I think the ARRA, the “stimulus package” that was enacted in 2009, was poorly conceived and poorly executed but I don’t want to get into the food fight over whether the timing of spending was deliberately structured for political reasons. Political reasons which seem pretty incoherent to me at that.
I have a question about this statement from the Washington Post’s fact check (lnked above):
Meanwhile, the Obama administration’s recovery.com Web site, which is still updated, also reports that much of the stimulus money has been allocated — $840 billion, to be exact.
There are a number of words that have similar but subtly different meanings. Here are a few:
- appropriated
- allocated
- budgeted
- spent
- disbursed
Let’s assume, arguendo, that the Post means “allocated” rather than, say, disbursed. What is the effect of allocation on aggregate demand?
WaPo is repeating what the administration’s website states: funds allocated. That website IIRC used to break-down the process in about three steps, but I can’t find it now. It seems like it was allocated or appropriated, then disbursed to state/local government, and finally spent.
I’d say very minimal stimuli from allocation. There probably are businesses that might modify their behavior with the expectation of some local project that has been approved, but that itself would be tempered by the knowledge that most of these projects were finite in duration anyway.
Here’s what I think. I think there is probably a very small effect when the money is appropriated and another very small effect when it’s allocated, each due to the credit implications. However, I believe that most of the effect won’t be seen until the money is spent.
That renders marking when the money is allocated a bit of sleight of hand, of misdirection. Now I really want to know when the money was actually spent. The ARRA may have been even less competent than I thought.
1/3 of the ARRA was tax cuts. Spent and disbursed would not seem to apply.
Steve