for workers to be hired and supplies procured. About one-half of the $275 billion has been obligated.
Meanwhile, a sizable portion of the spent chunk of grant/loan/contract money, around $80 billion, wound up going toward shoring up public sector payrolls, not job-creating projects. Among the most common uses of grant money, for example, was for education programs, including salaries of teachers in public school systems, a job-saving measure perhaps, but not necessarily the badly needed private-sector booster shot stimulus proponents have been touting.
But Onvia's analysis suggests this is all about to change.
Most of the as-yet unspent $193 billion appropriated to the contracts/grants/loans category is going to be doled out over the next 12 months, according to Onvia.
A spokeswoman for the White House confirmed that outlays for specific stimulus projects is expected to double during the first half of 2010 compared to the first half of 2009.
Onvia has identified a current pipeline of 25,500 infrastructure-related projects, partially or fully funded by approximately $90 billion in stimulus money. These are projects, such as a $90 million rail yard renovation in Bridgeport, Connecticut and a $300 million road reconstruction effort in Southern California, that have either begun thus far in 2010, or will begin by year's end, Balsam said.
In addition to infrastructure projects, there are stimulus-funded transit initiatives, such as the procurement of around $1 million worth of bus parts in Monroe, Michigan and $3 million for investments in transit security in Houston, Texas, as well as major energy initiatives, including a nearly $1 billion electricity grid modernization for Duke Energy in Charlotte, N.C.
Such projects in aggregate could create up to 900,000 jobs, Onvia estimated.
Lion's Share Heading South
Drilling further down into those 25,500 projects and estimated 900,000 jobs, Onvia's Balsam has found a number of other interesting trends:
The largest number of jobs, around 250,000, will be created by projects in the Southeast.
The infusion of stimulus dollars, whether lauded on the left or deemed negligible on the right, is likely to be well received by state authorities regardless of political affiliations. Most states are starved for cash amidst unprecedented revenue shortfalls, both for fiscal years about to conclude at the end of June, and for the following fiscal years that start in July.
The recent one-year anniversary of the Obama stimulus brought, unsurprisingly, sharply partisan assessments.
Democrats said the spending measures created and saved 2 million jobs; Republicans, pointing to unyielding unemployment, scoffed. Economists and think tanks, meanwhile, issued mediocre to favorable grades. A group of economists assembled by ABC News gave the stimulus's first year a B minus.
Not many grades were issued for stimulus expediency amidst the partisan debate over effectiveness, and far less attention has been paid to the oncoming second wave of private-sector bound bucks.
"Overall, we expect 70 percent of the entire pool of stimulus funds to be disbursed by the end of 2010," said Ed Pound, a spokesman for the federal government's Recovery Accounting and Transparency Board, tasked with overseeing stimulus money with an eye toward preventing abuses. "Relative to what one could expect from the federal government that's actually fairly quick."
While stimulus money has been slow to reach the private sector, in part owing to the usual bureaucratic inertia, a "use it or lose it" approach was specifically designed to ensure the money gets spent.
Working on the Highway
For example, around $27 billion was earmarked for departments of transportation in 50 states, said Jack Basso, director of program finance and management for the Washington, D.C.-based American Association of State Highway and Transportation Officials (AASHTO). The agencies had until June 2009 to obtain Federal Highway Administration approval for projects tied to half of their allotted stimulus funds. Projects tied to the balance of funds had to be approved by March 2.
AASHTO estimates that more than 12,000 projects so far have been funded as a result of stimulus money, impacting the income of hundreds of thousands of workers employed by state DOTs, contractors, subcontractors, as well as manufacturers of materials such as asphalt and pipes, Basso said.
"With the collapse of the housing sector, the construction industry has been flat on its back," Basso said.
"Anyone who says the stimulus isn't creating jobs should recognize that this government spending is giving the construction industry a desperately needed boost."
Countered Issa: "I still lament the stimulus as a wasted opportunity to leverage $1 trillion in a $14 trillion economy. It's like keeping the Titanic buoyant for a period of time equal to 1/14 longer than it would have."