Stimulus: Where's the $787 Billion?

(page 2 of 2)

Still, some basic facts of federal contracting slow the process, analysts say. Funneling federal funds through state agencies can prove slower than awarding contracts directly. Seeking competitive bids—a process that's designed to ensure the government doesn't overpay or favor select contractors—also takes time. "It's really not going all that slowly when you take into consideration just the process to spend federal money," says Clint Currie, a transportation analyst for Concept Capital's Washington Research Group.

Similarly, funds allocated to help states with Medicaid and school costs began flowing pretty quickly, says Nick Johnson, director of the Center on Budget and Policy Priorities' state fiscal project. But there, some of the spending was explicitly earmarked for 2010 and even 2011. The Administration has said it hopes to meet Congressional Budget Office estimates that 70% of stimulus funds will be spent by fall 2010. "Everyone knew the recession wasn't going to end in a blink," Johnson says.

Bids Lower Than Expected

Other projects will take time by their very nature—as is the case with funds intended to foster what the Administration calls long-term, sustainable growth in industries supporting public transit or renewable energy. Transit funds that go toward replacing light-rail or subway cars could take years to spend, and building a new light-rail system could take a decade or more, as did Charlotte's 18-month-old light-rail system, says Guess, the American University researcher. Plus, state and local agencies must determine which projects actually qualify for federal funds under rules set by Congress.

One bright spot: Bids for many projects are coming in under expectations, sometimes by as much as 20% to 30% in the case of some transportation contracts, analysts and government officials say. Depressed demand for materials has lowered prices, while contractors are willing to work more cheaply than when construction was booming, notes Currie, the transportation analyst.

There are other, less obvious impediments as well. In a few cases, lawmakers have sought to reject federal funds, as in South Carolina Governor Mark Sanford's failed effort. Other programs that would have qualified for federal matching dollars under the stimulus plan have been cut as states face their own budget woes. As the unemployment rate rises across the country, some states are forgoing stimulus dollars specifically designated to help the unemployed. As of July 2, little more than half of the money had been claimed, and four states rejected it altogether, according to ProPublica, a nonprofit news organization. In some cases, states worried that accepting the money would require them to sweeten the benefits they offered laid-off workers at a prohibitive cost to the state.

More Reporting Ahead

If simply tracking stimulus spending has proven complex, determining how many jobs have actually been created or saved is even more daunting. Most Administration estimates come down to a fairly straightforward but indirect calculation: Each $1 million of government spending creates 10.9 jobs, or about $92,000 a year for each job, including benefits, administrative costs, and other overhead. Using that ratio, for example, a $1.6 billion contract to demolish and remediate a Washington state nuclear facility could generate 17,740 jobs, but whether it ultimately does, only time will tell.

Starting Oct. 10, stimulus-fund recipients must begin reporting more concrete details on jobs and spending at www.federalreporting.gov, and federal budget officials have made it clear that they plan to refine reporting requirements as time goes on, says Craig Jennings, a senior policy analyst with OMB Watch, a nonprofit group that focuses on budget issues. "It's not hopeless," Jennings says. The federal Office of Management and Budget "has been very clear on the fact that their approach is iterative. They're not going to get it right the first time."

But even then, it won't be easy to square whatever job gains are claimed with rising unemployment. Few economists expect the jobs picture to improve this year, and many predict the national unemployment rate will rise to 10% or beyond. Ultimately, stimulus supporters argue that, without it, job losses would be even worse.

Francis is a correspondent in BusinessWeek's Washington bureau. Craig is a reporter for BusinessWeek in Washington, D.C.

Business Exchange

Track and share business topics across the Web.