As I watched yesterday evening’s 10:00 news this item caught my eye:
June 16, 2010 (CHICAGO) (WLS) — The I-Team has found billions of state dollars gathering dust, even as Illinois claims to be broke and has one of the nation’s highest jobless rates.
The billions in unused funds – $2.5 billion – are part of a massive, year-old Illinois Jobs Now! Program. The I-Team’s findings may lead you to ask: “My money is where?”
It is money that the state budget office tells the I-Team could put people to work on projects that have already been approved, but money that government agencies haven’t bothered to pick up.
“The best social program is a J-O-B, a job. And that’s what we believe in. We want people to work!” said Gov. Pat Quinn in July of 2009.
Surrounded by leaders including Mayor Daley, Gov. Quinn signed a $31 billion economic recovery plan last summer that was to create 439,000 jobs.
State budget records, however, reveal that 70 percent of the money allocated for the first year is still unused, surprising even the Illinois budget director.
“That’s my attitude exactly, what’s the hold up?” said David Vaught, Illinois budget director.
Some of the money is being spent, most notably on road projects including on the Eisenhower Expressway. But thousands of additional jobs that could be filled for this summer, haven’t been – and the money is just sitting.
I believe I have an explanation for the inability to spend appropriated funds that seems to puzzle the ABC reporters and state officials so much.
At least here in Illinois the state government works with approved vendors and, presumably, bids for projects include delivery requirements and, possibly, penalties for failure to meet requirements. Those factors taken together virtually assure that the handful of connected vendors will traffic available projects at the pace at which they can execute them which, in turn, guarantees that the stimulus provided by spending will be negligible. Essentially, money can only be spent at a fixed rate, it’s already being spent at that rate, no increase is possible and, consequently, no jobs will be created however much money is appropriated. However, the cash flow for those connected vendors is assured now and into the future.
If that’s the case, it’s as I’ve been saying for a year and a half now this isn’t the 1930’s. States don’t round up unemployed men loitering in the city parks, give them shovels, start building roads, and pay them at the end of the day. Modern bureaucracy tends to reduce the Keynesian multiplier from spending to zero.
The question is not whether hypothetical spending in an optimal rate on optimal projects could result in increased growth and employment. The question is whether real spending at the actual rate on projects that will actually get approved will result in enough growth to justify the backend costs.
I’d welcome other explanations. Another explanation, for example, would be simple incompetence. I don’t see that incompetence is a particularly good argument in favor of Keynesian stimulus, either.
IIRC the feds rejected a chunk of Illinos proposed projects because the feds had determined that the state did not have enough public employees to oversee all of those projects at once. I am betting there were ultimately too many projects approved anyway.
The bottlenecks are probably at every stage, including wet weather.
BTW/ I drive by two Obama stimulus projects on my ten minute commute to work. One involves digging up an entire city block’s streets and sidewalks to replace it with more “historic” brick features. On that block, the restaurants, shops and offices are inaccessible. I assume that some compensation is given to the owners, but that’s a lot of commercial activity that has been stopped.
Keynesian multipliers probably worked wonderfully – in Keynes time. Now we’re pretty much infrastructured. Building the first trans-continental highway has a high multiplier no matter when you build it, but fixing a bridge to cut a mile off someone’s commute probably doesn’t. At this point tax cuts – as a Keynesian DEMAND booster- and unemployment benefits are probably the best bang for the buck. Or fast tracking nuclear reactors.
Or revamping the electricity grid of you want a stimulus. My other thought, besides your two, and I generally favor incompetence, is that people were very aware that spending would be watched closely and wanted to stay safe with vetted firms. Sending some of that to a new firm would risk scandal, which would play poorly in the press.
Steve