Mar 26 2009
Stimulus money in California
California is going to receive billions of dollars in federal stimulus money. The money is going to come into the state – approximately $85 billion – and must be spent quickly. About $50 billion will be federal funding for health care, education and other projects. The remainder, $35 billion, is expected to come into the state in the form of tax credits.
Under the plan, individuals who make $75,000 or less will receive a $400 tax credit over the next year. The credit will begin within weeks, and will appear in qualifying taxpayers’ paychecks in the form of an increase in take-home pay, about $10-$20 per paycheck.
The amount of money that is coming into the state, and the speed at which it must be spent, is creating a feeding frenzy in Sacramento. Local government, companies, state agencies and non-profits are all swooping in quickly to try and get a share of the money.
The federal government wants the state to spend the money wisely, but it also wants the state to spend the money quickly. The two concepts do not always go together.
The other problem is that applications for federal money must be submitted to the appropriate dispersing agency by March 31 – although the agencies will not make known that projects which are eligible for funding until March 30.
So this creates a quickly-wisely problem.
First of all, the state may not get all the money it is planning on. In fact, when tax payers are going to be given a credit, a wise bet to place is that the extra money will go to savings or paying down debt – not to spending. Paying down debt and saving is good for the family, and bad for the economy. What the economy needs is people to spend and buy with their money. Otherwise, the extra stimulus money doesn’t stimulate anything.
Second, by asking states to spend the money wisely, but not giving the states and other organizations enough time to know what money they can apply for, things may get missed or the wrong application may be submitted. This money is being dispersed in a haphazard way that is systematic of the way money has been handed out under this Administration. First the banks got money without oversight, and now the states are going to get money, or not get money, without the time to make sure they are getting the right money for the right things.
Lastly, quick spending doesn’t mean the best spending. Quick spending means projects get done that would otherwise be put on the backburner. It doesn’t mean that projects that need to get done will be getting done – some of those projects don’t qualify. In fact, in several counties, back roads are getting repaved because the main roads don’t qualify for stimulus money.
There should be more time in this process. Spending the money quickly doesn’t ensure any sort of turnaround. Most economists say that even if the money was spend this fiscal year, it would be almost two more years before the effect of that money will be felt. Why? Because until times are more certain, people aren’t going to buy, people are going to save….and that doesn’t stimulate anything.
