Ed Kilgore is managing editor of The Democratic Strategist, a senior fellow at the Progressive Policy Institute, and a frequent contributor to a variety of political journals.
In looking for something else this morning, I ran across a couple of conservative blog posts that almost perfectly illustrated how rapidly routine information can be distorted into talking points used in attacks on the Obama administration, the Democratic Congress, and in this case, state and local governments.
The original source of those talking points was a General Accounting Office report on how state and local governments were (so far) using money from the American Recovery and Reinvestment Act of 2009, a.k.a. the economic stimulus package. According to the report:
Across the United States, as of June 19, 2009, Treasury had outlayed about $29 billion of the estimated $49 billion in Recovery Act funds projected for use in states and localities in fiscal year 2009. More than 90 percent of the $29 billion in federal outlays has been provided through the increased Medicaid Federal Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization Fund (SFSF) administered by the Department of Education.
A Reuters blogger named James Pethokoukis linked to the report under the headline, "Maybe this is why the stimulus isn't creating tons of jobs yet," implying that the amounts were small and the spending wasn't going into "infrastructure" projects.
Now keep in mind that of the estimated $787 billion in stimulus funds, only $185 billion was slated to occur in Fiscal Year 2009, mainly because FY 2009 began last October 1. I do wonder if Mr. Pethokoukis might have been confusing fiscal years with calendar years.
His apparent surprise that 90 percent of the state-local funds spent so far for FY 2009 are going to something other than "infrastructure" indicates (1) he wasn't paying much attention when ARRA was enacted and (2) he doesn't seem to understand that it's inherently a bit speedier to adjust a Medicaid match rate or disburse a block grant than it is to fund specific highway projects. The GAO report indicates that $9.2 billion in highway funds for have already been obligated but not spent, which is about a third of the total highway money in the stimulus package (about what you'd expect given the time frames). Moreover, a significant portion of the roughly $111 billion in "science and infrastructure" money in ARRA will not flow through states and localities (e.g., most of the scientific research money).
But whatever you think of Mr. Pethokoukis' brief and sardonic take on the GAO report, here's how it devolved at the hands of Stephen Spruiell at National Review's The Corner, under the headline, "Ninety Percent of Stimulus Funds Spent on Bailouts for State Government:"
The [GAO] study found that 90 percent of the stimulus funds spent so far have gone toward bailouts for fiscally irresponsible state governments. These states made commitments on health care and education spending commensurate to what they could afford during the boom years. When the economy crashed and tax revenues dried up, they had no way to pay for these commitments short of raising taxes, which none of them wanted to do. (Most states' constitutions restrict their ability to run deficits.)This is what the stimulus was really all about--not creating or "saving" jobs, but preventing states from suffering the consequences of their profligacy.
Note that the relatively small portion of stimulus money GAO was analyzing, which excluded direct federal expenditures and tax provisions, has now become "the stimulus funds spent so far." And the temporary Medicaid match rate increase, along with funds to prevent education cuts and a very small provision for flexible state funds, has become "preventing states from suffering the consequences of their profligacy."
Aside from the fact that the Medicaid, education and flexible money Mr. Spruiell is saying "aha" about was in the original legislation, and was fully debated and (in the case of the education and flexible funds) reduced before ARRA was enacted, he does not seem to understand that (1) it's hardly "profligate" to fail to immediately slash Medicaid rolls or dump school costs on local property taxpayers when state revenues drop massively in a major recession, and (2) if states and localities weren't "profligate" and made these cuts, they would contribute to the recession and heavily offset the impact of federal stimulus funds, through both reduced consumer spending and personnel layoffs (which were happening all across the country before ARRA was enacted, and which are still happening to some extent because what Spruiell calls "bailouts" weren't sufficient).
Maybe that's why not a single one of the 22 Republican governors--including the up-until-recently fiscal conservative hero Mark Sanford of SC--objected to the Medicaid money that always represented over half of the federal-state assistance in ARRA, and why only two--Sanford and Sarah Palin--tried to reject anything other than a very specific set of funds aimed at expanding unemployment insurance coverage.
But loose talk about "bailouts" from people who haven't followed the debate and don't know the numbers or the issues can go viral pretty fast, so don't be surprised if you or your conservative friends soon get emails claiming that 90% of all the stimulus funds are being spent on profligate state social programs.
--Ed Kilgore