The complicated and uneven flow of stimulus funds (MN as an example)

[lindisfarne]

As the article points out, certain parts of the stimulus package were easier to implement quickly, while others took longer. For example, payroll tax cuts, unemployment benefits, medical assistance benefits.
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Three months after Vice President Joe Biden stopped there to promote the $787 billion spending package by visiting a plant that's expected to supply 29 Twin Cities buses funded by stimulus cash, the deal is still moving through the federal bureaucracy. It illustrates how the stimulus is unfolding so far in Minnesota -- in fits and starts, with a lot of money slow to flow.

Detailed job-creation figures are not due until October. But with unemployment in Minnesota holding at about 8.2 percent, White House officials say that more than $2 billion in Recovery Act funds are already flowing into the state -- much of it in ways that don't show up in state coffers, such as Social Security, unemployment and tax benefits that go directly to individuals.
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Though much of the stimulus plan was sold on the strength of road and highway investments, records released by Congress last week show that only 37 transportation and infrastructure projects were underway in Minnesota as of May 31, creating or sustaining 124 jobs.

State officials note that they were among the first in the nation to earmark their allocation of federal transportation money, and that the construction season in Minnesota is just getting underway. "The Recovery Act was signed on Feb. 17," said Dan McElroy, commissioner of Minnesota's Department of Employment and Economic Development. "We had snow on the ground until about April 20."

At this point, the bulk of the $4.8 billion in stimulus money slated to pass through state agencies over the next two years won't start flowing until this week, with the July 1 start of the state's 2010 budget year.

"For us, the money is hitting exactly when we need it," Hanson said. The latest data from his office show that most of the estimated $500 million in stimulus money actually spent to date has gone toward additional Medicaid services promised under the plan.

Medical assistance money can flow speedily through existing programs. But other types of spending -- such as the money for highway construction and New Flyer buses -- has to work its way through multiple layers of bureaucracy between Washington and St. Paul.
http://www.startribune.com/politics/state/49346117.html?page=2&c=y
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See also Robert Reich's column on the estimated impact of various kinds of options that could have been enacted. The chart he has there does not show which options can be implemented more quickly, which also is relevant.
http://robertreich.blogspot.com/2009/02/senate-republicans-and-stimulus-playing.html

Do we need a 3rd stimulus? Without a doubt. Economists like Paul Krugman said that the 2nd stimulus package was far too small before it was passed. But since infrastructure money takes longer to flow through the system, and you want the stimulus to continue for many months (hardly helps to spend all the infrastructure money in three months), does it matter? The political reality was that getting a larger 2nd stimulus package approved would have taken longer, thus delaying all programs, including the ones that could be implemented relatively quickly. Economists have also said health care reform is very important for the long-term well-being of the economy.

List of economists calling for a third stimulus:
http://www.cepr.net/index.php/press-releases/interactive-press-releases/economists-who-make-the-third-stimulus-honor-roll/

[lindisfarne]

1. A little more on the numbers in Robert Reich's article (at the link in OP)

http://www.centeronbudget.org/cms/index.cfm?fa=view&id=938
A new analysis by Mark Zandi, chief economist of Moody’s Economy.com, examines the effectiveness of various stimulus options that policymakers are now discussing. Zandi’s findings, which cover both tax and spending options, include the following:

* A temporary increase in food stamp benefits is the most effective stimulus measure on the table; it would generate $1.73 in increased economic activity for each $1.00 in cost.
* Extending unemployment benefits so that workers’ benefits don’t run out before they can find a new job would be the second most effective measure, generating $1.64 in increased activity per dollar of cost.
* A tax rebate that includes low- and moderate-income working families that don’t earn enough to owe income tax would be 24 percent more effective as stimulus than a rebate that leaves these families out (generating $1.26 in increased economic activity per dollar of cost, as compared to $1.02 in activity for a rebate that excludes the lower-income workers).
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See also Krugman's comments (Jan 11 2009): http://www.nytimes.com/2009/01/12/opinion/12krugman.html?_r=1
The Romer-Bernstein report acknowledges that “a dollar of infrastructure spending is more effective in creating jobs than a dollar of tax cuts.” It argues, however, that “there is a limit on how much government investment can be carried out efficiently in a short time frame.” But why does the time frame have to be short?

As far as I can tell, Mr. Obama’s planners have focused on investment projects that will deliver their main jobs boost over the next two years. But since unemployment is likely to remain high well beyond that two-year window, the plan should also include longer-term investment projects.
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http://krugman.blogs.nytimes.com/2009/07/06/and-more-on-bernstein-romer/#comments (Krugman July 6 2009)
The figure actually shows predictions by quarter. Roughly, the stimulus was supposed to reduce unemployment — again, relative to the baseline — by about 0.2 percentage points in the second quarter of this year; by about 0.7 percentage points in the third quarter.

The most recent unemployment data we have are for June, which was the end of the second quarter. So the prediction was that the stimulus would cause unemployment to be something like 0.3 or 0.4 percentage points lower in June than it would have been otherwise.

That’s not much. The stimulus wasn’t ever expected to be having a large effect this early.