Examiner.com
Ephemeral stimulus "spending" goal reached by last minute trickery
written by James McConnell, Chicago Economic Policy Examiner
Monday September 14, 2009
On the 200th day after the American Recovery and Reinvestment Act was passed, President Obama announced that his goal of "obligating" $225 billion out of the stimulus appropriations has been reached. How did he do it? At the eleventh hour before the deadline, the Education Department "obligated" $11 billion in grants to state education officials. The "obligation" was orchestrated on September 4, the last day of the 200 day reporting period, and represented a significant acceleration of Education Department plans to fund state and local education programs.
Why the rush? No reason other than to be able to say the goal was met. And this particular stimulus goal is fictional anyway. "Obligating" appropriated funds does nothing to speed the cash into the hands of consumers and businesses that can spend it to stimulate economic activity. You can "obligate" half a billion dollars for a two or three year construction project, but the money does not actually get spent all at once. The cash flows out a little bit each month as contractors submit billings to the government, the billings are processed, and the checks written so the contractor has cash to meet the next month's payroll and material purchases for the project. Counting "obligated" funds as money spent is the government equivalent of a payday cash loan, and we all know where those things lead.
The folks in Washington do need to spend these appropriations a lot faster if they really want to put citizens back to work, but Enron style accounting maneuvers are not an answer to the problem. Just looking at the Education Department whose heroic last second bookkeeping shenanigans produced this "win" for the Obama administration, we note that although Education has "obligated" 68% of its $100 billion in stimulus funding, it has only actually written checks for 17% of the dough. Figures don't lie ....
Ephemeral stimulus "spending" goal reached by last minute trickery
written by James McConnell, Chicago Economic Policy Examiner
Monday September 14, 2009
On the 200th day after the American Recovery and Reinvestment Act was passed, President Obama announced that his goal of "obligating" $225 billion out of the stimulus appropriations has been reached. How did he do it? At the eleventh hour before the deadline, the Education Department "obligated" $11 billion in grants to state education officials. The "obligation" was orchestrated on September 4, the last day of the 200 day reporting period, and represented a significant acceleration of Education Department plans to fund state and local education programs.
Why the rush? No reason other than to be able to say the goal was met. And this particular stimulus goal is fictional anyway. "Obligating" appropriated funds does nothing to speed the cash into the hands of consumers and businesses that can spend it to stimulate economic activity. You can "obligate" half a billion dollars for a two or three year construction project, but the money does not actually get spent all at once. The cash flows out a little bit each month as contractors submit billings to the government, the billings are processed, and the checks written so the contractor has cash to meet the next month's payroll and material purchases for the project. Counting "obligated" funds as money spent is the government equivalent of a payday cash loan, and we all know where those things lead.
The folks in Washington do need to spend these appropriations a lot faster if they really want to put citizens back to work, but Enron style accounting maneuvers are not an answer to the problem. Just looking at the Education Department whose heroic last second bookkeeping shenanigans produced this "win" for the Obama administration, we note that although Education has "obligated" 68% of its $100 billion in stimulus funding, it has only actually written checks for 17% of the dough. Figures don't lie ....
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