Stimulus Second-Guessing

I got a question yesterday over Twitter about leaving the size of the stimulus aside, I had any criticisms about the design of the American Recovery and Reinvestment Act. I've actually got a bunch of criticisms, but the one that I think is the most clear-cut and underappreciated had to do with how ARRA handled grants to state and local governments. To make a long story short, ARRA made this complicated. They made it complicated because the bill's authors had specific ideas about what they thought would be the best uses of the funds. This had an obvious cost in terms of the speed with which funds could be disbursed, but it was supposed to have a lot of upsides as well.

One of the things we've learned over the past two years is that those upsides were largely illusory. Governors and state legislatures turned out to be pretty damn good at finding ways to make all the conditional grants fungible after all. Thus, even though ARRA tried to specifically boost state infrastructure spending, infrastructure spending didn't actually go up. It's too bad that this happened, but if Congress had simply accepted it as inevitable and had doled the money out as unconditional grants, then the money could have at least been spent more quickly. What's more, going the conditional grants route wound up creating a fair amount of inadvertent stimulus in the consulting and grant application writing sectors, even though the kind of experienced, BA-holding professionals who are eligible for that sort of work were hit much less hard by the recession.