The NYT presented a somewhat confused discussion of the stimulus bill passed by the House today. For example, it told readers that: "the bill would also create a $79 billion state fiscal stabilization fund, disbursing half the money in late 2009 and half in late 2010. The Congressional Budget Office has estimated that little of that money would be spent this year." Hmmm, should we be worried that little of this stabilization fund will be spent in fiscal 2009 (before October 1)? Right now state and local governments are preparing massive cutbacks in services and payrolls based on huge projected budget deficits. The day this bill is signed into law, these governments know that they will have access to this $79 billion fund. This means that they do not have to start cutting back services and lay off workers. They may not literally tap the funds immediately, but the impact on their spending and employment should be almost immediate. Later the article discusses the prospect that some of the infrastructure will not be well-spent, commenting: "then there is the risk that the projects themselves have little or no long-term economic value and simply drive up the budget deficit." There is a risk that any government spending, or tax cuts, will have little long-term economic and therefore "simply drive up the budget deficit." (The tax cut in this bill that allows businesses to write-off losses against taxes paid up to six years ago, might fit this category.) There is no obvious reason that infrastructure spending should raise this concern more than any other item in this bill.
--Dean Baker
