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The federal stimulus at age two: Was it a success?

By ThisIsReno

By Andrew Doughman, Nevada News Bureau: The American Recovery and Reinvestment Act that President Barack Obama signed into law two years ago has channeled $800 billion to the states in an attempt to jolt the economy to life.

But in Nevada, the unemployment rate has actually risen since then. So what has the $2.9 billion in stimulus money actually done in the Silver State?

How the money was spent

Most of the funding did not go to new job creation.

A little more than half the money, $1.5 billion, helped the state pay out unemployment benefits. Another $425 million propped up health programs like Medicaid and food stamp programs through increases in something called FMAP, or the Federal Medical Assistance Percentages.

Nevada also used about $400 million to mitigate cuts to its education and corrections budgets. The state’s transportation department and Nevada’s two public research universities also received millions in funding.

In short, about two-thirds of the money fell outside the realm of new job creation.

“Since the act had so many goals originally, the focus of all those other goals has dimmed,” said Charles Harvey, the governor’s ARRA director. “The light has shined on jobs and unemployment only.”

The actual job creation numbers are difficult to track or assess.

Nevada still has $400 million more to spend through June 30, 2014.

So if it is impossible to pin down job creation numbers and most of the money went elsewhere, was the spending effective?

An “epic failure” or a helpful “Band-Aid”?

As with many policy assessments, success is in the eye of the beholder. In short, it depends who you ask.

The original act passed in Congress with virtually no Republican support.

“It was an epic failure,” said Victor Joecks of the conservative Nevada Policy Research Institute.

Joecks argued that the stimulus prevented the market from self-correcting for the recession’s effects. He said the money came from taxes collected largely from businesses, which could have better spent those dollars.

Others say it artificially sustained state spending and did little to create jobs.

“It’s a Band-Aid,” said Sen. Barbara Cegavske, R-Las Vegas, who sits on the Senate Finance committee that dealt with ARRA dollars. “Was it beneficial? That’s what we’ll find out. We still have a high unemployment rate. We’re at close to 15 percent … so that’s not a very good indicator.”

Across the aisle, the view is different. For supporters, ARRA dollars patched the state budget when it otherwise would have been shredded.

“ARRA funds have saved Nevada jobs and provided education funding for our state,” said Senate Majority Leader Steven Horsford, D-Las Vegas, the chair of the Senate Finance committee, in an e-mail. “They have been successful in helping us maintain a baseline of services during tough economic times.”

UNR economist Elliott Parker pointed out that economists also disagree about the stimulus.

He said some economists say it didn’t work because the economy is growing too slowly for the stimulus to have had its intended impact.

Parker, however, said the recession crippled the economy so much that any stimulus would not have worked.

“Once it happened, the economic damage was so severe,” he said. “It’s like giving aspirin for a broken bone. All you can do is reduce the pain.”

Among those interviewed, many hedged their comments and said it’s still too early to gauge the full effect.

In part, that is because Nevada and other states still have billions more to collectively spend. A complete analysis probably won’t be available for several years, when the states have spent every last stimulus dime.

Stigma has made stimulus a “bad word”

The lack of an authoritative report, however, has hardly stopped politicking. For federal spending bills, perhaps none in recent history has been as slandered as ARRA.

The act has become the whipping boy for people who would like to arrest federal spending. Liberal economists have denigrated it for being a wimp, saying it was too small to do any good. Government watchdogs have criticized how the funds were disbursed.

“There are different types of funding that will still be coming to the state,” Harvey said. “It will no longer be called ‘stimulus’ or ‘ARRA.’ That’s become a bad word.”

The twilight days of the stimulus are causing the states grief in more ways than one, too.

We’ll explore that effect in our next story about ARRA.

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