Stimulus: Where's the $787 Billion?

Administration officials insist that it takes time to dole out money properly, which explains why so little has been spent so far

By Theo Francis and Elise Craig

Call it the $787 billion question: Where is all that government stimulus money, and why hasn't it stemmed the heart-stopping slide in U.S. employment?

The stimulus plan was all about jobs, after all. Key Obama Administration officials pledged to save or create between 3 million and 4 million jobs with the measure. But the federal government's employment figures on July 2 clocked in worse that expected, with job losses lurching to 467,000 in June and the unemployment rate reaching its worst showing since 1983, at 9.5%; many expect it to rise further still. Public confidence in the stimulus plan is slipping and over the weekend, Vice-President Joe Biden suggested another stimulus plan is possible, something of a shift from Obama's position just two weeks ago that more spending isn't yet called for.

Yet analysts and federal contracting experts say that, in many ways, stimulus spending is going about as quickly as expected. Dispensing billions of dollars, it turns out, simply takes time, particularly given government contracting rules and the fact that much of federal spending is funneled through the states. Moreover, some spending was intentionally spread out over several years, and other projects are fundamentally more long-term in nature. "There are real constraints—physical, legal, and then just the process of how fast you can commit funds," says George Guess, co-director of the Center for Public Finance Research at American University's School of Public Affairs. "It's the way it works in a decentralized democracy, and that's what we're stuck with."

Certainly, based on key numbers, it looks as if the five-month-old spending legislation has been slow to unfold. Onvia (ONVI), a Seattle company that tracks federal spending, estimates that some $65 billion of the $420 billion that was in the stimulus package for contract and infrastructure spending has gone out the door. Federal officials offer similar numbers, saying $60 billion of the $499 billion in total stimulus spending has been disbursed. (The remaining $288 billion consisted of tax cuts.)

"Right on Target"

But those numbers mask a lot of activity, analysts and government officials say. Onvia has identified some 18,500 specific projects covered under the legislation, and while just under 1,800 of them have had contracts awarded, another 5,000 or so have been put out to bid. For the remainder, funds have been allocated but not spent, says Michael Balsam, the company's chief solutions officer.

Ed DeSeve, senior adviser to the President for recovery and reinvestment, tells BusinessWeek that $157.7 billion has been "obligated" for projects of various kinds, roughly a third of total stimulus spending, and $43.3 billion has been distributed in tax breaks. "We think we're right on target," DeSeve says.

He also argues that it makes more sense to count funds allocated to specific projects than dollars actually spent. "When do you buy something—when you use your American Express, or when you pay your bill?" DeSeve says. "You buy it when you use your American Express." Critics of the stimulus rollout argue that what matters most is when the dollars reach the economy—the equivalent of when American Express pays the merchant.

States Slow the Process

The U.S. Transportation Dept. recently stressed that it routinely reimburses states for payments to contractors on federal infrastructure jobs, meaning work can be under way for some time before states pay contractors and seek reimbursement from the feds. Doing otherwise risks wasting federal funds by overpaying up front, the agency said on an Administration blog.

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